The Antitrust Hotch Potch

Commission confirms sending of Statement of Objections to Standard & Poor's

Interestingly, the Commission seems to go after another company for "excessive pricing". I have never been convinced that competition authorities should regulate prices for a number of serious reasons. moreover, exploitative cases can lead to serious mistakes.

The Commission seems to be of a different opinion. See its press release:

The European Commission can confirm that on 16 November 2009 it sent a Statement of Objections (SO) to Standard & Poor's (S&P), a division of McGraw-Hill Companies, Inc. of the United States. The SO outlines the Commission’s preliminary view that S&P is abusing its dominant position by requiring, as the sole-appointed National Numbering Agency (NNA) for US securities, financial institutions and information service providers (ISPs) to pay licensing fees for the use of International Securities Identification Numbers (ISINs) in their own databases. The Commission takes the preliminary view that this behaviour amounts to unfair pricing and constitutes an infringement of Article 82 EC Treaty.

ISINs are the global identifiers for securities and are governed by International Standardisation Organisation (ISO) standard 6166. They are indispensable for a number of operations that financial institutions carry out (for instance, reporting to authorities or clearing and settlement) and cannot be substituted by other identifiers for securities.

S&P is the sole-appointed NNA for US securities and therefore the only issuer and first-hand disseminator of US ISIN numbers. The Commission’s preliminary conclusion is that S&P is abusing this monopoly position by enforcing the payment of licence fees for the use of US ISINs by (a) banks and other financial services providers in the EEA and (b) information service providers in the EEA.

This preliminary finding is based on, inter alia, a comparison with the charging policy of other NNAs that either do not charge any fees at all or, if they do, do so only on the basis of the distribution cost as opposed to usage, according to ISO principles. According to the Commission's preliminary findings, S&P does not incur any costs for the distribution of US ISINs to financial service providers because the latter do not receive the ISINs from S&P but from information service providers such as Thomson Reuters or Bloomberg.

S&P has 8 weeks to reply to the SO, and will then have the right to be heard in an Oral Hearing. If the preliminary views expressed in the SO are confirmed, the Commission may require S&P to cease the abuse and may impose a fine.

Decision of the European Ombudsman closing his inquiry into the Intel against the European Commission

The very important decision of the EU Ombudsman on the Intel's complaint against the European Commission for procedural irregularities has now been published. The decision does not look good for the Commission. 

Whether or not this will have an impact on Intel's appeal to CFI against the Commission's decision of 13 May 2009 finding Intel in breach of Article 82 EC for exclusionary rebates is an open question. 

Here is a short summary of the findings of the EU Ombudsman: 

On 10 July 2008, the Ombudsman received a complaint from Intel. The complaint alleged procedural errors by the Commission during an anti-trust investigation of Intel under Article 82 of the EC Treaty.

According to the complainant, the Commission failed to take minutes of a meeting with Dell it held on 23 August 2006, despite the fact that the meeting directly concerned the subject-matter of the Commission's investigation of Intel.

In his decision dated 14 July 2009, the Ombudsman found that the Commission did gather information relating to the subject-matter of its investigation in the meeting of 23 August 2006. He also found that the Commission did not make a proper note of that meeting and that the Commission's investigation file did not include the agenda of the meeting. The Ombudsman concluded that the Commission had committed an instance of maladministration. The Ombudsman did not, however, make any finding as to whether the Commission had infringed Intel's rights of defence.

In addition, the complainant alleged that the Commission encouraged Dell to enter into an information exchange arrangement with AMD. According to the complainant, the effect of this arrangement was to allow AMD to obtain confidential information about Intel that was contained in the Commission's investigation file. The complainant argued that, in acting this way, the Commission circumvented the rules which limited AMD's right of access to the investigation file.

As regards this second allegation, the Ombudsman considered that it would not have been in accordance with principles of good administration if the Commission had encouraged Dell to enter into such an information exchange agreement with AMD. However, he noted that the Commission had no responsibility, and indeed no power, to prevent such an arrangement.

The Ombudsman found that the possibility of Dell entering into the information exchange agreement was first raised in a telephone call of 30 August 2007 between senior representatives of Dell and senior Commission representatives. However, since the Commission had not made any contemporaneous notes of the content of that telephone call, the available evidence was not sufficient for the Ombudsman to take a position as to whether Dell, or the Commission, had first suggested the agreement. The Ombudsman did not, therefore, make any finding of maladministration as regards the complainant's second allegation. However, the Ombudsman recommended that, in the future, proper internal notes should be made of the content of meetings or telephone calls with third parties concerning important procedural issues.

42nd Lunch Talk of the GCLC – 26 November 2009

The 42nd Lunch Talk on Recent trends in the Commission’s Review of Airline Mergers will take place on 26 November 2009.  The speakers: Daniel Boeshertz from DG COMP and Sven Voelcker from WilmerHale. The registration form can be downloaded here.

Conference on the New Frontiers of Antitrust in Paris

The Revue Concurrences, the leading French competition law journal, is organizing is annual conference on the theme of "The New Frontiers of Antitrust" on 15 February 2010 in Paris.

The programme is very interesting. Speakers will include Chris Varney and Bill Kovacic.

Douglas Melamed to become Intel's new General Counsel

Another interesting development at Intel, which has now decided to appoint Doug Melamed as its new General Counsel. Melamed is one of America's finest antitrust lawyers and a former assistant attorney general for antitrust in the DoJ.  He is certainly a very good choice. 

Intel is not the first large US corporation to hire a former senior antitrust official as GC. In the recent past, Procter & Gamble hired Debbie Majoras and Chevron hired Hew Pate as their new GC. If anything, this shows the importance of antitrust for large US corporations. 

Breaking news: AMD and Intel Announce Settlement of All Antitrust and IP Disputes

Here is the joint release published this morning:

SUNNYVALE/SANTA CLARA, Calif. – Nov. 12, 2009 – Intel Corporation and Advanced Micro Devices (NYSE: AMD) today announced a comprehensive agreement to end all outstanding legal disputes between the companies, including antitrust litigation and patent cross license disputes.

In a joint statement the two companies commented, "While the relationship between the two companies has been difficult in the past, this agreement ends the legal disputes and enables the companies to focus all of our efforts on product innovation and development."

Under terms of the agreement, AMD and Intel obtain patent rights from a new 5-year cross license agreement, Intel and AMD will give up any claims of breach from the previous license agreement, and Intel will pay AMD $1.25 billion. Intel has also agreed to abide by a set of business practice provisions. As a result, AMD will drop all pending litigation including the case in U.S. District Court in Delaware and two cases pending in Japan. AMD will also withdraw all of its regulatory complaints worldwide. The agreement will be made public in filings with the Securities and Exchange Commission.

This puts an end to one of the most ferocious legal battles between large high-tech companies. This will of course not prevent agencies to continue investigating Intel, although as I indicated in a post below the case against Intel is rather weak. 

NY AG Cuomo Files Antitrust Lawsuit Against Intel

New York Attorney General Andrew Cuomo, has filed an antitrust lawsuit against the computer chip manufacturing giant Intel, accusing the company of engaging in a “systematic worldwide campaign of illegal, exclusionary conduct to maintain its monopoly power,” in the market for computer chips starting in 2001.

According to Mr. Cuomo's press release:

"Over the last several years, Intel has extracted exclusive agreements from large computer makers in which they agreed to use Intel’s microprocessors in exchange for payments totaling billions of dollars. Intel also threatened to and did in fact punish computer makers that they perceived to be working too closely with Intel’s competitors. Retaliatory threats included cutting off payments the computer maker was receiving from Intel, directly funding a computer maker’s competitors, and ending joint development ventures.

“Rather than compete fairly, Intel used bribery and coercion to maintain a stranglehold on the market,” said Attorney General Cuomo. “Intel’s actions not only unfairly restricted potential competitors, but also hurt average consumers who were robbed of better products and lower prices. These illegal tactics must stop and competition must be restored to this vital marketplace.”

To obtain exclusive agreements, Intel paid hundreds of millions of dollars annually - and in some years billions of dollars - in so-called “rebates” to individual computer makers. These rebates were actually just payoffs with no legitimate business purpose that Intel invented to disguise their anticompetitive nature. Intel also attempted to erase the most obvious traces of its anticompetitive scheme by eliminating crucial but flagrantly objectionable provisions from written agreements or by camouflaging language about illegal guaranteed market shares with terms like “volume targets.”

The payments for exclusivity that Intel provided could make the difference between profit and loss for a computer maker or a segment of its business. Sometimes, the payments from Intel exceeded a company’s reported quarterly net income."

These claims closely resemble those made by the European Commission in its 13 May 2008 Decision against Intel, which in this paper I found misguided. 

Talk on Standardization and Antitrust

Paul Seabright (Toulouse) and I have been invited to give a talk tomorrow morning in the context of the Philippe Nasse seminar organized by the French Ministry of Economy, Industry and Labour and the French Competition Authority on the complex subject subject of standardization and antitrust. My presentation (in French) can be found here.Download GeradinParis

Those interested in the subject may also want to have a look at this paper which nicely summarizes the issues.

SSRN: TOP 10 Papers for Antitrust & Regulated Industries Journals (September 4, 2009 to November 3, 2009)

Rank	Downloads	Paper Title
1	3453	Broken Promises of Privacy: Responding to the Surprising Failure of Anonymization  Paul Ohm,  University of Colorado Law School,  Date posted to database: August 17, 2009  Last Revised: September 10, 2009
2	290	Why the Google Books Settlement is Procompetitive  Einer Elhauge,  Harvard University - Harvard Law School,  Date posted to database: August 23, 2009  Last Revised: October 19, 2009
3	280	Dynamic Competition in Antitrust Law  J. Gregory Sidak, J. Gregory Sidak, David Teece,  Criterion Economics, L.L.C., Tilburg University - Faculty of Law, University of California, Berkeley - Business & Public Policy Group,  Date posted to database: September 29, 2009  Last Revised: November 2, 2009
4	182	Wikipedia’s Labor Squeeze and its Consequences  Eric Goldman,  Santa Clara University - School of Law,  Date posted to database: August 20, 2009  Last Revised: August 20, 2009
5	179	‘Judging’ Economists: Economic Expertise in Competition Law Litigation - A European View  Ioannis Lianos,  University College London - Faculty of Laws,  Date posted to database: September 5, 2009  Last Revised: September 5, 2009
6	156	Regulating Credit Rating Agencies after the Financial Crisis: The Long and Winding Road Toward Accountability  Stephane Rousseau,  Université de Montréal - Faculty of Law,  Date posted to database: August 19, 2009  Last Revised: August 19, 2009
7	124	Free Speech and the Myth of the Internet as an Unintermediated Experience  Christopher S. Yoo,  University of Pennsylvania Law School,  Date posted to database: September 22, 2009  Last Revised: September 22, 2009
8	118	The Puzzling Persistence of the Single Entity Argument for Sports Leagues: American Needle and the Supreme Court's Opportunity to Reject a Flawed Defense  Gabe Feldman,  Tulane School of Law,  Date posted to database: September 15, 2009  Last Revised: September 28, 2009
9	108	The Decision of the Commission of 13 May 2009 in the Intel Case: Where is the Foreclosure and Consumer Harm?  Damien Geradin,  Howrey LLP - Brussels, Belgium Office,  Date posted to database: October 19, 2009  Last Revised: October 25, 2009
10	98	The Quest for Appropriate Remedies in the Microsoft Antitrust EU Cases: A Comparative Appraisal  Nicholas Economides, Ioannis Lianos,  New York University - Stern School of Business, University College London - Faculty of Laws,  Date posted to database: August 31, 2009  Last Revised: September 15, 2009

Competition 2009 Summit in Brussels

I have been asked to speak at the Competition 2009 Summit in December. Here is a brief description of this event:

Premier Cercle, in association with The Wall Street Journal Europe, is organizing the Competition 2009 summit on December 3 & 4, 2009 at the SAS Radisson hotel in Brussels, Belgium. The summit will gather more than 100 high level speakers and 400 participants from 30 countries on essential topics such as antitrust enforcement, merger control, corporate compliance, state aids, the liberalization of network industries, inquiries and dawn raids as well as cases studies at the halfway between IP and Competition law.

For more information and an updated programme, please visit www.competition2009.com