Publication of the week: Stranger in a Strange Land: An Outsider's View of Antitrust and the Courts

 

By Neil Komesar, published in 41 Loyola University Chicago L.J. 443 2009-2010. For those with HeinOnline access, here is the link.

 

This weeks publication is one of the few examples where a scholarly paper is both educational and enjoyable to read.  Neil Komesar uses his comparative institutional approach to assess whether (private) court or agency enforcement of (US) competition law would be preferrable. He argues that agency enforcement should be preferred to the (in the US more common) private enforcement, because the Court system has very little resources to devote to big and complicated antitrust ligitation. Judges are furthermore not usually experts on competition law and thus liable to make many mistakes. While competition agencies might be easier to influence than the judiciary, Komesar holds that the larger resources and the expertise held by competition agencies outweigh the possible bias. He even holds that competition agencies appear to avoid bias by hearing both sides to a case.

While I agree with Komesar's analysis for the most part, I am a bit less certain that bias is not a problem in competition agencies. While this may be true for the US (I'm really not expert enough to say), in the EU, the Commission is frequently a party to cases as well as the prosecutor in cases, which makes avoiding bias more difficult. The Commission has tried to avoid bias by creating the role of the hearing officer, but this role seems to be too small to disperse doubts about bias.

In any case, Komesar's article, and indeed his books, are a great read for anyone interested in competition law and/or  institutional law & economics!

Case C-617/10 Åkerberg Fransson (the principle of ne bis in idem in taxation cases)

The Court of Justice (the Court) has finally delivered its' judgement in the preliminary ruling procedure, upon request from the Haparanda District Court (the District Court) in Sweden, concerning the principle of ne bis in dem (prohibition of double jeopardy) in cases regarding administrative and criminal sanctions for tax evasion. 

Background

The case arose stemmed from an administrative procedure before the Swedish tax authorities ('Skatteverket') in which Mr. Åkerberg Fransson was ordered to pay a surcharge for his alleged provision of false information for the purposes of VAT and income taxation in 2004-2005. In addition, Mr. Åkerberg Fransson was criminally prosecuted for failing to declare employers' contributions for the same period. Both the administrative sanction and the criminal prosecution, the latter which brought Mr. Åkerberg Fransson before the District Court, were based upon the same acts of providing false information. Mr. Åkerberg Fransson challenged the prosecution, claiming that he had already been sanctioned by the Skatterverket in the first place.

In summary, the case revolved around two legal aspects:

1. Whether the case fell within the scope of EU law (the 'jurisdictional question').
2. Does the principle of ne bis in idem prevent the imposition of criminal sanctions for tax evasion if administrative sanctions has been levied for the same act in the first place (the 'substantive question')? 

The jurisdictional question

The jurisdictional question is perhaps the most interesting part of the case. Sweden, and several intervening governments argued that the case did not fall within the scope of the principle of ne bis in idem within the meaning of the Charter of Fundamental Rights of the EU (the Charter), because neither the administrative nor the criminal sanctions were adopted in pursuit of national implementation of any EU legislation and accordingly: the Charter was not applicable (para. 16). Thus, the outcome of the case would determine the applicability of the Charter. The Court, relying on its case law, ruled that Article 51(1) of the Charter, which determines its' applicability, is to be interpreted in the following manner:

"The requirement to respect fundamental rights defined in the context of the Union is only binding on the Member States when they act in the scope of Union law" (para. 21).

I.e., it was not strictly necessary for the national legislation to have been adopted for the implementation of EU law, it was sufficient that the situation fell within the scope of EU law. This is a very broad interpretation of the Charter, which I personally welcome, but which I also believe that several jurists will disagree with. 

In either case, the Court went on to explain that since the case partially concerned administrative sanctions for providing false information with relation to VAT, the case fell within the scope of EU, since VAT is regulated on a European level. Accordingly, I welcome that the Court made a bold statement when it confirmed that the case at hand fell within the scope of EU law, as the prosecution was also brought for providing false information with relation to VAT. In this case, I believe that there is no doubt that the situation fell within the scope of EU law and that the jurisdictional decision by the Court was fully accurate.

The substantive question

The substantive question was dealt with the rather swiftly by the Court. It confirmed that the principle of ne bis in idem prevents the levying of two subsequent criminal sanctions for the same act, whilst the same principle permits a administrative sanction followed by a criminal sanction (para. 34). Rather discouraging is the fact that the Court was not as bold in this part of the judgement, as in relation to the jurisdictional issue. The Court confirmed that sanctions that are administrative by name may in fact be criminal, depending on their legal classification, nature of the offence and the degree of severity of a potential penalty. However, instead of providing clear guidance as to whether or not the administrative sanction was criminal, the Court left it to the national court to decide, thereby still leaving the door open as to the applicability of the the principle of ne bis in idem in taxation cases (para. 36).

Other interesting aspects

There are two additional aspects that were interesting albeit minor in relation to the two former. The first relates to the interpretation of the ECHR and its' relation to EU fundamental rights and national law. The Court was, somewhat surprisingly, relucant to give guidance on the interpretation of the ECHR in the present case:

"... as Article 6(3) TEU confirms, fundamental rights recognised by the ECHR constitute general principles of the European Union’s law and whilst Article 52(3) of the Charter requires rights contained in the Charter which correspond to rights guaranteed by the ECHR to be given the same meaning and scope as those laid down by the ECHR, the latter does not constitute, as long as the European Union has not acceded to it, a legal instrument which has been formally incorporated into European Union law. Consequently, European Union law does not govern the relations between the ECHR and the legal systems of the Member States, nor does it determine the conclusions to be drawn by a national court in the event of conflict between the rights guaranteed by that convention and a rule of national law."

The Court is more decisive when it lectures the Haparanda District Court on the general applicability of EU fundamental rights and in a very affirmative manner dismisses any notion that it must be clear from the Court's case law or the provisions in the Charter whether or not they should apply. The Court points out that national courts may, or sometimes must, refer questions to the Court for preliminary ruling in case of doubt (paras. 45-48).

Conclusion

Åkerberg Fransson won't go down in the history books as one of the classics of EU law but it is nonetheless an important piece in the puzzle as to the applicability of the Charter. Personally I believe that the Court makes the right choice when it states that the Charter applies to situations falling within the scope of EU law, as opposed to strictly limiting it to situations concerning national legislation implementing EU law. However, the case unfortunately leaves a slightly sour aftertaste since the Court could have graced us with more precise guidelines as to the applicability of the principle of ne bis in idem, in particular in the light of the case law of the European Court of Human Rights. 

Some fun reading for the weekend...

AG Jääskinen's opinion in the Pfleiderer follow-up Donau Chemie

New Guide to the application of the European Union rules on state aid, public procurement
and the internal market to services of general economic interest, and in particular to
social services of general interest

DG Comp finally seems to be moving to its new address in the Madou tower

Should Competition Policy Promote Happiness?

The Commission's "European Competition Forum" will take place next Thursday (I will be in Brussels, but sadly won't be able to attend). For those who have time, but aren't in Brussels, you can also livestream the event.

Have a nice weekend everyone!

Publication of the week: Nudge

 

Today's publication of the week is "Nudge: Improving Decisions about Health, Wealth and Happiness" written by Richard H. Thaler, Professor in Economics and Behavioural Science at the Univrsity of Chicago and Cass R. Sunstein, Administrator of the White House Office of Information and Regulatory Affairs.

Behind the rather cheesy title stands a book that is highly interesting both from a private and an academic point of view. Thaler and Sunstein describe how "choice architects" can influence people's behaviour for their own good, say what they eat for lunch in the cafeteria. They advocate "libertarian paternalism", that is they want to influence people for their own good without taking away their liberty to choose something that may be less beneficial to them. In the cafeteria example, this means that desserts are not taken away entirely, but rather put in a place that makes it unlikely for people to choose to eat dessert. "Nudge" is written in a style that many would probably call "popular science", but that makes it easy for us non-economists to understand the basic economic concepts that the authers talk about and it shouldn't be too difficult to read up on the relevant academic literature if necessary.

What has all this to do with researching on EU competition law enforcement? Well, if one can influence people for their own good, should it not be possible to influence companies for their own good?  In my view, competition law is still very much a bastion of Chicago School economics (ironically originating from the same University where Thaler and Sunstein are Professors). Behavioural Economics is therefore only slowly finding its way into academics and enforcers minds. However, it may play quite a role in my PhD project, as I am striving to research how EU competition law enforcement could be improved and that leads me to think that maybe one needs to change the approach to deterring companies from infringing competition law. Speaking of which, I will try to post something more detailed about my project in the near future!

Google – The jury is still out (at least in the EU)

I wrote the post below a while ago after I read Bork and Sidak's article, but never got around to publishing it. In the meantime the google cas in the US has been closed and Google has proposed commitments to the Commission. However, it is still open if the Commission will accept these commitments.

 

Robert H. Bork  and J. Gregory Sidak have written an Article entitled “What does the Chicago School Teach about Internet Search and theAntitrust Treatment Of Google?”, a video presentation which can be seen here. The authors assess accusations concerning anti-competitive conduct made by Google’s competitors from the point of view of the teachings of the Chicago school. While the article is very well written and I highly recommend anyone interested in the Google case to read it, I would like to briefly comment on a small selection of their findings in this post.

1.      Google is not the gateway to the internet

Some of Google’s competitors claim that it is the “gateway or, more extremely put, the “gatekeeper” to the internet. The authors however argue that consumers can navigate to websites by themselves, they are not forced to use Google (or any other search engine) to open a website. Besides typing in an URL, one can also use bookmarks or the browsers’ autocomplete function as well as mobile apps. Nevertheless, this is only correct as long as the user knows exactly where he wants to go. Often this is not the case, which is exactly why search engines exist. They guide users through the internet, specifically to websites they do not know yet. Thus, search engines are the key to new business. For example, if one makes a search for “Restaurants Stockholm” with Google.se, the first hit will lead to Stockholm’s tourist portal followed by a number of restaurants supplemented by a map and trip advisor on third position. Arguably, what is displayed first by the major search engine, Google, will influence the choice made by consumers searching for a restaurant in Stockholm. Thus, while claiming that Google is the “gatekeeper” of the internet might be going too far, Google’s search results still have a significant influence on consumers’ choices especially when it concerns new products. Whether or not the placement of results negatively impacts consumers is another question, but it appears logical that the order in which Google chooses to list results does have some effect on consumers.

2.      Specialised searches benefit consumers

The authors claim that the specialised searches, which Google displays on the top of the first results page has no anti-competitive effects. Specialised searches are for example maps with a number of searched places marked or a number of news stories grouped together when searching for a person or recent event. In fact, such specialised searches are displayed by all major search engines (Bing, Yahoo, Ask.com) and thus, according to the authors, “it is reasonable to infer that this display has “competitive virtues”—it reflects consumer preferences.” (p.2) However, just because all competitors in a certain market are doing something, does not automatically mean that this also benefits consumers. Nobody would claim that consumers benefit if all gas stations agree on a set price for gasoline. Likewise, it is not necessarily beneficial for consumers if all search engines implement specialised searches. Rather, something that is implemented by all competitors can be assumed to benefit all competitors. Specialised searches can for example guide users to other products provided by the search engines, for instance maps services, as in the example above. This does not mean to suggest that specialised searches are detrimental to consumers, but merely that the assumption may be too easily made by the authors. If consumers really benefit from specialised searches would need to be researched further.

3.      Google is not blocking competitors

In their third section, the authors further reject various claims made by Google’s competitors, concerning the blocking of services such as Youtube and Google books from the search results of competitors as well as agreements with hardware manufacturers about the standard search engine pre-installed on their devices. The authors claim that: "By definition, some search engine must be the consumer’s default search engine on computers and devices, because consumers value having a pre-installed search function on their newly purchased computers or phones.” (p.23) Unfortunately, no statistical evidence referring to the preference of consumers with regard to pre-installed default search engines is cited by the authors. In any case, one could argue that pre-installed search engines on computers could be compared to the pre-installed browser discussed in the Microsoft case in the EU. Could users not be presented with a choice screen during setup of their device in which they choose the search engine they would like to use as a default?

The criticisms of the article discussed here show that the jury is still out on the Google case and that more research is perhaps necessary to show if and if so, which of Google’s activities are anti-competitive.

Some fun for the weekend...

Happy Friday everyone! On Fridays I will try to post a list of links for competition law nerds to read over the weekend. So, here we go.....

US Antitrust Cheatsheet

The UK may become the first Member State in which private enforcement of competition law is actually attractive.

Alexander Italianer speaks on levelling the playing-field and innovation in technology markets

DG Comp is looking for a Chief Competition Economist

Publication of the week: Public and Private Regulation: Mapping the Labyrinth

Trying to revive this blog, I will try to create some categories that reappear every week, hopefully even on the same day, but I guess that will depend on my workload from week to week. Anyway, one category is the "publication of the week". Here, I plan to showcase books and articles that have caught my attention in the past week. Up first is Andrea Renda and Fabrizio Cafaggi's paper on public and private regulation, available for download here. I had the pleasure of attending two lectures Andrea gave at Stockholm University today and I was deeply impressed by his insights into the economics of competition law.

His paper deals with a slightly different, but related area; the question of if and how the state should regulate. In the words of the authors: "In this paper, we try to propose a theoretical framework that could guide public policymakers in assessing whether, and in what form, private regulation can prove the most appropriate form of policy intervention." It does thus not directly concern competition law enforcement, but can surely be related to it, as it can be questioned if private regulation could to a certain extend replace or compliment the enforcement of competition law carried out by competition authorities. 

Revival

Hi all, I'm thinking of reviving this blog in the near future, and hope to be a bit more consistent in my blogging (easier said then done). I will probably try to focus most of my attention on EU competition law, which is what I am writing my PhD thesis on, but occasionally I may also include posts about other issues in EU law. I still very much consider myself to be a student of EU law and will probably do so for some time to come (you can never stop learning, right?), so I will keep the name of the blog. I hope to be back soon with some new posts, but right now I need to get back to my thesis, as I have a deadline to keep :-).