Deutsche Parkinson Vereinigung (C-148/15) - an important judicial piece in the free movement puzzle

The Court of Justice of the EU (CJEU) has recently decided that German legislation on fixed prices for prescription pharmaceuticals is contrary to the free movement of goods, pursuant to Article 34 TFEU*, and that the legislation is not justifiable pursuant to Article 36 TFEU. On the face of it, the judgement is not particularly surprising. However, when one looks closer, the case is an important judicial piece in the free movement puzzle. We shall soon take a closer look at the judgement, but first the facts of the case.

*Treaty on the Functioning of the European Union

What the DPV case was about

The case concerned Deutsche Parkinson Vereinung eV (DPV) an organisation helping patients suffering from Parkinson's disease. DPV had entered into an agreement with the Dutch mail-order pharmacy DocMorris (a pharmacy chain already famous in EU law circles). By virtue of this agreement, the members of DPV could order prescription-only medicinal products for Parkinson' disease from DocMorris and recieve various bonuses. This was not appreciated by the German Association for Protection Against Unfair Competition (Zentrale zur Bekämpfung unlauteren Wettbewerbs eV, ZBUW) which filed an injunction to prohibit DPV from promoting its' bonus system.

The matter eventually landed before the Regional Court in Düsseldorf. The regional court did not consider that the practice of DPV infringed the German price-fixing legislation as such. However, the regional court took the view that the German price fixing regime prohibited a system where, in parallel to the purchase of a medicinal product at the fixed price, a customer is afforded a benefit which makes the purchase appear more economically advantageous to him or her. As the regional court also had doubts as to the compatibility of the national price fixing regime as such with Article 34 and 36 TFEU, the regional court made reference for a preliminary ruling to the CJEU.

The judgement

The CJEU found that the price-fixing regime constituted a measure having an equivalent effect of a quantitative restriction, contrary to Article 34 TFEU. The Court's rationale was that since mail-order pharmacies were not able to compete effectively with service, in the same way as brick-and-mortar pharmacies, a restriction on the possibility to compete with price made it harder to access the German market for foreign mail-order pharmacies (paras. 24-27). In the light of the Court's tremendously low threshold for finding measures contrary to Article 34 TFEU, the judgement in this part is not surprising at all.

The Court then makes an assessment of whether the German price fixing regime could be justified for the protection of public health - more specifically to ensure safe and high-quality supply of pharmaceuticals - pursuant to Article 36 TFEU. The CJEU starts off by affirming, as the Court has done many times before, that protection of public health is the most important ground for restricting one of the fundamental freedoms in the Treaties (para. 30). The Court goes on discuss the arguments raised by the applicant and several interveners of the case, who argued that price fixing of pharmaceuticals was necessary to guarantee safe and high-quality supply of pharmaceuticals, in particular in rural areas (paras. 32-33). Whilst the Court acknowledges that this may be the case, it also adds that measures restricting a fundamental freedom must be accompanied by necessary evidence that shows the appropriateness and proportionality of the restrictive measure (paras. 34-35). The national court then has to render judgement on the basis of such evidence (para. 36).

In my opinion, the judgement could have stopped here and the CJEU could have - as it usually does - handed the matter to be decided back to the national court. But lo and behold the CJEU does not in this case. Instead, the Court goes on to rule on the evidence in the case file and reaches the conclusion that there was not sufficient evidence that showed that price fixing was an appropriate measure to ensure safe and high quality supply of pharmaceuticals. In that regard, the Court underlined that it is not sufficient, when justifying a restriction of a fundamental freedom, to rely on general contentions (para. 37). The Court rounds up the case by dismissing further arguments put forward as to the negative effects of price competition for prescription pharmaceuticals (paras. 39-44) (e.g. that price competition on prescription pharmaceuticals would affect pharmacies in rural areas negatively (paras. 40 and 43)).

My thoughts on the judgement

I find this judgement very interesting for four reasons:
 
Firstly it is quite odd that the Court actually rules on the facts of the case and finds that the price fixing regime is not justified pursuant to Article 36 TFEU, based on the evidence in the case file. Given that the case is referred to the CJEU by a national court pursuant to Article 267 TFEU, the CJEU should, in my opinion, have left it to the national Court to rule on the appropriateness and proportionality of the price fixing regime.

Secondly, I do agree with the law. If there is not sufficient evidence to ascertain a measure restricting  a fundamental freedom, a national court should should not accept the measure. This follows in line with the recent Scotch Whisky Judgement (C-333/14, to which the CJEU also refers to in the judgement) and confirms that the Court has taken a more strict view on the appropriateness criterion and the necessity of producing sufficient evidence when restricting fundamental freedoms.



Thirdly, what will the consequences of this judgement be? Will price fixing regimes in other MS come under challenge? Will the judgement necessitate new secondary legislation expressly allowing national price regulation of pharmaceuticals (the European Commission's proposal on new transparency rules for price regulation of pharmaceuticals was recently withdrawn)? Will other markets, for example books where there is price fixing in Germany and Austria, come under similar judicial scrutiny?

Fourthly and finally, could the applicants and interveners really produce no hard evidence what so ever to support their claim!?! This is perhaps the most surprising part to me but it also shows how important it is that the CJEU is now evidently taking a much stricter view on the appropriateness criterion and the need to produce sufficient evidence.

In conclusion, the DPV judgement will, alongside last year's Scotch Whisky Judgement, be one of the most important rulings on the free movement of goods in recent years. I really hope that the case will spark some debate as the judgement, in its simplicity, is controversial for several reasons. Personally, I look forward to the opinion of the Swedish Dental and Pharmaceutical Benefits Agency (Tand- och läkemedelsförmånsverket, TLV) on the judgement.

10 EU-related terms you should know

Understanding the EU is not easy. There are too many councils, courts and other difficult things to keep track of. Below is a cheat-sheet of the most important terms you should know. To make things easier for our Swedish readers, the Swedish terms are included in brackets.

Inspiration cred goes to Professor Mårten Schultz, who recently made a list of mistakes commonly made when discussing and reporting on legal matters, and Annika Ström Melin's article about lacking EU knowledge, which itself was wrongly edited. 

I. Institutions

1. European council (Europeiska rådet)
The European council consists of the heads of state of the EU's Member States. The European Council does not have any formal legislative power! Instead, the European council sets out the broader political direction of the EU. Sometimes, one can get the impression that the European Council enters into international agreements, such as the recent deal with Turkey regarding asylum seekers. However, such agreements, if made by the European Council alone, are not necessarily legally binding. For more detail on this issue, read here.

2. Council of ministers (Ministerrådet) (also called the Council of the European Union)
This is the Council that is meant when just referring to "the Council". The council is made up of the ministers of the different Member State governments. The council has a number of different constellations, depending on the question discussed. For example, when discussing the regulation of foodstuffs (say bananas), the ministers responsible for that issue will meet. The Council, together with the European Parliament, has the formal legislative power in the EU. 

3. European Parliament (Europaparlamentet)
The European Parliament is directly elected by the citizens of the EU and is not organized by nationality of its members, but by groups of political parties. Together with the Council, the Parliament has the legislative power in most, but not all, legislative issues decided by the EU.

4. Commission (Kommissionen)
The Commission consists of one Commissioner from each Member State. The Commissioners usually have a background as politicians and are (similar to ministers) tasked with different policy areas. One of the most important tasks of the Commission is to propose and draft new legislation. Thus, when you read in the paper that "the EU wants (insert controversial issue)", usually what has happened is that the Commission has proposed new legislation. This, however, does not necessarily mean that such legislation will also be passed, since the Commission does not have legislative power to adopt its proposals. This power rests with the Council of ministers (indirectly elected by the people) and the Parliament (directly elected by the people).

5. European Court of Justice / Court of Justice of the European Union (EU-domstolen)
The Court has its seat in Luxembourg and actually consists of three separate Courts: The Court of Justice, the General Court and the Civil Service Tribunal. Most prominently, the Court of Justice answers questions regarding the interpretation of EU law by national courts of the Member States (so called preliminary rulings). Note that preliminary rulings are just that - preliminary. Final judgment is always rendered by the national court asking the question. 

II. Institutions NOT part of the EU

6. Council of Europe (Europarådet)
The Council of Europe, which has 47 European states as its' members, is an international organization tasked with promoting human rights, democracy and the rule of law in Europe. The monumental achievement of the Council of Europe is the adoption of the European Convention on Human Rights (ECHR) in 1950, Europe's human rights bill. The Council of Europe is also, contrary to the popular belief that the EU is the originator, the creator of the gold-starred European flag and the European anthem.

7. European Court of Human Rights (Europadomstolen)
This Court has its seat in Strasbourg and is tasked with judging in cases where one of the states signatory of the European Convention of Human Rights (ECHR) has allegedly infringed human rights.

III. EU Legislation and decision-making

8. Regulations (Förordningar)
Regulations are one of the legislative instruments that can be adopted by the EU (usually the Council and the Parliament together). Regulations are directly applicable in the Member States. One example it Regulation 1/2003 which, amongst other things, allows the Commission to investigate and fine companies that have been involved in a cartel. 

9. Directives (Direktiv)
Directives are the other important legislative instrument that can be adopted by the EU. Directives need to be implemented into national law by the Member States. This means that a national law can be based on a directive, but this is not necessarily visible from the individual clauses in the law itself.

10. International free trade agreements (Internationella frihandelsavtal)
If the Member States want to enter into a free trade agreement with a state outside of the EU, they first need to give the Commission a mandate to negotiate such an agreement. During negotiations, the Commission must inform and consult with the Council and the European Parliament. Once negotiations are concluded, the Council and the European Parliament must formally agree to the deal negotiated by the Commission. Recent examples are the free trade agreements with Canada (CETA) and with the USA (TTIP), whereas the latter is still being negotiated.

Taking decisions in competition cases - a balancing act

An evergreen amongst questions discussed in competition law enforcement is whether competition authorities that investigate infringements of competition law and assess merger applications should also be able to adopt a first decision in these cases, or whether that task should be left to the courts. The European Commission, for example, has that right, as do a number of national competition authorities in the EU. Whether such an order infringes the right to a fair trial has been discussed by the ECtHR in Menarini regarding the Italian competition authority. The ECtHR found that such an order does not infringe the right to a fair trial as long as a full appeal of the competition authorities' decision at a court is possible. One of the authorities not (yet) endowed with the right is the Swedish competition authority (Konkurrensverket (KKV)). In Sweden the topic has resurfaced as there is a new public inquiry arguing that KKV should be able to take the first-instance decision in all competition and merger application cases it investigates.

Should KKV gain the right to adopt decisions in competition infringement and merger applications a problem that appears is that KKV would both be investigating cases AND adopting decisions in these cases, even though these decisions would still be subject to court appeal. To adopt these decisions in a legitimate manner, it is important to discuss HOW they are taken. The public investigation discusses this issue with regard to the way KKV is organized.

There are two concerns that could be voiced. Firstly, whether the decision-making process could be influenced by politicians, for example to protect local industries. In Sweden, public authorities are independent from the government. In fact, the Swedish government is not allowed to adopt decisions in matters that are subject to the exercise of public authority towards individuals, where the decisions are to be adopted by independent public authorities (so-called ministerstyre) (RF 12:2). Thus, this is not a major concern in this case.

Secondly, the decision-making could be internally influenced by those who have investigated a given case, for exampple by case-handlers or heads of departments who want to establish a good track-record. What safeguards should be taken to prevent this problem? One option that is discussed in the public investigation is whether KKV should be lead by a board instead of by a director, as is currently the case. KKV would still have a director, but decisions in competition cases would be taken by the board consisting of a group of external experts and the director. This way of  leading a public authority is already employed for the Swedish post and telecom authority (PTS) which is in charge of regulating the markets for post and telecommunications. PTS makes similar assessments as regards competition law as KKV does and is thus lead by a board, ensuring maximum legitimacy in its decision-making. Oddly, the public investigation comes to the conclusion that KKV should not be lead by a board because of practical reasons, such as a lack of suitable experts that could be members on the board, few decisions taken and the time pressure associated with decisions in merger application cases. Some of thes issues could surely be solved, for example by only deciding on phase 2 mergers with the board? It appears odd that "practical issues" are allowed to take precedence over important legal considerations such as legitimacy and legal certainty, especially since the investigation finds that many practicing competition lawyers do not trust KKV to take decisions in competition cases. One could of course consider if the internal organization of KKV could be changed in such a way that any given investigation would be assessed by employees not involved in any given case. However, this would only be second-best to the assessment by experts whose loyalty is not associated with KKV.

To me, organizing KKV as an authority lead by a board of external experts appears like a good balance between taking decisions in competition cases more efficiently and in a legitimate manner at the same time. Practical reasons should be reconsidered, especially knowing that there is another Swedish authority (PTS) doing similar work being run that way. 

But That's Not What I Asked! The Reformulation of Questions Asked in Preliminary Rulings

Short break for a small commercial: As some of you may know I (Katharina) am a doctoral candidate in EU law at Stockholm University. A little while back I published a paper discussing the CJEU's handeling of questions asked in requests for preliminary rulings by national courts.
Besically, I argue that the CJEU sometimes changes or reformulates questions where the national court has failed to formulate an adequate question as regards the legal problem at hand with respect to EU law. There is no problem with such a practice, as it will contribute to a better ruling by the national court at the end of the day. Conversely, what is problematic is that the CJEU sometimes appears to reformulate questions where answering the exact question posed by the national court may require a controversial answer that would put the Court in a difficult situation.
Read the full article here!

Skadeståndsansökan för olagliga ID-kontroller i Öresundsregionen - Vems mänskliga rättigheter?

565 pendlare i Öresundsregionen har med hjälp av ett juridiskt ombud vänt sig till Justitiekanslern och kräver ersättning, eftersom de anser sig ha lidit både ideell skada och förmögenhetsskada av regeringens införande av ID-kontroller vid båt-, buss- och tågtransporter över Öresund (så kallat transportörsansvar). Skadeståndsanspråket glädjer många, inte minst de av oss jurister som vurmar för tanken på ett enat Europa där mänskliga rättigheter är en central del av samhället. Och det finns många juridiska skäl att ifrågasätta om lagen respektive förordningen som reglerar ID-kontrollerna är lagliga. Argument, och goda sådana, förs i skadeståndsansökan fram om bl.a. regelverkets förenlighet med reglerna om inresa enligt regeringsformen (RF 2:7) och Europakonventionen samt reglerna i Schengenförordningen ((EU) 2016/399) om tillfälliga gränskontroller. Därutöver ifrågasätter de skadelidande lagstiftningsförfarandets förenlighet med beredningskravet i RF 7:2 (om någon har missat så rekommenderar jag varmt att ni läser Lagrådets yttrande över regeringens lagförslag).

De skadelidandes argumentation bygger till stor del (utöver Schengenförordningens regler) på rätten för svenska medborgare att resa in i sitt eget land. Kring detta har jag inga synpunkter, och inte heller om det finns en rätt till ersättning på de grunder som de skadelidande åberopar (vilket jag principiellt tycker verkar rimligt). Det jag vill lyfta är en argumentation som saknas i skadeståndsansökan: Kan ett EU-medlemsland åberopa ett behov av att minska möjligheterna för asylsökande att resa in i landet som ett legitimt skäl för att inskränka den fria rörligheten för personer?

I skadeståndsansökan finns en något udda hänvisning till den fria rörligheten i EU-fördragets artikel 3.2  respektive EUF-fördragets artiklar 20, 21 och 77 samt avdelningarna IV och V EUF. För mig hade den rättsliga utgångspunkten för en argumentation om fri rörlighet enligt EU-rätten utgått från artikel 45 (fri rörlighet för arbetstagare) EUF, artikel 56 EUF (fri tjänsterörlighet) samt artikel 21 (fri rörlighet för EU-medborgare, även icke ekonomiskt aktiva). På så vis fångas både arbetspendlare (både anställda och egenanställda) och andra personer (t.ex. studenter) upp.

För mig är det uppenbart att ID-kontrollerna hindrar, eller i vart fall gör det mindre attraktivt, för EU-medborgare som vill pendla i Öresundsregionen och därmed utgör hinder för den fria rörligheten mellan Sverige och Danmark. Normalt sett är detta en ganska låg juridisk tröskel att ta sig över, eftersom EU-domstolen i sin praxis har satt ribban väldigt lågt för vad som kan utgöra en överträdelse av den fria rörligheten (se t.ex. mål C-55/94, Gebhard (1995) p. 37). Det som är intressant är dock om det finns något legitimt skyddsintresse som kan rättfärdiga införandet av ID-kontroller, trots att kontrollerna utgör hinder för den fria rörligheten.

I propositionen till lagen framför regeringen ganska svepande argument om att ID-kontrollerna är nödvändiga för att upprätthålla allmän ordning och säkerhet. Det verkliga skälet, som regeringen i min uppfattning är väldigt öppna och tydliga med, är att lagen syftar till att minska antalet asylsökande som reser in till Sverige (prop. 2015/16:67). Jag anser att det är svårt att påvisa en övertygande kausalitetskedja för att införandet av ID-kontroller och hur detta ska minska den påstådda överbelastningen av samhällsfunktioner. Om regeringen föreslagit mer direkta åtgärder för att upprätthålla sagda samhällsfunktioner, t.ex. anställa fler lärare för att ge stöd åt kommunerna som måste tillhandahålla platser i skolor åt nyanlända elever, hade jag köpt att inre ordning hade varit ett legitimt skäl. I fallet med ID-kontrollerna är emellertid det uttalade och direkta syftet att minska antalet asylsökande, i praktiken därmed att inskränka asylrätten, som i EU-rätten en högst åberopbar grundläggande rättighet (artikel 18 i EU:s rättighetsstadga).  

Vad innebär då detta ur ett fri rörlighetsperspektiv? Det följer av EU-domstolens praxis att hinder för den fria rörligheten endast är godtagbara så länge de inte strider mot grundläggande rättigheter (mål C-260/89, ERT (1991) p. 43). Min tolkning av EU-domstolens praxis är att en åtgärd vars själva syfte eller effekt är att inskränka en grundläggande rättighet inte kan vara godtagbar, med undantag för om inskränkningen av rättigheten i sig kan legitimeras. När det gäller ID-kontrollerna har jag framfört ovan att jag anser att sambandet mellan ID-kontrollerna och den inre ordningen och säkerheten är för indirekt. Mig veterligen finns det inte heller någon generell grund inom EU-rätten för att ett medlemsland ska kunna vidta åtgärder för att minska antalet asylsökande. Slutsatsen bör därför bli att ID-kontrollerna inte har ett godtagbart legitimt skyddsintresse, eftersom kontrollerna syftar till att inskränka asylrätten och det finns ingen grund för att rättfärdiga den inskränkningen i sig.

Att pendlarna i Öresundsregionen drabbas av ID-kontrollerna på ett sätt som förefaller stå i strid med deras rätt att resa in i Sverige (samt i strid med Schengenregelverket) är givetvis allvarligt. Av den anledningen vore det givetvis önskvärt om de drabbade pendlarna ersätts för sina skador och i förlängningen vore det en seger även för asylrätten om regelverket upphävs, oavsett hur upphävandet sker. Jag kan dock inte undgå en känsla av förargelse eftersom den viktigare frågan återigen riskerar hamna vid sidlinjen: nämligen hur ID-kontrollerna fått drastiska effekterna för möjligheten att resa in till Sverige för att söka asyl (en problematik som numera i viss utsträckning har förflyttats söderut i och med det, ur ett människorättsperspektiv, beklagliga avtalet (om det nu ens är ett avtal) mellan EU och Turkiet). Jag önskar därmed pendlarna all lycka till med deras ansökan vid JK. Om de är framgångsrika kan det bli en nyttig läxa för regeringen. Tyvärr riskerar nog läxan i praktiken att pendlares mänskliga rättigheter väger tyngre än de som söker skydd från krig och förföljelser.

A shout-out to the EC in UK's "Euromyths"

Unfortunately the local representation was not vigilant enough. The initiative is to be congratulated though:

European Commission in the UK - Euromyths

DG COMP’s settlement procedure evaluated in Timab Industries

After the Alrosa case, the General Court once again had the opportunity to evaluate the difference between the different remedies used by the Commission to enforce Articles 101 and 102 TFEU. This time the case did not deal with the commitments procedure, but rather with the settlement procedure in Article 10a of Regulation 773/2004. The Commission often switches between the different procedures (as last seen in the Google case here) or pursues hybrid cases, such as in the present case, where some parties are part of the settlement procedure and some part of the standard procedure. It is therefore important to know to what extent the Commission can use these different procedures, how they are linked and what rights undertakings subject to these procedures enjoy. This is exactly what the General Court had to decide on in the Timab Industries case, handed down yesterday (May 20, 2015).

The Nintendo-case and the cultural value of video games

The Court of Justice has in a recent judgement (which is also interesting on its' legal merits concerning the interpretation of directive 2001/29/EC) stipulated that video games are not merely the content of programming code. On the contrary the Court holds that:

[...] videogames, such as those at issue in the main proceedings, constitute complex matter comprising not only a computer program but also graphic and sound elements, which, although encrypted in computer language, have a unique creative value which cannot be reduced to that encryption [§ 23].

The result? Videogames are protected by the legislative framework in directive 2001/29/EC.

Directive 98/34: Don't let barriers stop your success!

Sometimes the enthusiasm of the Commission's PR people is exhilarating. DG Enterprise has recently released a informative video about the notification procedure according to directive 98/34/EC. The notification procedure obligates Member States to submit proposals for national technical regulation dealing with issues that have not been regulated by harmonising measures. As I am currently working with the directive at the Swedish National Board of Trade, I cannot but share this exciting short video to the public.

Enjoy!

I got published!

You can download my article entitled "Preventing the Cure: Corporate Compliance Programmes in EU Competition Law Enforcement" here.

Some fun reading for this week....

I know I should get a bigger post concerning a current issue together, but my thesis writing has been flowing quite well...which obviously means no time to write about anything else. For now, some links for this week....

Almunia on committments, remedies and settlements

Almunia on the Microsoft fine

Advances on private enforcement in the UK?

Daniel Sokol's new article "Policing the firm"

ECN Brief 1/2003

Breaking news: The Commission fines Microsoft €561 million for non-compliance with commitments

See here

Some fun reading for the week...

The Commission is being sued for damages because it has supposedly encouraged a breach of Article 101 TFEU which it later punished.

AG Kokott gives a controversial opinion on legal advice in the context of competition law infringements

The CJEU has given judgments in Åkerberg Fransson and Melloni

The Commission prohibits a merger between Ryanair and Aer Lingus (again)

Bruno Lasserre writes on Compliance as an Effective Tool of Competition Enforcement: The French Example

ThyssenKrupp files a constitutional complaint before the BVerfG alleging that the Commission and or the CJEU has breached Human rights obligations

Samsung overtakes Apple as no. 1 smart device producer

Samsung has now overtaken Apple as the no. 1 producer of smart devices. According to this article by techdigitt.com, Samsung shipped 250 million units in 2012, whilst Apple came in second with 218.7 million devices. However, Samsungs crowning does not seem to have been taken at the expense of Apple, which increased its total shipping rate by comparison to 2011. Perhaps all the patent wars between IT-technology producers is just a sign that competition in certain consumer technology markets is as fierce as ever?

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