21 April 2009

No recoupment in predatory pricing claims

In France Télécom v Commission (Case C-202/07 P, judgment of 2 April 2007), the ECJ disagreed with the Advocate General and agreed with my earlier blog posting (I am under no illusion that the ECJ is aware of my blog) that recoupment is not a pre requisite for a finding of price predation. There are three salient points in this judgment.

1. Objective evidence of a plan to eliminate competition
The Court confirms that you can use an undertaking's internal documents to furnish evidence of a predatory strategy. Wrong, I think.

2. A restatement of Article 82 principles
Paragraphs 103-114 are at the heart of the issue under appeal and also offer a restatement of the ECJ's approach to Article 82. I leave it to others to reflect on how much the ECJ's view tallies with that in the Commission's Guidance Paper.

3. Recoupment
The basic reason why recoupment isn't needed is that the aim of Article 82 is to protect a competitive market structure. Thus harm to the competitive process, not harm to consumer welfare is the factor that motivates Article 82, contrary to the views of the Advocate General.
Unfortunately the Court also inserted paragraph 111 which says that the Commission may find a reason to use proof of likely recoupment in certain cases: (a) when pricing is below AVC and the defendant advances an objective justifictaion, the likelihood of recoupment may be used to deny the defence (highly unlikely); (b) when prices are below ATC and above AVC then proof of recoupment can serve to show that there is eliminatory intent. (This I think is wrong because it does not sit well with the principle that you want to protect the competitive process. Though you might argue that if one is keen to punish predation when it threatens the competitive process, any proof of a 'plan' to damage competition is unnecessary because it is a poor proxy.

14 April 2009

The Speeches of Commisioner Kroes

The speeches of Neelie Kroes are hard hitting and delivered with good humor. Of late the outgoing Commissioner has upped the entertainment value in her public pronouncements. Those wanting punchy quotes to adorn their essays would do well to look at the speech she gave on 30 March 2009 at the Economic Club of Toronto: 'The crisis and the road to recovery.' The layout is like a free verse poem, here are some of the more quirky lines:

"It may seem crazy to draw a line between this belief in a shared humanity and competition policy, but if you will indulge me – that is what I will try to do this morning." (candidate for a future exam question)

"Do we have complete answers to the current problems? No, I would be a rich woman if I did have the answers!" (not as good as the 'known unknowns' of another gifted speaker)

"We cut down the red tape and favoured pragmatism over some of the ideas and processes that had put competition policy in a ghetto marked 'for lawyers only'." (but a pretty well remunerated ghetto of practitioners)

"After four years – when the financial and then economic crisis hit - the systems were lean and fast and ready to deal with a moving target. It's an approach that Wayne Gretzky calls 'skating to where the puck is going to be, not to where it has been.'" (the speech has another quote from the great man, plus a reference to Margaret Atwood)

"We aren't about to let EU Member States create inefficient national champions so they can patch up their pride.
Nor do we want to see two struggling banks cripple each other through a botched merger, or create another bank that is 'too big to fail.'
So it is business as usual in merger control – for all our sakes."
(serious point here - line 2. The Commission does not necessarily have the power to prevent a merger that causes a bank to become too big to fail. Such a bank need not have market power but is so interconnected in the financial system that its failure would spell disaster across the banking sector. So, is she hinting that the Commission may be prepared to intervene in a case where the merger does not substantially impede effective competition but where the merged entity is too big to fail?')

'Tough love is certainly the way to describe our subsidy control in banking and other sectors.' (another future exam question)

'We are working like hell to make recovery happen in Europe.' (puzzled looks from the audience)

'I want us to be able to turn around and look our grandchildren in the eyes and say that we did the right thing by them. ' (audience by now wiping tears away)