Covington’s Net Neutrality and Zero-Rating Webinar

On 20 November, Covington hosted its webinar looking at developments in Net Neutrality and Zero-rating from both a US and a European perspective. Our presenters included ex-FCC Bureau Chief, Partner Matt DelNero from our DC office, and ex-DG Competition Head of Unit, Partner Kevin Coates and Senior Associate Siobhan Kahmann from our Brussels office. The webinar was well attended, with participants from all major jurisdictions around the world.

Matt covered the wider area of Net Neutrality and its evolution in the US over the last fifteen to twenty years, including an overview of the rules currently in effect, which are slated to be repealed next month…

He then focused on the US Net Neutrality debate in 2017, and the Restoring Internet Freedom ‘Notice of Proposed Rulemaking ‘ issued in May this year – which received over 22 million comments. He discussed the principal arguments for and against the FCC’s proposal to overhaul the net neutrality framework in the US, and finished his part of the presentation with an overview of what’s next – providing some different scenarios to consider ahead of the FCC’s upcoming next move. (Just two days later, the FCC made the text of its draft order publicly available.)

Kevin and Siobhan then looked at the Net Neutrality debate from the European perspective. This included an overview of the Net Neutrality Regulation and the BEREC Guidelines, before focusing on zero-rating, a concept which has been the subject of much regulatory debate in the EU.

Zero-rating is an offer from a mobile operator where data used by certain apps or groups of apps will not be deducted as data usage from a customers’ cap – it is charged instead at zero, or free. The BEREC documents set out Guidelines as to what is acceptable and what is not. Notwithstanding the Guidelines, national European regulators have taken different approaches to applying the Net Neutrality rules. DG Competition is also following this area closely and commissioned a detailed Report on developments in Europe earlier this year.

The Bundeskartellamt Publishes a Paper on Big Data and Competition

On 6 October 2017, the German Competition Authority (the “FCO”) launched a new series of papers on “Competition and Consumer Protection in the Digital Economy” with its first paper on “Big Data and Competition” (available in German) (the “Paper”). The FCO sets out its view of the specific characteristics of digital, data-based markets, the role data may play in the competitive analysis of such markets and the importance of data protection in competition law proceedings.

The FCO has already considered these issues in its May 2016 joint paper published by the FCO and the French Competition Authority on “Competition Law and Data” (the “Joint Paper”). While this paper does not reflect a significant departure from the Joint Paper, it reaffirms the FCO’s intent to be part of the discussion about the appropriate approach to applying competition law to data in digital markets. In addition to the Joint Paper, the German Monopolies Commission’s report on Digital Markets (June 2015) and the FCO’s Working Paper on Market Power of Platforms and Networks (June 2016) have also considered elements of this issue.

Continue Reading

Net Neutrality and Zero-Rating Webinar

Date: Monday, November 20, 2017
4 p.m. CET
3 p.m. GMT
10 a.m. EST

Please join us for a webinar dedicated to net neutrality and zero-rating. This presentation will be hosted by Covington lawyers Matt DelNero from our Washington office, and Kevin Coates and Siobhan Kahmann from our London/Brussels offices.

This introductory webinar will be approximately one hour in length.

Net Neutrality

Matt DelNero will discuss net neutrality from the U.S. perspective and, more specifically, the pending proposal of the Federal Communications Commission and what it may mean for the various stakeholders in the online ecosystem:

–Net Neutrality Background and Overview
–The Net Neutrality Debate in 2017
–What’s next? — Possible scenarios of a changed legal framework

Zero Rating

Kevin Coates and Siobhan Kahmann will look at net neutrality in Europe, before zooming in on zero-rating issues and developments:

–The EU Net Neutrality Regulation and BEREC Guidelines
–Zero-rating: issues and developments
–Review of differing Member State approaches
–What to expect moving forward

This webinar is targeted at in-house counsel from:

–Telecommunications companies
–Technology companies
–Companies which provide apps to their customers/users, or are considering doing so

Log-In Details will be sent closer to the date of the event.

To RSVP click here.

If you have any questions, please contact Sydney Jones, sjones@cov.com

Price comparison websites: the UK’s CMA weighs in on the competition law, data protection and consumer protection requirements

The UK’s competition regulator, the Competition and Markets Authority (CMA), has published a 349 page Final Report (combined with 5 Background Papers and a glossary) on its Market Study into what it refers to as Digital Comparison Tools (DCTs) – a term which includes price comparison websites, best buy tables, and other more automated services like matching services which analyse complex usage patterns, voice-based comparison tools, and reverse auction platforms. The CMA concluded that consumer experiences of these services were mostly positive, although there were concerns over:

  • Competition law implications of exclusive or preferential arrangements;
  • Data protection law and the use of personal data;
  • Consumer protection law and the transparency of arrangements between these sites and the services that they are comparing.

Continue Reading

Welcome clarifications by the EU Court on the concept of excessive pricing

On 14 September, the Court of Justice of the European Union provided detailed guidance on the concept of excessive pricing under Article 102 TFEU, in response to questions posed by the Latvian Supreme Court.

In Case C-177/16, the Latvian Supreme Court referred a number of questions to the Court of Justice of the European Union (CJEU) regarding the concept of excessive pricing.

This resulted from a series of appeals relating to a decision that the Latvian Competition Council (LCC) took over conduct of the Consulting agency on copyright and communications / Latvian authors’ association (AKKA/LAA), the Latvian collective management organisation handling copyright licences for (Latvian and foreign) musical works in Latvia. The 2013 infringement decision found that the AKKA/LAA had abused its dominant position by imposing excessive music licence fees for music played in Latvian retailers and service providers.

Under EU law, the imposition of ‘excessive pricing’ by a dominant entity amounts to an ‘exploitative abuse’ of dominance under Article 102 TFEU – a concept not recognized under US law. Until now, the EU Courts had applied a basic two prong test for excessive pricing – namely whether the difference between the costs incurred and the price actually charged is excessive, and thereafter, whether the price could be considered to be excessive in itself – or when compared with competing products.

  1. An appropriate and sufficient comparator

First, the CJEU looked in detail at the concept of what an appropriate and sufficient comparator should mean. It found that:

(i) The LLC’s methodology of comparing AKKA/LAA’s royalties with those in a limited number of Member States was acceptable – where those Member States were chosen using objective, appropriate and verifiable criteria. Such criteria may include consumption habits, and other economic and sociocultural factors such as gross domestic product per capita and cultural and historical heritage.

The Court took the view that there can be no minimum number of markets to compare, and the choice of appropriate comparator markets depends on the circumstances specific to each case.

 (ii) The LLC’s methodology of comparing AKKA/LAA’s royalties with those in a wider number of Member States (in this case twenty) was also acceptable where those Member States were chosen using objective, appropriate and verifiable criteria, and were adjusted in accordance with the PPP index – so that the comparisons were made on a consistent basis.

The Court also confirmed that it was permissible to make a comparison within one or several specific segments, where there were indications of excessive fees in those segments.

The Court observed that such a comparison with a wider number of Member States may serve to verify the results of a comparison with a limited number of Member States.

  1. The threshold for an excessive price

The Court then considered what would be needed for a dominant undertaking’s prices to be abusive and excessive. In doing so, it considered previous cases in which the difference in prices applied in one Member State in comparison to others was significantly higher than in the present case. However, it observed that the existence of such precedent could not lead to the conclusion that the differences in the present case could never be ‘appreciable’.

The Court then went on to confirm that there is “no minimum threshold above which a rate must be regarded as ‘appreciably’ higher”, since the circumstances specific to each case are decisive in that regard. The Court concluded that for a difference between rates to be appreciable, it must be both significant and persistent on the facts, with respect to the particular market in question. Advocate General Wahl’s observation that the difference must be significant for the rates concerned to be regarded as abusive was emphasized on this point. Furthermore, the Court highlighted that any such difference must persist for a certain length of time, and should not be temporary or episodic.

  1. Analysis of objective justification

As a final step in its analysis of excessive pricing, the Court observed that the above factors were merely indicative of abuse of a dominant position, and that it may still be possible for the AKKA/LAA to justify any difference by relying on objective dissimilarities between the situation of the Member State concerned and the comparator Member States. It acknowledged that factors that may justify such a difference include the relative level of the fee, and the proportion which is actually handed over to the rights holders.

The Court went on to explain that, where the proportion of fees taken up by collection, administration and distribution expenses was considerably higher, it might be that it is precisely the lack of competition in the market that accounts for the heavy burden of administration, and therefore the higher level of fees.

Accordingly, in examining the facts of this case, the Court concluded that, if:

(i) The AKKA/LAA only retained 20% of the fees collected – as was argued during the hearing, such expenses did not appear to be unreasonable or to evidence inefficient management. Is was further observed that, even where this level of expenses was higher than in the comparator Member States, this may be explained by objective factors including costs, such as regulations which impose a heavier administrative burden than in other markets.

(ii) The fees retained by the AKKA/LAA were established to be higher, and the difference could be regarded as appreciable – it was for the AKKA/LAA to justify them. The Court observed that, in such a case, the existence of a national law on fair remuneration, different from the laws applicable in the comparator Member State(s) could provide an objective justification.

This guidance provides both regulators, and dominant companies and their legal advisors, with invaluable insight into assessing whether conduct amounts to an exploitative abuse of dominance – involving excessive pricing – and whether it can be objectively justified under Article 102. This will be of significant value in ongoing probes involving allegations of excessive pricing.

The European Court of Justice’s Judgment in Intel

Today the Court of Justice of the EU (CJEU) issued its long-awaited judgment in Intel Corporation Inc. v European Commission. It sets aside the judgment of the General Court (GC) on the basis that the judges failed to assess the effects of the loyalty rebate schemes implemented by Intel on competition in the EEA. The CJEU refers the case back to the GC.

Background

The Intel case concerns the supply of central processing units (CPUs) to original equipment manufacturers (OEMs). Following a complaint lodged in 2000 by Advanced Micro Devices (AMD), the European Commission (Commission) investigated two types of conduct by Intel:

  • Intel offered rebate schemes to four OEMs – Dell, Lenovo, HP and NEC – conditioned on them obtaining all or almost all of their requirements for x86 CPUs from Intel. In addition, Intel granted payments to one of its retailers, Media-Saturn-Holding (MSH), on the condition that it only sold computers containing Intel’s chips.
  • Intel made payments to HP, Acer and Lenovo on the condition that these OEMs postponed, cancelled or limited distribution of products using CPUs from AMD.

Continue Reading

The European Commission takes stock on the Digital Single Market

The European Commission launched its Digital Single Market strategy in May 2015 and with their term to finish in October 2019, the Commission is now taking stock on the progress made with this initiative so far. On May 10, the Commission released the mid-term review of its Digital Single Market strategy, see press release here and full communication here.

Since 2015, the Commission has already brought forward 35 legislative and policy proposals related to the Digital Single Market and much of the review focuses on the need for quick adoption and effective implementation of these initiatives. The Commission will need to secure political agreement with the European Parliament and Council in order to ensure that these proposals are adopted. However, the Commission also identified three main areas for further legislative action: (1) developing the European Data Economy, (2) tackling cybersecurity challenges in the EU, and (3) promoting online platforms as “responsible players of a fair internet ecosystem”. Continue Reading

The DSM mid-term Platform Proposals

The Commission published the mid-term review of its Digital Single Market strategy today. The report reviews the development of the strategy over the last two years, and announces a number of new initiatives, including initiatives relating to important areas where action is needed to address digitization, including: (i) the free flow and accessibility of data, (ii) alignment and strengthening of cybersecurity strategy and standards, and (iii) online platform practices and co-ordination.

Of particular note are the proposals to regulate online platforms in connection with unfair clauses and practices in platform-to-business relationships. The Commission notes that, while online platforms drive innovation and growth in the digital economy across the board, they are especially important for SMEs (citing Eurobarometer survey results showing that almost half of SMEs use online marketplaces to sell their products and services). However, the preliminary results of the Commission’s fact-finding on platform-to-business trading practices identify certain “unfair trading practices” (including delisting of products or services without due notice or possibility to appeal, platforms favoring their own products or services, and discrimination between suppliers). Lack of transparency in terms of ranking or search results was also identified as a key issue. Moreover, it was noted that a significant proportion of disagreements arising with online platform operators remain unresolved.

In its efforts to ensure a fair and innovation-friendly platform economy, the Commission has proposed to address the issues of potentially unfair contractual clauses and trading practices by the end of this year, considering dispute resolution, fair practices criteria and transparency.  This could lead to the proposal of legislative instruments, following an Impact Assessment and Member State and industry structured dialogues. Whether legislative action will be taken is unclear, however, with today’s Commission’s Communication and official Q&As taking apparently slightly different positions on the issue, (the former saying the Commission “could” propose legislation, the latter that it “will”, subject to the usual Impact Assessment and other procedures referred to above).

The proposals put forward today are likely to lead to changes in dispute resolution mechanisms and contract terms, and increase transparency. Whether additional obligations are added later in the year remains to be seen.

German Ministry for Economy Publishes a White Paper on Digital Platforms

On 20 March 2017, the German Federal Ministry for Economic Affairs and Energy (the “Ministry”) published its Digital Platforms White Paper (the “White Paper” and launched a dedicated web portal), reflecting at least in part the results of its consultation on its Green Paper on Digital Platforms. The White Paper sets out several proposals for digital policy to facilitate growth of digital platforms on the basis of fair competition while guaranteeing individuals’ fundamental rights and data sovereignty. The Ministry appears to start from the premise that digital platforms sometimes fall outside the scope of German competition, consumer protection and commercial laws, such that the White Paper seeks to address this perceived enforcement gap.

The White Paper and other related German initiatives come as the European Commission (“EC”) pursues its 2015 Digital Single Market (“DSM”) Strategy for the European Union (including several legislative proposals, a Communication on Online Platforms and a Communication on Data Economy) and a number of other Member States also focus on regulatory issues related to online platforms (e.g., the French investigation of non-search online advertising).

This post summarises some of the key elements of the White Paper. Continue Reading

The European Commission’s Legislative Proposal on Audiovisual Media Services

In the context of its Digital Single Market (“DSM”) Strategy for the European Union (“EU”), the European Commission (“Commission”) published a proposal for an updated Audiovisual Media Services Directive (“AVMSD” or the “Directive”) on 25 May 2016 (the “Proposal”).  In its Communication on the DSM Strategy, the Commission indicated it would review the AVMSD “with a focus on its scope and on the nature of the rules applicable to all market players, in particular measures for the promotion of European works, and the rules on protection of minors and advertising rules.”

Despite a few novelties, the Proposal is generally less far-reaching than expected.  Vice President Ansip explained that, to offer the legal certainty companies need in the audiovisual sector, it is necessary to maintain “existing rules that work” while “deregulating where necessary for traditional sectors like broadcasting […] to improve user protection and to reach a level-playing field.”

The Proposal continues to seek to achieve minimum harmonisation, such that Member States may impose stricter rules (e.g., on advertising).  Therefore, there is no guarantee that the Commission’s aim to align the regimes applicable to all audiovisual media services and provide more flexibility to TV broadcasters will be fulfilled.

Continue Reading

LexBlog