Swiss Style Consultant Uf Widerluege. The Rise of the Robofacilitator?

The news has finally reached our “île paisible” that the Court of Justice in case C-194/14 P, AC Treuhand v. Commission, confirmed that consultancy firms (not trading on the relevant markets or on related markets) may be the subject of proceedings for infringement of Article 101 TFEU on the ground that they have facilitated a cartel.

Not only there is an embarrassingly high number of cartels around, but some consultants may even be competing to give a helping hand to prospective cartelists against appropriate remuneration. None of these consultancy firms has been so notoriously successful as the Swiss AC Treuhand, though. A recent paper presented at the OECD highlights that the Swiss “association management company” (AMC) based on the shores of lake Zurich has been called out in eight cartels since 1966 and concludes that “antitrust policy should be directed toward deterring the role of AMCs with regard to such anticompetitive activities”.  In aggregate over the eight cartels, AC Treuhand has been fined the comparatively meek sum of 175,000 euros 

While the Commission back in 1980 had already found that collusive services provided by a management company infringed Article 81 EC (now 101 TFEU), consultancy firms, including those of the recidivist kind, got away with their facilitating role rather brilliantly so far. A longing for antitrust purism or, ultimately, lightness, which we lemurs, alongside Advocate General Wahl, particularly cherish, might have in the past dissuaded the European Commission and national competition authorities (with the exception of the cloggies in a couple of instances) from taking a firmer stand in these matters.

In any event, the Court of First Instance (now General Court) in 2008 in AC-Treuhand I ruled, and its core tenet was confirmed and clarified by the CJEU last week, on the application of Article 101 TFEU (former Article 81 EC) to a consultancy firm which had contributed to the commission of an infringement. To my large mammal’s eyes, the “cartel facilitator test” put forth by the Courts looks roughly like this: (a) the firm contributes to the common anti-competitive objective of the participants to the agreement or concerted practice, even in a subsidiary, accessory or passive role: (b) at least reasonably foresees the conduct or plan pursued to reach the common anti-competitive objective (even if legal advice might be required to assess potential consequences of the given conduct or plan), and (c) is ready to take the attendant risk.

A further decision by the European Commission involves a different type of facilitator. In February 2015, the European Commission imposed the much less nominal fine of EUR 14.96 million on ICAP, a UK financial sector broker, for having facilitated six of the seven yen-libor cartels (currently on appeal). The juicy details of the allegedly “various actions” which had contributed towards the anti-competitive objectives pursued by the cartelists are still unknown to the non-initiated, however.

But the good old days, when cartels were facilitated by Swiss style consultancy firms, might be gone forever. Withered and died have the days of personalized, superior service offered to élite clientèle, of spectacular views of the Zurich lake with snow-capped mountains in the distance. More likely, the cartel facilitators of the future will be from ”the Valley” and its virtual surroundings. Time will tell whether a new era of impunity for "robofacilitators" dawns in the EU, in particular if the AC- Treuhand I subjective element of the “cartel facilitator test” is applied in an oversolicitous way by the Luxembourg-based judges.

(Uf Widerluege: pronounciation help).

Android: what's wrong with a free lunch?

Despite being rich in fruits, flowers, and young leaves, the rainy season in Madagascar is exceedingly long and rather dull. Luckily, news coming from Brussels suddenly brightened this lemur's grey and humid day. The European Commission decided to send a statement to Google containing allegations of abuses of dominant position in the markets for general internet search services. Moreover, the Commission opened an in-depth investigation as regards the mobile operating system Android.

It isn't unlikely that many a rainy season will need to pass by before European consumers will be able to experience any type of concrete results deriving from the ongoing Google proceedings. At any rate, it isn't expected that Google’s quasi de facto monopoly of the European general internet search markets will be challenged in any significant way. Not even Commissioner Vestager can raise the dead. One of the most disheartening lessons of the US and EU Microsoft Windows cases is that the same company still holds more than 90% of the allegedly bubbly market for desktop computer operating system. However, it can be hoped that these late enforcement feats will help establish some clear-cut, reasonable, enforceable boundaries to Google’s potentially fatal expansion into adjacent markets. Competition law isn't too boorish a tool for judging the high-pitched technologies of the "digital economy". In fact, few primates would disagree that Google's search algorithm should perform in a way that doesn't hamper competition on the merits.

What this lemur finds particularly enlivening is the news regarding the in-depth investigation zooming in on Android. Google's technological platform is not directly defined and controlled by the ownership of its operating system for hand held and other devices. Therefore, Android isn't retracing the path of the personal computer industry. The technology universe has become a much more complex place.The relative openness of Android's licensing terms has enabled other firms such as Amazon and Xiaomi to build their own platforms on top of Android. Instead, Google focuses its monetization efforts on a whole array of digital services (Google Search, Gmail, Google Maps, YouTube, etc.) that collect economically valuable user information. In this respect, and differently from the Microsoft saga, the operating system isn't the bottleneck and the locus for value capture in Android's ecosystem. The bottleneck has shifted from the device to Internet (or cloud)-based services. Most importantly, the Android operating system has also been embedded in glasses, watches, automobiles, TVs, refrigerators, etc.

Even a simple minded lemur can see why Google's governance of its Android platform deserves candid attention by competition authorities. The set of post-Chicago economic models developed specifically to account for  network effects presented competition authorities on both sides of the pond with arguments explaining the emergence and resiliency of Microsoft Windows as the dominant OS for personal computers. "Free lunch" rhetoric aside, the still largely untackled question that Commissioner Vestager and her team are set to dwell into is whether there are market characteristics providing Google with the incentives to fortify its grip on the technological platform not through innovation of its products but through the exercise of some form of market power. This hopelessly sentimental lemur considers that one of competition policy most honourable objectives should be to protect competitors' legitimate challenges to the hegemony of platform owners. Admittedly, here is where competition authorities spectacularly failed in the EU and US Microsoft cases.

Did Importers Go Bananas?

It's a well established fact that we as a species are particularly fond of bananas and don't shy away from resorting to some naughty tricks and cheat strategies in order to grab one. Therefore, it doesn’t come as a surprise to a seasoned lemur with a faible for competition policy that, as Advocate General Kokott put it, “hardly any other fruit has been the source over the years of as acrimonious and diverse legal disputes at European level as the banana” The last episode in this series of European savoury skirmishes over the beloved Musa fruit ended solemnly on 18 March 2015 by way of CJEU ruling C-286/13 P.

To my frequently perplexed primate’s eyes, it seems that this ruling will likely cheer up those who haven’t totally lost faith in the now largely démodé understanding of competition policy as aiming to protect also “the structure of the market and thus competition as such”. Instead, the majority of competition policy acolytes will be seen shaking their respective heads, with at least some of them breaking into a restrained smile at the ever assuaging thought of unstinting counsel fees.

As well known also in my remote part of the world, competitors in some cases do not fix the prices charged to customers or exchange information on those prices but rather exchange information on some form of list or quotation prices (“pure” information exchange). These jolly chinwags are unlikely to be considered by competition policy watchdogs as facetious gossip unworthy of further scrutiny. Following a three year-long investigation, the EU Commission found in 2008 that the exchange of quotation prices between bananas suppliers gave rise to a ‘concerted practice having as its object the restriction of competition' contrary to Article 81 (Article 101 of the Treaty on the Functioning of the European Union). The magic here is twofold. Being a "concerted practice", the EU Commission didn't need to demonstrate that the arrangement amounted to an agreement between the parties or any other form of consensual conduct. Second, being a restriction "by object" there was no need to demonstrate that the practice had any anti-competitive effect. The General Court in 2013 and the CJEU earlier this week confirmed the decision by the EU Commission.

Specifically, the banana cartel involved Chiquita, Dole, and Weichert, major importers of Latin/American bananas to Northern Europe (Austria, Belgium, Denmark, Finland, Germany, Luxembourg, the Netherlands and Sweden). The case had come to light following Chiquita’s leniency application (Chiquita was granted immunity from fines). The banana shipments to Northern European ports arrived on a weekly basis. Following the same time schedule, Dole and Chiquita on the one hand and Dole and Weichert on the other were holding regular chats on Wednesday-Thursday. The parties exchanged information related to pre-pricing factors, i.e. information related to future quotation prices, not actual pricing information. More specifically, the information exchanged concerned sales, supply conditions such as leftover import stocks at the ports, demand conditions and more general factors influencing price trends such as weather forecasts. On Thursday mornings between 11 a.m. and 11.30 a.m each week, Chiquita, Dole and Weichert sat their respectively quotation prices and notified them urbi et orbi, i.e. to customers, to the trade press, and to competitors. These quotation prices applied to untasty green, unripe bananas  (and to yellow banana on the basis of the green price plus a ripening fee). After setting quotation prices, on Thursday afternoon or later, the importers started chummy negotiations with retailers and distributors. The actual banana price paid by the latter was the result either of weekly negotiations or was set on the basis of pre-established pricing formulae linked to the quotation price of the seller. In other words, the actual transaction prices were negotiated bilaterally (and discretely) between the banana importers and their customers. Therefore, and differently from the quotation prices, the outcomes of such bilateral negotiations were not publicly observable.

We ringtailed lemurs are renowned for our social intelligence, despite the comparatively small brain size. We form jovial social groups and communicate in a whole array of effective and elaborate ways, by scents included. As somebody with a fine eye for complex social interactions, I’m therefore inclined to share the EU Commission’s view that, although the quotation prices were not the actual prices paid by customers, they "served at least as market signals, trends or indications as to the intended development of banana prices". The assumption, it seems to me, is that since the quotation prices  served  at least as  reference  point  for  bilateral price  negotiations with retailers (if not directly linked to quotation prices in accordance with a pre-specified formulae), the  actual prices tended to be different than absent the regular pre-pricing chats between banana importers. Importantly, the CJEU holds in this respect that proof of a “a direct link between the information exchanged and the wholesale prices” is not necessary for the finding of an anticompetitive object. It's in fact sufficient to demonstrate “that information is exchanged between competitors about factors relevant to their respective pricing policy or — more generally — to their conduct on the market.” Shrewd banana importers, the GC found, can learn preciously much from quotation prices: market signals, market trends and/or indications as to the intended development of banana prices. Moreover, at least in some transactions, banana prices were directly linked to the quotation prices on the basis of contractually agreed pricing formulae. Otherwise, as pointedly noted by Advocate General Kokott, the whole pre-pricing communication drill would seem to make alarmingly little sense: why bother “if the undertakings' own quotation prices and the information obtained about the quotation prices of competitors were not to be factored into the respective undertakings' future conduct on the market and the prices actually applied by them”? Competition policy recognizes that humans, also those having embraced the business creed, can be a bit mindless at times, but claims of widespread market obtusity are hardly sustainable.