Perspectives of the TTBE – A couple of issues or a shopping list for the future.

by

Ashley Roughton

Five New SquareLincoln’s Inn

London

WC2A 3RJ

ashleyroughton@hogarthchambers.com

Perspectives of the TTBE – A bad introduction

• “The guidelines are unworkableFinally, the TTBER and Guidelines are scheduled to be implemented by national tribunals. Given the nature of the draft TTBER and Guidelines, experience from the history of US antitrust enforcement in the courts suggests that there will be years of inconsistent decisions pertaining to licensing agreements. The TTBER and Guidelines as they stand are not only bad competition policy, but are also unworkable. Therefore, the draft TTBER and Guidelines should not be implemented. The existing TTBER, whatever its failings, is both more workable and, as our analysis shows, generally consistent with accepted practice. While it is more formalistic, most of the white clauses were consistent with sound economic and antitrust principles. The current draft is an unwise extension of competition policy that will seriously erode IP rights and their promotion of a progressive, dynamically competitive and efficient economy. Its adoption would seriously set back the EC’s stated goals of making the economy of the EU more competitive in a rapidly evolving global economy.”

Lind, Robert C. And Muysert, Paul “The Europan Commission’s Draft Technology Transfer Block Exemption and Guidelines: A Significant Departure from Accepted Competition Policy Principles” [2004] E.C.L.R. 181

Perspectives of the TTBE – Some important points.

• There is no right to refer an agreement to the OFT or to the European Commission for clearance save for informal opinions falling within the Commission Notice on informal guidance relating to novel questions concerning Articles 81 and 82 of the EC Treaty that arise in individual cases (guidance letters) (2004/C 101/06) (as published in the Official Journal of the European Union, series C, volume 101 of the 27th of March 2004, pp 78-80.).

• The position where, despite acting in demonstrable and credible good faith, the parties may obtain leniency.

• The position of the court under article 81(3) and section 9 of the Competition Act 1998 (as amended by regulation 4 of and paragraph 6 of Schedule 1 to the Competition Act 1998 and Other Enactments (Amendment) Regulations 2004 (S.I. 2004 No. 1261), with effect from the 1st of May 2004, regulation 1(b)).

Perspectives of the TTBE – Market Definition I

• This is the key feature of the TTBE - complex area especially where there are a variety of different issues to be considered.

• Can the NCA be convinced that (1) a proper market definition exercise was carried out in credible good faith and (2) that it is right.

Perspectives of the TTBE – Market Definition II

“There is growing concern over the lack of rigour and factual analysis by the European Commission and national competition authorities when defining markets and assessing market power. This has culminated in several recent successful appeals [such as Aberdeen Journals] which have reiterated that competition authorities must maintain and satisfy high evidentiary standards and burden of proof.”

Harris, Barry C. And Veljanovski, Cento G. “Critical Loss Analysis: Its Growing Use in Competition Law” [2003] E.C.L.R. 213.

Perspectives of the TTBE – Market Definition III

• OFT guidance, the same as European Commission’s guidance, which can be broken down into:-

• Demand side substitutability.

• Supply side substitutability.

• Potential for competition.

Perspectives of the TTBE – Market Definition IV

• No right way to define markets.

• “the smallest market worth monopolising”

• SSNIP test (recommended in Australia, Brazil, Bulgaria, Canada, EFTA, EU, Israel, The Netherlands, New Zealand, the United Kingdom and the United States).

Perspectives of the TTBE – Market Definition V

• The test can be applied to available industry data.

• The application of the test provides useful information about market structure.

• Cellophane.

• More guidance would be appreciated.

Perspectives of the TTBE – The Courts I

• Courage v. Crehan.

• Uncertainty in the application of competition rules in our domestic courts.

• Delimitis.

Perspectives of the TTBE – The Courts II

• Securing a declaration from the Court that article 81(3) of the treaty or section 9 of the 1998 Act applies to the agreement in question.

• Article 6 of regulation 1 empowers national courts to apply the full ambit of article 81, including article 81(3).

• European Commission in its white paper “Modernisation of the Rules Implementing Articles 85 and 86 of the EC Treaty, Commission Programme m 99/027” said:-

“100. Because of the exclusive right to exempt that is conferred on the Commission by Regulation m 17, national courts cannot themselves apply Article ... [81](3) so as to exempt an agreement. And because the courts have no jurisdiction to apply Article ...[81](3), undertakings can, in practice, bring court proceedings to a halt by lodging a notification with the Commission. This phenomenon is a major obstacle to more extensive application of the competition rules by national courts. In a directly applicable exception system, undertakings would be able to invoke the direct applicability of Article ... [81](3) as an argument in their defence before the courts. This new ground of defence would allow them to obtain immediate civil enforcement of those of their restrictive practices which satisfy the conditions of Article ... [81](3). Their legal certainty would thus be strengthened. Complainants, on the other hand, would be able to obtain damages more quickly where they are victims of illegal agreements. Except where an appeal was lodged, the judgments of national courts would have the force of res judicata. These judgments are recognised by the courts of all Member States under the Brussels and Lugano Judgments Conventions.”

Perspectives of the TTBE – The Courts III

• Finding a defendant.

• Part 8 of the civil procedure rules – defendentless proceedings.

Perspectives of the TTBE – The Courts IV

• Sue the other players in the market (or a representative) - though that would still mean that third-parties are not bound.

• Sue the OFT which is really notification by another route.

• Meaningful, enforceable declarations

• Change of circumstances?

• Power to withdraw the benefit of an individual exemption?