The Antitrust Hotch Potch

Joaquin Almunia confirmed as the new Competition Commissioner

The news is now official. Almunia is a Spanish national who currently is the Commissioner in charge of economic and monetary affairs.  His official bio is reproduced below. Some of you might be concerned with his background as a trade unionist and former socialist minister. But it does not mean very much in practice. Commissioner Kroes, for instance, was considered too close to industry interests when her name was first advanced four years ago and she had a very difficult time during her hearing at the European Parliament. Yet, she proved a very tough enforcer. Although Mr. Almunia's views on competition policy will only come clear during his hearing at the European Parliament, he is certainly a very skilled politician and administrator.

JOAQUÍN ALMUNIA

Personal Data

• Born in Bilbao (Spain), on 17 June of 1948.
• Married. Two Children.

Academic Background

• Graduated in Law and Economics at the University of Deusto (Bilbao).
• Follow-up studies at L’École Pratique des Hautes Études de Paris.
• “Senior managers in Government” program at the Kennedy School of Government, Harvard University.
• Associate Lecturer at the University of Alcalá de Henares (Madrid) on Employment and Social Security Law.

Professional Activities

• 1976-1979, Chief economist of the UGT, a Spanish trade union.
• 1972-1975, Economist at the Council Bureau of the Spanish Chambers of Commerce in Brussels.

Politicial Positions

• Since 26 April 2004, Member of the European Commission, responsible for Economic and Monetary Affairs.
• 2000, Socialist candidate for Prime Minister.
• 1997-2000, Leader of the PSOE.
• 1994-1997, Spokesperson of the Socialist Parliamentary Group.
• 1986- 1991, Minister of Public Administration.
• 1982-1986, Minister of Employment and Social Security.
• 1979-2004, Member of the Spanish Parliament.
• Member of the Federal Committee of the PSOE.

Other Activities

• Director of the research program on “Equality and redistribution of income” at the Fundación Argentaria (1991-1994).
• Founder (2002) and Director of the progressive think tank “Laboratorio de Alternativas”.
• Author of several books and numerous press articles.

Rachel Brandenburger joining the Antitrust Division of the US DoJ

It has been announced that Rachel Brandenburger, one of the leading competition partners at Freshfields, will resign from her firm to join the antitrust Division of the DoJ in January 2010 to serve a special adviser on international matters, reporting directly to assistant attorney general Christine Varney and working closely with Phil Weiser, deputy assistant attorney general in charge of international, policy and appellate matters.

This is a most interesting development as I have no prior recollection that a European competition lawyer occupied such a position at the DoJ or even at the FTC. This is perhaps a sign of the times as antitrust authorities are increasingly confronted with global issues: cross-border mergers, international cartels, abuse of dominance investigations taking place on different continents.

Mrs Brandenberg is certainly an excellent recruit for the DoJ. Congratulations to both parties!

Great news on the Qualcomm case

After a four year long investigation, the European Commission announced earlier today (MEMO/09/516) that it has decided to close the formal antitrust proceedings it had launched against Qualcomm in October 2007 as well as the press releases being issued by complainants Ericsson and NEC confirming the withdrawal of their complaints. This is a remarkable result for Qualcomm considering the misfortunes of several large high-tech corporations subject to abuse of dominance investigations by the European Commission.

 This case, which was initiated following complaints lodged in 2005 by Ericsson, Broadcom, NEC, Nokia, Panasonic and Texas Instruments, raised highly complex and important issues about the pricing of patented technology after its adoption as part of an industry standard. The complaints alleged that Qualcomm’s royalties for its patented technology – which was part of the WCDMA wireless telecommunications standard adopted by ETSI – were excessively high and thus amounted to an exploitative abuse in violation of Article 82 EC.

The Commission’s press release indicates that given that all complainants have withdrawn or indicated their intention to withdraw their complaints, it does “not consider it appropriate to invest further resources in this case.” Nokia withdrew its complaint in July 2008 after reaching a global settlement of its licensing disputes with Qualcomm. Broadcom made a similar move a few months later. While the Ericsson, NEC, Panasonic and Texas Instruments’ complaints remained pending with the Commission, it became clear in from the speech delivered by Commissioner Kroes on 15 October 2005 and in the Q&A which followed that a decision had been taken to close the investigative proceedings against Qualcomm. The decision of the remaining complainants to withdraw their complaints (see the press releases of e.g. Ericsson and NEC of 24 November 2009) was no doubt seen as a preferable alternative than suffering the embarrassment of the Commission commencing formal proceedings to reject them.

As one of the lawyers retained by Qualcomm to assist them in their defence against these groundless complaints, I wish to praise the Commission for its thorough review of a complex body of evidence and the cautious approach it took in this case. The Commission wisely refrained from seeking to regulate the royalties and other terms comprised in Qualcomm’s licenses, which were the result of often long-standing contractual arrangements entered into after arm’s length negotiations with large undertakings several times its size.

Antitrust: Commission closes formal proceedings against Qualcomm 

The European Commission has decided to close formal antitrust proceedings against Qualcomm Incorporated, a US chipset manufacturer, concerning an alleged breach of EC Treaty rules on abuse of a dominant market position (Article 82). The investigation was opened on 1^st October 2007 (see MEMO/07/389).

The European Commission is committed to fight against illegal behaviour by dominant companies in key innovative sectors like telecoms and IT when an abuse of their market power would deny consumers the benefits of competition and choice.

The Qualcomm case has raised important issues about the pricing of technology after its adoption as part of an industry standard. In practice, such assessments may be very complex, and any antitrust enforcer has to be careful about overturning commercial agreements. 

The Commission has investigated whether the royalties that Qualcomm has been charging since its patented technology became part of Europe's 3G standard are unreasonably high.

The Commission committed time and resources to this investigation in order to assess a complex body of evidence, but has not as yet reached formal conclusions.

All complainants have now withdrawn or indicated their intention to withdraw their complaints, and the Commission has therefore to decide where best to focus its resources and priorities. In view of this, the Commission does not consider it appropriate to invest further resources in this case.

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.