Conference Debriefing (27): EU Competition Conference 2021

Conference Debriefing (27): EU Competition Conference 2021

Following the bi-annual tradition the EU Competition Conference was held again this year – not in Brussels but instead all over Europe. Competition law practitioners submerged in the virtual world to discuss the latest developments in EU Competition Law – Patrick Hauser and Lisa Pawlak have the details. 

Name of Event: EU Competition Conference

Topic: Latest developments and upcoming challenges in key areas of EU competition law, especially the “new” Art. 22 EUMR referral regime in merger control, the reform of EU rules on horizontal and vertical restraints, the regulation of digital gatekeepers, as well as foreign subsidy control and investment screening.

Place & Time: 28 October 2021, virtually via REMO

Hosts: CMS and the Institute for Competition Law (IKartR) of Heinrich Heine University Düsseldorf (HHU)

Audience: Mainly competition law practitioners across Europe from all professions, i.e. in-house counsel, lawyers, competition officials as well as academics including many doctoral researchers inter alia from HHU. The keynote was held by Director-General of DGComp Olivier Guersent. The timing of the conference, which started at noon European Central time allowed both Fiona M. Scott Morton (Yale, United States) as well as Keen Won Shin (South Korea) to attend at somewhat reasonable times in their respective time zones.

Another Online-Conference and not even hybrid? I thought that conferences could be held in person again?

We hoped so, too! However, due to the developments of the Covid 19 pandemic and considering that more than 700 people from all over Europe registered for the event, the virtual conference seemed like a sensible choice: Safety first! 

Alright, if the conference focused on the latest developments of EU competition law, surely you talked about the current reform of the EU rules on vertical restraints?

Well of course we did! In fact, the conference kicked-off with a panel on the reform of the Vertical Block Exemption Regulation (VBER) and the Vertical Guidelines. Following the publication of the draft reform rules (a short overview is (of course) available on D’Kart) the Commission is currently busy in sifting through the comments received during the public consultation to finalize the rules which shall enter into force on 1 June 2022. It, thus, seemed like the perfect time for our panelists from the cars (Julia Portmann, Porsche) and beverages industry (Ben Graham, AB InBeV, and Johannes Stampfer, Coca Cola Hellenic Bottling Comp.) to discuss the reform together with a national competition official (Erwann Kerguelen, Autorité de la concurrence).

The four panelists of the “vertical”-panel with moderators Malgorzata Urbanska and Markus Schöner

Give me the essentials!

While there was agreement that the VBER had to be revised due to the significant changes in retail channels in the last decade, especially the emergence of e-commerce, the industry representatives (not surprisingly) heavily criticized that dual distribution is subject to much stricter rules in the draft VBER and argued the benefits for consumers of dual distribution. There was consensus that the proposed aggregated market share threshold of 10% for an exemption was too low and would (at least for the multinational companies represented on the panel) effectively put dual distributions under the Vertical Guidelines. In fact, even Kerguelen agreed that the 10 % threshold should be re-assessed! It will be interesting to see whether the Commission will be swayed by these arguments. Another interesting point raised was the question, whether the new VBER and Vertical Guidelines should again be in force for 12 years, or whether a shorter period seems adequate given the speed of market developments.

The final VBER will surely be scrutinized intensely. What else was discussed?

There was a focus session on foreign subsidies control, where Christof Schoser (Head of the Taskforce Third Country Subsidies at the EC) presented the EC’s proposal for a foreign subsidy regulation which was published in May 2021. 

Wait. Aren’t government subsidies to undertakings in the EU already regulated in the EU?

Only subsidies granted by Member States are currently regulated while subsidies granted to undertakings by third country authorities are not, although these subsidies could distort competition in the single market by allowing the subsidized companies to compete more strongly. The proposed new regulatory mechanism aims to fill this gap.

Surely this proposal is addressed at China?

One would think so, especially given the fact that China has a program in place to subsidize firms in sectors it considers strategic. However, Schoser was adamant in stressing that the regulation is in principle neutral on sector and country and only aimed at ensuring a level playing field. “We will have to find out, where the focus will be”, as he put it. Procedural wise there is a key difference between the classic EU state aid rules and the new proposal is the burden of proof. In classic EU state aid rules the respective Member State has to prove that a subsidy is compatible with state aid regulation. This burden of proof is, however, reversed for foreign subsidies, where the Commission has to prove the incompatibility. 

Speaking of a new act, I’m sure you also talked about the DMA?

Fiona Scott Morton (Yale University, USA), Kee Won Shin (Bae Kim & Lee, South Korea), Oliver Bethell (Google) and Rupprecht Podszun (HHU) discussed the new rules for gatekeepers in the digital economy. Btw: What is Oliver Bethell trying to tell us with the skeleton in the background? Is it that Google is here to stay forever or that we will all be dead by the time that gatekeeper regulation comes into force?

The DMA consultation process is ongoing (see here for an overview of the compromise of the European Parliament). During that process the questions of who should be addressed (only the GAFAs (“GAMAs”) or who else?), what are the aims of the DMA and how exactly should the new, sometimes very detailed rules be enforced, surely need to be answered as Rupprecht Podszun pointed out. But besides these (surely important) technicalities, Podszun believes that society as a whole – and not only lawyers – has to ask itself first where boundaries for certain companies need to be drawn. Do we, for example, want our children to be smartphone addicts?

Puh, surely the answer to that question is a no-brainer. But before we drift too far off into existential subject matters (i.e. What should the world be like? What do we want for us and our children?) did you gather any insights from the international experts? 

There was a huge contrast between the experiences shared by Fiona Scott Morton from the US and Kee Won Shin’s report from Korea. While Scott Morton believes that the EU is far ahead when it comes to finding ideas to regulate the power of big-tech companies, she hoped that the USA might be able to catch up by passing bills to prohibit discrimination and to promote interoperability. Ideas that partly mimic the DMA. However, the moral bankruptcy which became obvious recently as a result of the information shared by former Facebook employee Frances Haugen and the lack of transparency in general are only two of the many problems. Nevertheless, congress doesn’t seem to pass anything soon.

Kee Won Shin on the other hand explained that South Korea’s Trade Commission (KFTC) is not shy about imposing severe fines against domestic as well as international companies (especially if it comes to cases of self preferencing). Shin explained that regulation against domestic tech firms, being more present than the international ones, exists as long as South Korea does. In the past those rules were enforced quickly – even though the decisions may not in all cases have been perfectly beneficial for the consumer. The approach being to do something fast and to look at the consequences later. And this was all possible with the traditional tools and instruments that worked pretty good.

Act fast and enforce quickly. That seems like sensible advice that was not practiced in the EU regarding big tech firms.

Exactly the point that Fiona Scott Morton raised. She believes that the DMA would have to be enforced very quickly. While Oliver Bethell (as the head of Google’s EMEA competition team something like the “villain” in this discussion) agreed that new rules were necessary he raised concerns that a lot of the terms such as “interoperability” could be understood differently amongst consumers, companies and authorities. While the concept was easy to agree to, the application in practice was very difficult. Similarly regarding data sovereignty it is apparently very difficult how “default” should be defined, what actual consent looks like and which services have to be scrutinized. Since technicalities are crucial for the practical implementation, Bethell would like to set a technical framework before discussing the questions about the actual aims of the DMA. Especially when it comes to consumers’ choice.

I bet that didn’t sit well with Fiona Scott Morton.

No it did not! In her opinion Google had enough time to figure out a technical framework. A choice screen is not that hard. If Google really wanted to do something, it would have done it by now. In her opinion, instead of trying to find the perfect framework, the law has to move forward and do something. There was not enough time to keep discussing beforehand – that could be done simultaneously. She thought it funny that after 10 years of litigation with Google, there were now concerns about moving too fast. Competition should happen in the market rather than for the market. Also, in order to achieve fairness, one had – in her opinion – to rebalance the bargaining power by redistributing the surplus to consumers and small businesses. The DMA should be aiming at these two goals when talking about contestability and fairness. 

Do say (1): “Ex post fines just don’t get the job done” (Fiona Scott Morton)

Do say (2): “If we don’t do proper rules now, something bigger will hit us in a couple of years” (Rupprecht Podszun)

This seems like a very heated debate. Were the discussions as fierce in other panels?

At least not on the “regulators-panel” that focused on merger control and foreign direct investment.

The “regulators-panel”: Colin Raftery (Mergers, Competition and Markets Authority UK), Florentine Kessler-Grobe (Ministry for Economy and Energy, Germany), Sergio Sinovas (Comisión Nacional de los Mercados y la Competencia, Spain) and Stefan Ruech (Federal Competition Authority, Austria)

Florentine Kessler-Grobe from the German Ministry of Economics first gave an overview over the current state of foreign direct investment screenings (FDI screenings). In her view the increase in cases (from 40 cases in the “Kuka year” 2016, to already 250 cases in 2021 in addition to 200 cases from the EU) she has seen in recent years relates partly to the widening of the scope but also to an increased awareness. She conceded that it is not always obvious whether an FDI screening is necessary, given that there are no turn-over thresholds and FDI screenings are focused on security, rather than market share issues. However, Florentine Kessler-Grobe had two pieces of advice: First, if in doubt the parties can always ask her (or somebody else in the ministry). Second, “be open and take a lawyer”! 

Well at least the second advice is easy enough and at least the lawyers will be glad to hear it. What did the regulators from the competition authorities have to report? 

For one, in the represented EU countries there seems to be already a good cooperation between competition authorities and the investment screening departments. The UK seems to be lagging behind a bit, but Colin Raftery explained that there is a new regime in the UK as well which will come into force at the start of 2022 and he expects a relatively close cooperation. Talking about cooperation, luckily Brexit doesn’t seem to have affected cooperation between the CMA and the other European competition authorities! 

Do say (3): “The benefit of being able to talk to other really good regulators is something that we find is key to arriving at the right answer”. (Colin Raftery)

Do say (4): “Cooperation is good, was good, and will be good in the future”. (Stefan Ruech)

Let’s start discussing the new approach of the EU Commission regarding Art. 22 EUMR.

As you know, the EU Commission earlier this year – in a u-turn to its previous practice – issued a guidance encouraging national competition authorities to make use of the possibility of referral laid down in Art. 22 EUMR even if the EU or the national threshold is not reached. Competition practitioners from private practice were not necessarily thrilled, to put it mildly. However, maybe the uproar was a bit premature. At least Sergio Sinovas and Stefan Ruech said that Spain and Austria respectively would not refer cases to the Commission if the local thresholds are not met, as they currently see no enforcement gap. 

That’s good to hear! As interesting as this panel and topic seem, you must have had a keynote speech as well!

Olivier Guersent discusses the latest developments with Annemieke Hazelhoff and Jannik Otto

Yes! The Director-General of DGComp Olivier Guersent spoke about new challenges and approaches in EC Competition policy and what can we say, considering the points raised by Olivier Guersent the Conference was spot on. However, regarding the “new” Art. 22 EUMR referral regime, Guersent stressed the point that he did not consider it a new interpretation of Art. 22 EUMR. Rather, from the Commission’s point of view these referrals had always been legally possible and the new guidelines were only meant to provide a safety net to protect EU consumers and businesses. As far as the reform of VBER and the Vertical guidelines are concerned the Commission has three objectives in mind. Firstly, the safe harbor needs to be adjusted so that only agreements which fulfill the criteria of Art.101 (3) TFEU are excluded. Secondly, stakeholders must be provided with up-to-date guidance to inter alia ensure a more harmonized application of the rules across the EU. Which, lastly, shall also serve to reduce compliance costs for businesses. That market dominance of big tech companies is a key focus of the Commission is surely no surprise either. According to Guersent, the Commission wants to tackle the challenges through different approaches. On the one hand theories of harm as well as currently available tools and remedies must be adapted and reconsidered. On the other hand, new regulations like the DMA are necessary. Regarding the criticism that the DMA may be a solution for the few, but not for the many, Guersent declared that „the DMA is no magic stick“. It can therefore not solve all the problems but as one of the tools in the whole (international and national) enforcement system it can be a part of the new approach towards powerful gatekeepers. The last key challenge in the near future according to Guersent is dealing with agreements that have a positive impact on the environment. Do those agreements harm competition and should therefore be forbidden? Or do these positive effects maybe negate any possible harms? 

Ha! Finally a point that the conference didn’t address! 

Hold your horses. The conference didn’t conclude with the key note speech. We still have to report from our panel on horizontal cooperation. 

The “horizontal panel”: Carla Beuret (Wettbewerbskommission Switzerland), Christane Dahlbender (MARS), Maria Jaspers (DG Comp) and Theon van Dijk (Autoriteit Consument & Markt, Netherlands)

Christiane Dahlbender explained that in her experience regarding any agreement to promote sustainability which might lead to higher consumer prices, there was always the feeling that competition law is in the way. The Dutch Authority for Consumers & Markets seems to share that feeling, as their chief economist Theon van Dijk laid out how the draft guidelines on sustainability agreements in the Netherlands want to take away this perception. Maria Jaspers, however, seemed more cautious, although according to her, DGComp is in the vast majority of cases on the same page as the Dutch competition authority. However, given the experience of DGComp that at least some firms collude to delay more sustainable products (one of the cases was discussed on D’Kart) she remained skeptical and highlighted that companies should compete on the demand for more sustainable products.

So there won’t be an exception for sustainability agreements in the new Horizontal Guidelines?

We didn’t say that! Maria Jaspers just remained cautious and also pointed to other ways to “plant certain messages”, such as policy briefs or an outlook to Horizontal Guidelines. Due to the delicacy of these guidelines, they would probably be too cautious and would have to be complemented by cases and explanations. In her view, the sustainability area would be the area, which may allow the Commission to use the tools in the toolbox that have not been used so far. She also seemed to indicate, that the Commission would provide guidelines on individual requests, but they had received none. Carla Beuret on the other hand suggested that the Swiss rules gave some more room for justification, as the rules not explicitly refered to “customer welfare” as the necessary benefits to outweigh any negative effect on competition.

So, to demonstrate solely a social benefit would suffice? 

No, no. Beuret didn’t go that far. She clarified that simply a social benefit without reference to a market would not suffice. Theon van Dijk on the other hand stated that benefits to society as a whole just would have to be large enough to offset increase in prices. 

This sounds like a very exciting conference. Too bad that I missed it.

Well, we have good news in that regard. Michael Bauer from CMS announced at the end, that CMS and IKartR are currently considering to host the originally bi-annual conference again already next year! While a participation in person will hopefully again be possible, most likely the event will also be streamed online, so that as many interested people are able to participate in this free of charge-conference!

Lisa Pawlak and Patrick Hauser are researchers at the Chair for Civil Law, German and International Corporate, Business and Competition Law at Heinrich Heine University Düsseldorf (HHU) of Prof. Dr. Christian Kersting, LL.M. (Yale). Lisa Pawlak is a doctoral student and Patrick Hauser is a post-doctoral fellow and also the manager of the Institute for Competition Law (IKartR) at HHU.

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