Last orders at the OFT.....

Of particular interest to us UK based competition lawyers, today is the last day of trading for the UK’s Office of Fair Trading.....

On Tuesday, 1 April 2014, the OFT is no longer and its powers (along with those of the UK’s Competition Commission) are officially transferred to the newly constituted Competition and Markets Authority (‘CMA’).

Apart from a change of address (the UK competition regulator is moving a stone’s throw north from just off Fleet Street to Southampton Row) and an efficiency gain of a reduction in a five to three lettered acronym (OTF + CC → CMA), it will be business more or less as normal....

The CMA is going to have its hands full given a likely investigation into the UK energy sector, and the OFT’s and CC’s existing workload will of course transfer across. The remaining competition related provisions of the Enterprise and Regulatory Reform Act 2013 (‘ERRA’) also come into force on 1 April 2014, which include additional powers for the CMA over and above previous powers vested in the OFT.  For more on these see here.  The CMA is under a considerable amount of political pressure to perform.  Let’s hope that the merger of the two current institutions does result in the increase in efficiencies and reduction of costs expected by the UK Government.  Two stated areas of interest for the CMA on which we will be keeping a particularly close eye are public markets (such as developments further to the OFT’s recent market study into the public sector ICT sector – see here for the OFT’s final report) and online business models (see for example our previous post here on the recent application of competition law to online distribution models by several national competition bodies). Watch this space.

Helen Hopson

Object restrictions on the menu

Many AG opinions are just a forgettable ‘entremet’ between the General Court hors d’oeuvre and the main course offered by the Court of Justice.  But once in a while a game-changing Advocate General Opinion is offered up – for me (and many competition lawyers, particularly those with an interest in the comp-IP interface), these would be the opinion of Sir Francis Jacobs in Oscar Bronner and that of...  Sir Francis Jacobs in Syfait / GSK (a case in which the main meal was considerably delayed). 

And now we have the Opinion of AG Nils Wahl in Cartes Bancaires (currently available only in French or Greek*).  The central subject of the opinion is the question of whether the tariff arrangements of Cartes Bancaires (a grouping of French banks) in relation to credit cards is an agreement which restricts competition by ‘object’.

There has been a marked expansion of the object category of anti-competitive agreements over recent years.  Notably, last year’s Court of Justice ruling attracted a barrage of criticism for identifying an object restriction on the basis of a complex factual analysis which many believed was more suited to an ‘effects’ case.  This matters, of course, because it is considerably easier for competition authorities (and indeed, private claimants) to prove an object infringement, and considerably harder for companies to defend such an allegation.

AG Wahl takes direct aim at this blurring of the categories.  His arguments are buttressed by international practice (notably the US distinction between ‘per se’ and ‘rule of reason’ infringements), and analysis of the policy reason for having object infringements at all, noting in particular the benefits of procedural economy for the regulator and legal certainty for companies operating on the market.  But, he says: “Such advantages  will, however, be obtained only if recourse to the notion of restriction by object is clearly circumscribed” – if this is not the case, “this could lead to the inclusion in the object category of conduct where the harmful effects on competition are not clearly established”. 

For this reason, a “damaging slippage” between object and effect-type restrictions must be resisted, with the former category being reserved for “conduct which presents an intrinsic risk of particularly serious prejudicial effects or of conducts where it can be presumed that the detriment to competition outweighs the pro-competitive effects”  (my underlining).  Similarly, a “restrictive” interpretation must be given to the question of which agreements are anti-competitive by object.  And in this case?  AG Wahl has in effect said “must do better” to the General Court which, he recommends, needs to look at the case again in order to establish whether the agreement was really anti-competitive by object.  In doing so, it has been given a strong steer that comments made by individuals within one or two of the (many) parties to the agreement have little or no bearing on whether the agreement is actually restrictive by object.

Attentive readers may be asking – why is this a Competition Law / IP interface issue?  Well – perhaps it’s simply the case that some things are so important that we feel compelled to transcend our ‘CLIP’ remit.  But it is also worth bearing in mind the implications for interface cases which are currently in the Court pipeline.  For example, it is clear from comments made by Alexander Italianer (Director General of DG Comp) in a speech last year that the Commission’s recent Lundbeck decision, its standard-bearer case in the area of patent settlement agreements, is based on the identification of an object restriction.  This contrasts with the US Supreme Court’s use of a ‘rule of reason’ test in Actavis, as we discussed a few months ago.  The Commission’s press release announcing the Lundbeck decision also emphasises a couple of statements which suggest the parties’ ‘bad intention’.  If the Court of Justice confirms AG Wahl’s analysis in relation to object infringements and the (ir)relevance of pre-contractual statements in Cartes Bancaires, the task of DG Comp’s legal service in defending its decision will have been made that little bit harder.

But for now, we will have to wait and see whether AG Wahl’s Opinion will prove to be ‘an indigestible dish’** for the Commission, or whether it will fade into insignificance when the Court of Justice rules.

* Translations – from the French – are mine; forgiveness is sought for any errors...

** Kudos for readers who can spot the Competition Law/IP interface case from which I’m quoting here...

Sophie Lawrance

US judge questions illegality of seeking an injunction

Following on from Osman’s recent post ‘The FRAND debate: is the tide turning?’ see here, FTC Commissioner Wright’s viewpoint has recently been echoed by Paul Michel, a former chief judge of the U.S.'s top patent court (the U.S. Court of Appeals for the Federal Circuit).  He questioned at a U.S. conference earlier this week how it could possibly be illegal merely to seek an injunction (whether for an SEP or non-SEP).  Michel has spoken out previously against restricting the ability of patent holders to enforce their patents (in the context of the U.S. anti-troll legislation currently underfoot) asserting that such developments will weaken the patent system, not strengthen it. 

I agree with Osman that it is odd that such comments are being made on the other side of the Atlantic so late in the day.  Many in Europe have been making similar statements since the EU Commission opened its investigation into Samsung in January 2012.  For example, in mid-2013 Sir Robin Jacob, a former judge of the Court of Appeal of England and Wales, speaking at a UK conference equated the EU Commission's current enforcement activities to 'standing outside a court door with a gun threatening people who want to go inside' suggesting that the Commission 'is saying it is above and better than the courts'.  

When engaging in this debate, it is important to remember that national courts often deny injunctions for patents that have been found to be valid and infringed.  The U.S. Supreme Court’s eBay v MercExchange judgment sets out a four factor test for deciding whether to grant a permanent injunction in (all) U.S. patent cases.  The judgment makes clear that an injunction is not an automatic right for a patent holder upon establishment of validity and infringement but that in determining whether to grant a permanent injunction, a court should adhere to “well established principles of equity”.  In the UK, it is also well established that injunctions are equitable remedies the grant of which is at the discretion of the court.  For example, in July 2011, the English court denied IPCom an injunction for an SEP upheld as valid and infringed by Nokia pending determination of Nokia’s outstanding FRAND defences.  Injunctions are also often denied even in the case of non-SEPs.  For example, the English court recently stayed an injunction in the Nokia v HTC proceedings (see my previous post here) and US Judge Lucy Koh of the U.S. District Court for the Northern District of California has recently denied Apple an injunction for a non-SEP on the basis that there is no “requisite causal nexus” between Samsung’s infringement and Apple’s claimed irreparable harm (irreparable harm is one of the eBay factors).  This legal landscape underpins the comments made by Paul Michel and Sir Robin Jacob, both retired judges, who apparently object to the proposition that parties can be prevented from seeking an injunction without giving the court the opportunity to assess the facts and exercise its discretion (and that the seeking of an injunction in such circumstances can be abusive).    

These latest comments by Michel and FTC Commissioner Wright are unlikely to cause the EU Commission to deviate from its chosen paths as against Samsung and Motorola in its investigations into both companies’ enforcement of their SEPs in Europe, nor indeed for the FTC to amend its settlements with Google and Bosch, both of which impose limitations on the circumstances in which injunctions can be sought.  However, the more that these types of comments are forthcoming, the less likely perhaps it seems that an industry-wide initiative significantly limiting the seeking of injunctions for SEPs will arise... All eyes will be on ETSI when it meets again on 14 - 16 May 2014 to continue discussions on this topic.

Helen Hopson

BREAKING NEWS – New EU Technology Transfer Regulation and Guidelines

The European Commission has announced that it has adopted a revised technology transfer block exemption regulation and new technology transfer guidelines (see press release, FAQsnew TTBER and the new guidelines).  The TTBER and guidelines come into force on 1 May 2014 and will apply for twelve years.

Given that the existing TTBER and guidelines are due to expire on 30 April, the Commission had been expected to release a revised text in November or December 2013.  The delay was likely the result of the initial draft being subject to substantial criticism (see consultation feedback here). Despite this, the finalised text remains broadly the same as the earlier draft, although the Commission has included some significant revisions.  These are noted below:  

Termination-on-challenge clauses in exclusive licences will continue to be block-exempted:

  • Existing position and draft proposal:  under Article 5(2) of the existing regulation all ‘terminate-on-challenge’ clauses can be block exempted.  The Commission had initially proposed to remove this exemption, requiring all such clauses to be subject to case-by-case scrutiny.  This was heavily criticised for being: (i) likely to make the agreement of new licences more difficult; (ii) likely to cause disruption to licensing arrangements once completed; and (iii) liable to be circumvented by a reframing of the licence terms by the licensor.  The proposal was seen as particularly bad for SMEs, e.g. in the biotech industry – if the change had come into force larger licensees could use the threat of revocation actions to ‘renegotiate’ the terms of deals they enter into. 
  • Final revised text: in light of the consultation feedback, the Commission has revised its text such that termination-on-challenge clauses will continue to benefit from the block exemption where they are included in exclusive licences (and subject to the market share thresholds being fulfilled).  In non-exclusive licences these clauses will in future be subject to individual scrutiny before exemption.  The guidelines also now include new text which states that termination-on-challenge clauses are unlikely to be exempted in the field of standardised technologies (e.g. mobile telephony). 

Clearer (or less unclear!) guidance in relation to settlement agreements

  • Existing position and draft proposal: the current Technology Transfer Guidelines are rather liberal where settlement agreements are concerned.  However, given the change in Commission priorities in this area, with its annual patent settlement monitoring exercise, the shift towards a more restrictive approach in the draft proposal was unsurprising.  The draft proposal was, however, unsatisfactory in a number of particulars, not least in the conflict with the Monitoring Reports.  According to these, licences granted in conjunction with a settlement agreement represent a ‘value transfer’ from the patentee, thus bringing the agreement into the ‘potentially problematic’ zone.  The references to patentees ‘knowing’, or being in a situation where they ‘ought to have known’ that their rights were invalid was also very problematic.
  • Final revised text:   the guidance provided on these issues has been somewhat clarified.  The Guidelines explain that a particular concern around licences grants in conjunction with settlement is where they relate only to ‘some of the markets concerned’ – i.e. the theory of harm is based around market sharing.  It is notable, however, that the Guidelines refer to the need for such licences to comply with sections of the TTBER applicable to competitors – in other words, parties in litigation with each other are regarded as competitors, and any subsequent licence grant is thus to be reviewed under the stricter list of hardcore terms.  Despite the removal from the final draft of the concept of licensors who know, or “ought to know” that their rights are invalid, the underlying assumption appears to be that the patent rights which were the subject of the litigation should be assumed to have been invalid or not infringed by the other party, and that there was therefore no relevant blocking position.  Indeed, the separate section of the Guidelines dealing with when parties should be viewed as potential competitors considerably broadens that concept, requiring ‘particularly convincing evidence’ of a blocking position where both parties have an interest to claim one (i.e. in many settlement situations), and also emphasising that ‘substantial investments already made or advanced plans to enter a market can support the view that the parties are at least potential competitors, even if a blocking position cannot be excluded’.  Strangely, this is the opposite approach to that which was taken in the recent Teva/Cephalon merger decision, as we discussed recently on the Bristows CLIP Board blog.
  • The guidance on settlement agreements maintains the endorsement in the draft proposal of broad freedom-to-operate type cross licences, provided there is no limitation on the parties’ ability to gain a competitive lead over each other in product pipelines – this should be welcome in the IT and TMT sectors in particular. 

Confirmation of safe harbour for technology pools

  • Existing position and draft proposal: the section on technology pools in last year’s draft Guidelines took with one hand – explaining that licences granted by pools could not be covered by the TTBER – and gave back with the other, by providing for an informal safe harbour for pools. This covered not only the creation of the pool but also its subsequent licensing out, regardless of the pool’s market share.  Finally, the Commission clarified that the definition of essentiality covered both commercially essential as well as technically essential technologies.
  • Final position: the latest text remains largely the same, albeit with the addition of a few minor clarifications.  The safe harbour is retained, as is the express statement that essentiality covers both commercially essential as well as technically essential technologies.  A related change is that the Guidelines now expressly state that the mere fact that a technology holder declares a technology as essential does not imply that such a technology is in fact (commercially or technically) essential, or remains so throughout the life of the pool.  This may be of (marginal) assistance to parties that wish to challenge the true essentiality of declared essential patents (however, this is arguably uncontroversial as it is well understood that many declared patents are not truly essential).  The latest Guidelines describe ‘indicating factors’ that pooled technologies are complements (i.e. truly commercially / technically essential) as opposed to substitutes: (i) the technology holders remain free to license their technology individually (as well as via the pool); (ii) the pool is also willing to license the technology of each party separately; and (iii) the total royalties charged when taking separate licences to all pooled technologies do not exceed the royalties charged by the pool for the whole package of technologies.   However, it does not appear that there is any actual obligation on the pool to make such separate licences available.

Commission presses ahead with removal of block exemption for grant backs of ‘non-severable’ technologies

  • Existing position and draft proposal: under Article 5(1) of the existing regulation exclusive grant backs of non-severable technologies can be block exempted.  The Commission was concerned that this provision would limit follow-on innovation by licensees as such firms would have little to gain from experimenting or innovating with licensed technology.  The proposal was again heavily criticised by many in industry for being: (i) likely to make the agreement of new licences more difficult; (ii) likely to disrupt ongoing licensing relationships.   

  • Final revised text: despite the criticism of its position, the Commission is pressing ahead with its proposal.  Disappointingly, the transitional period remains limited to one year, so agreements already in force will need to be compliant by 30 April 2015 at the latest.            

Further thoughts...

These are our first impressions of the proposals.  We are not entirely convinced that the Commission’s revisions to its initial text have really resolved all of the many legitimate concerns expressed during the consultation process.  We intend to follow up with some further thoughts once we have had a chance to review the new texts more thoroughly.

The Competition and EU team

Pay-for-delay: an article on recent-ish developments

Those of you who are following developments in the Commission’s ‘pay-for-delay’ investigations may find my short article in the Journal of European Competition Law & Practice of interest – see here.  In this, I summarise the Commission’s two 2013 decisions in relation to citalopram and fentanyl.  I then explore some of the difficulties in the legal analysis, how the approach taken by the Commission might be seen to contrast with that of the US Supreme Court in Actavis, the role of intent and the implications of the likely changes to the Commission’s technology transfer regime.  There’s certainly a lot packed into the short article and as always, I’d be pleased to hear your thoughts.

Of course there are Commission settlement investigations which are still open, so we can expect some further insight into its approach in due course.  Happy reading!

Osman Zafar

The FRAND debate: is the tide turning?

The outspoken FTC Commissioner, Joshua D. Wright, recently made a speech where he spoke out against the FTC’s “new IP agenda” and its opposition to the availability of injunctive relief for standard essential patent (“SEP”) holders.  Wright states that the FTC now appears to view merely seeking an injunction in respect of an SEP as anti-competitive and against the public interest (he cites the FTC’s actions in Bosch and Motorola).  He suggests that the FTC’s approach is a departure from the long-established ‘symmetry principle’, i.e. that the application of antitrust law to IPRs should be in parity with the approach to real property, and that it is not necessary to have a different analytical framework or special rules to enforce the antitrust laws in order to promote consumer welfare.

"IPRs, like other property rights, play  a  critical  role  in  a  property  rights  regime  focused  on  voluntary  commercial  exchange and competition.  Linking the antitrust analysis of IPRs to the already well- developed  toolkit  available  to  analyze  the  economics  of  business  arrangements  involving  real  property  rights  encourages  methodological  consistency  and  analytical  rigor in identifying the appropriate limits on the exercise of IPRs."

The departure from the symmetry principle, in his view, risks creating uncertainty and a “regression towards an antitrust enforcement regime that is overly hostile to the exercise and exchange of IPRs.”  Highlighting the need to acknowledge the risk of reverse patent hold-up (or licensee ‘hold-out’ as it is sometimes referred to) in addition to that of patent hold-up, Wright points out that even if the seeking of an injunction in this context does constitute a breach of contract, such an act does not in itself generally violate competition law.  Furthermore, he vehemently rejects the notion that a FRAND commitment comprises an implicit agreement not to seek an injunction – no SSO appears to forbid injunctions and some have expressly considered and rejected such a rule.

Wright’s comments are fascinating, whether you agree with his views or not.  First, it is refreshing to see this type of open debate within a competition authority – this is in stark contrast to the highly polished (and sometimes quite repetitive) official lines taken by EU competition officials when speaking publicly – I’m all for openness about the difficulties that officials must be debating internally. 

Second, Wright’s advocacy for consistency reminds me of the recent paper by Professor Petit, in which he discusses the appropriate and consistent ‘legal standard’ that ought to be applied in the EU in assessing whether those who have given FRAND commitments for SEPs have abused a dominant position by seeking, or threatening to seek, injunctions (see our earlier post on this here).  A thoroughly excellent read for anyone genuinely interested in the legal theory, and not just the policy, underpinning these cases.  

Finally, although of course the FRAND debate has been going on for many years, it’s bizarre that these more high level debates are taking place so late in the day, on both sides of the Atlantic.  Personally, I think it’s always useful to oscillate from the micro to the macro, and from professional advocates’ views to more academic theories.  Perspective is important – I guess as the adage goes, better late…

Osman Zafar

Collusion in the standard-setting context – are we likely to see claims in the EU?

I was interested to read elsewhere in the blogosphere about a current US antitrust case concerning the selection of technology by standard-setting organisations.  A guest post by Burt Braverman on the IP Vancouver blog reports on TruePosition, Inc. v. LM Ericsson et al in which it is claimed that member companies of 3GPP and the SSO itself colluded to exclude TruePosition’s technology from the 4G standard. 

The value of the global telecommunications market presumably makes such a claim attractive, but are such claims likely in the EU?  Could ETSI and its members face such a claim, for example? 

Purely as a matter of principle, there is no reason why such a claim could not be brought – the agreement between the SSO members as to which technology is selected is an agreement between undertakings which is potentially subject to Article 101 (just as Rambus was investigated under Article 102).  It is, however, questionable how interesting a case of this kind would be to the Commission – in the absence of clear proof of collusion outside of the standard-setting meeting itself, the questions of fact in determining whether a better technology was excluded from the standard would be highly complex.

From a private action perspective, I wonder how attractive such a case would be in Europe – even if unlawful exclusion were established, computing the quantum of loss would be a hugely complex exercise, involving consideration of what licensing deals the claimant could have secured but for the exclusion.  The Commission’s approach to the determination of ‘reasonable’ licence fees for the purposes of the FRAND obligation arguably also reduces the incentives to bring such litigation.  The Guidelines on horizontal cooperation agreements suggest that the value the patentee can expect to capture is that which would apply in a competitive market, before the standard is set, and not the locked-in, ex post, value (para. 289).  According to this approach, the claimant in a case alleging unfair exclusion from the standard (who presumably isn’t making as much from licensing as it would like) would, bizarrely, be among the most appropriate comparators for the licence fee which the company which was selected for the standard in place of the claimant should be charging.  Given the values at stake, it may well be that such an exercise in double-think (to return to the 1984 theme of my previous post) would not be off-putting.

DG Comp’s 'Brave New World'

A better than average Commission speech on “competition policy in the digital age” was given just over a week ago.  As we have come to expect from Director General Alexander Italianer, the speech was ripe with cultural references (from Orwell’s 1984 to Dave Eggars’ The Circle, as well as the Huxley novel referred to in the title); historical perspectives (periods of ‘creative destruction’ from the 18th century – power looms, apparently – to the 20th – cars and chemicals); and discussion of the social impact of the internet on GDP and living standards.  But how well does the speech reflect competition policy in the present period of internet-driven change? 

Well, firstly, DG Comp professes itself to be ‘brave’ – it is unafraid to tackle the ‘internet giants’ in the here and now, just because they may be overwhelmed by the forces of creative destruction tomorrow.  Of course, the position in forward-looking mergers is somewhat different, as we discussed a little while ago in relation to Microsoft / Skype.  If one were quibbling, it might be questioned whether the forces of creative destruction have been paid rather too little regard in recent abuse of dominance cases. The recent cases brought against SEP holders, for example, may suggest that too little attention has been given to the strength of licensees and the onward march of generations of mobile technology.

The SEP question was not discussed by Mr Italianer, who focussed instead on developments such as the online hotel booking cases at NCA level and at net neutrality issues which are being explored both by DG Comp and as a policy matter by a number of EU and national players.  (We explored the former topic in a couple of posts – here and here, and may turn our attention to the latter in due course…) Despite this, the speech seeks to show that DG Comp’s cases are not ‘new’, but rather founded in competition law principles established since well before 1984, as applied to a new market context.  There is plenty of scope for disagreement on this, but it is nevertheless encouraging that the speech recognises the importance of ensuring that competition law intervention does not limit companies’ “ability to innovate”.

This speech is worth a read for those interested in the question of antitrust enforcement in the internet world, even if the global nature of many of these problems is largely neglected.

Five interesting things you might not have spotted about Case C-351/12, OSA (AKA the “Czech Spa” case)

The competition law points of interest are highlighted below, but it’s worth beginning with the usual summary of facts.  A Czech spa provided guests with music, but without having entered into a licence with the Czech collecting society, OSA.  In response to the OSA’s claims for royalties, the spa claimed (amongst other things) that the OSA was abusing its dominant position because the royalties charged were disproportionately high compared to those charged by collecting societies in neighbouring countries.  In light of its international clientele, it also claimed that this affected its ability to compete with other spas in neighbouring countries, thereby restricting its freedom to provide services.  The Czech Regional Court referred a number of questions to the CJEU, the third being of most relevance to competition law.

“Must Article 56 [TFEU] et seq. and Article 102 [TFEU] […] be interpreted as precluding the application of rules of national law which reserve the exercise of collective management of copyright in the territory of the [Member] State to only a  single (monopoly) … collecting society and thereby do not allow recipients  of services a free choice of a collecting society from another [Member] State of the European Union?” 

Given that the Court’s analysis on the freedom to provide services (Article 56) dovetails with some of the earlier competition law cases concerning music copyright, it’s worth a few words on this before looking at the Article 102 analysis.

The freedom to provide services

Unsurprisingly, the Court ruled that collecting societies are subject to the provisions of Article 56.  Given that they operate in two-sided markets, the Court explicitly referred to the services provided by: (i) a collecting society for the copyright holder (i.e. upstream); and also (ii) a collecting society to the user of the repertoire (i.e. downstream).  The Court needn’t have articulated this, but chose to do so (see fifth point below).

The Court held that the Czech legislation which mandated a single Czech collecting society, was liable to prevent the spa from benefiting from the services of a collecting society in another Member State, i.e. that it prevented cross-border services.  Given the reciprocal representation (i.e. licensing) agreements in place between the Member State collecting societies, whereby each is responsible within its territory for licensing the repertoire of the others, this again is hardly surprising.

The Court then considered whether the restriction served any overriding ‘public interest’, and whether it went beyond what was necessary to attain it.  The licensing of IP rights did, in its view, constitute “such an overriding public interest” and the legislative monopoly over the management of copyright was considered to be “suitable for protecting intellectual property rights, since it is liable to allow the effective management of those rights and an effective supervision of their respect in that territory”. The collecting societies’ reciprocal representation agreements were not held to go beyond what was necessary - to support this the Court referred to Tournier and Lucazeau, which concerned public performance rights (see also fourth point below).

First:  in effect, the spa had sought to criticise the network of reciprocal representation agreements, which are premised on a system of national monopolies across the EU – the Court declined to follow that route.  The Commission had criticised this network of monopolies in its 2008 CISAC decision, only for the General Court to annul the relevant part of the decision in 2013 (some 13 years after the first complaint had been made) on the basis that a ‘concerted practice’ to coordinate the territorial scope of the agreements had not been proven.  Despite the urgings of the spa, Article 56 was not seen as the solution by the Court.

The Court said that it had not been shown that, as EU law stood at the time of its ruling, there was another method of allowing the same level of copyright protection as the existing system of territory-based protection.  There are a number of legislative initiatives aimed at adapting copyright for the digital age, including the EU Parliament’s very recent adoption of the Collective Rights Management Directive, creating a legal framework for the efficient multi-territorial collective management of copyright, in particular in the music sector.  In future therefore, the assessment of public interest and the requirement to go no further than necessary, might well be different depending on the facts of the case, the copyright concerned and the applicable legislative framework.

Second: an interesting point for academic debate is to what extent (i) the requirement under Article 56, to go no further than necessary to achieve the public interest, is equivalent to (ii) the requirement under Article 101(3) that the restriction on competition must be ‘indispensible’ to achieve the identified efficiencies.  If anyone really knows what is required by the indispensability requirement under Article 101(3), please do send answers on a postcard!

Establishing an abuse of a dominant position

So, what did the Court have to say on Article 102?  Well, not much as it happens: only 12 paragraphs, but some fascinating points do emerge.

The Court noted that “the mere fact that a Member State grants a collecting society […] a monopoly over the management of copyright relating to a category of protected works in [that] Member State, is not, as such, contrary to Article 102”.  This is really as far as the Court needed to go to answer the third question referred to it, which asked whether Article 102 precludedthe application of rules of national law” which awarded the monopoly. 

Third: despite the fact that there was nothing that required the Court to do so, the Court then stated that “a collecting society […] which has a monopoly over the management in the territory of a Member State of copyright relating to a category of protected works [i.e. all of the Member State collecting societies], has a dominant position in a substantial part of the internal market within the meaning of Article 102.”  The Court, inevitably aware that the issue of music copyright licensing has clearly not gone away, seems to have signalled to anyone aggrieved by a collecting society, that an Article 102 complaint/claim might be worth pursuing.  The first hurdle, establishing dominance, appears to be easily met in the Court’s view. 

(It is interesting to compare the position of the Court with that of the Advocate-General, who stated merely that “a statutory monopoly may constitute a dominant position”.)

Fourth: the Court also stated that where a collecting society “imposes fees for its services which are appreciably higher than those charged in other Member States and where a comparison has been made on a consistent basis, that difference must be regarded as indicative of an abuse of a dominant position.”   It even goes as far as saying that “[i]n such a case it is for the collecting society in question to justify the difference by reference to objective dissimilarities between the situation in the Member State concerned and the situation prevailing in all other Member States” (87).  The ruling therefore breathes life into the Court’s earlier judgments in Tournier and Lucazeau, both of which had made these points, albeit in a different context.  In repeating this now, the Court again encourages the disgruntled to bear Article 102 in mind.

(Interestingly again, the Advocate General simply stated: “[w]hether those fees are in fact excessive is a matter for the national court to determine”.)

Fifth:  As is by now apparent, most are upset with collecting societies over (you guessed it) money: (i) rights holders grumble because the fees for services are too high; and (ii) licensees grumble because royalties are too high.  The referral arises from a dispute between the collecting society and a spa, i.e. a potential licensee. The factual matrix before the Court therefore firmly falls within the latter category.  Rather than refer to royalties though, the Court refers throughout its judgment to “fees”.  Which brings me to my last point of interest.

It is entirely possible that the Court has specifically used the word “fee” to leave the door open for both licensees and licensors to raise competition law arguments on the basis of Article 102.  This is supported by the explicit reference to those upstream and downstream to collecting societies, as well as the uncharacteristically liberal comments on dominance and abuse.  Or, of course, it just could be a question of Euro-speak, as Tournier and Lucazeau also referred to “fees”…

References to the Court are often evasive and conservative, with crucial determinations of law and fact often being sent back to the referring Member State court (as suggested by the Advocate-General in respect of the ‘excessive fees’ point in this case).  Clearly, the Court in this case was in a more bullish mood, which makes me wonder whether there was something in the counterfactual which isn’t immediately obvious from a reading of the Court’s judgment – Czech competition lawyers please get in touch to explain if so! 

Certainly, anyone who thought that the collisions of competition law, rights owners and rights users were now over, or would be dealt with through regulation rather than competition complaints, appears to be mistaken.

Osman Zafar