The AP reports:

The European Union has dropped long-standing antitrust charges against Microsoft Corp. after the company agreed to give users of the Windows operating system a choice of up to 12 other Web browsers.

Under the terms of the deal with regulators announced Wednesday, Microsoft will avoid further EU fines if it provides a pop-up screen that lets European users – from March – replace Microsoft’s Internet Explorer or add another browser such as Mozilla’s Firefox or Google’s Chrome. Internet Explorer is used by a majority of global internet users.

The deal will also allow computer manufacturers to ship PCs without Internet Explorer in Europe.

The EC press release is here and Microsoft’s statement – and links to several relevant documents – is here.

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Some news and notes:

• The Antitrust Hotch Potch reports on a recent EC Article 9 decision involving the French gas market.
• Congratulations to Joe Bial who has been promoted to special counsel at Cadwalader, Wickersham & Taft.
• Earlier this week, Truth on the Market had a lengthy symposium on credit cards and interchange fees.

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Once again the EU has performed some dawn “raids” on the offices of pharmaceutical firms.  Bloomberg reports:

Teva Pharmaceutical Industries Ltd., the world’s biggest generic-drug maker, Denmark’s H. Lundbeck A/S and other pharmaceutical companies were raided Wednesday by the European Union as part of an antitrust investigation.

…

The inspections mark the fourth time drugmakers’ offices have been visited since the EU started a probe of the pharmaceutical industry in January 2008. The EU has focused on whether manufacturers misuse patents and lawsuit settlements to keep less-expensive generic medicines off the market.

Commission officials conducted a surprise inspection at Teva’s office in London on Wednesday, according to Yossi Koren, a spokesman for the company. The raid followed an EU inspection of Teva’s Paris office in October.

Lundbeck, the Nordic region’s second-largest drugmaker, said in a statement its Milan office had been inspected. It said it expects the raid was a follow-up on a 2005 visit and that it didn’t address any new issues.

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A little behind the news but:

• A Spanish Socialist, Joaquín Almunia, will replace the Netherlands’ Neelie Kroes to the the EU’s competition commissioner.
• Article 81 is now Article 101.
• D.O.J. has hired Rachel Brandenburger from Freshfields Bruckhaus Deringer.  She worked in its London and Brussels offices.  According to Main Justice “Brandenburger will  join the Division in January, and will report directly to Assistant Attorney General Christine Varney, according to Justice spokeswoman Gina Talmona. Brandenburger also will work closely with Philip Weiser, the Deputy Assistant Attorney General for International, Policy and Appellate Matters.”

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We are always happy to welcome a new antitrust blog to the blogosphere (even if we are a bit late in our welcome).  Check out Chilling Competition which focuses on competition issues in Europe.

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Two quick links.

First, Randy Picker has some very detailed analysis of the DOJ filing in the Google-Book Search case.

Second, the EC has posted a non-confidential version of its decision in the Intel matter.  Also, there is a press release.

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Reuters, via the New York Times, reports that the European Commission has fined Intel$1.45 billion.

The European Commission fined Intel a record €1.06 billion on Wednesday for abusing its dominance in the computer chip market to exclude its only serious rival, Advanced Micro Devices.

The European Union’s competition commissioner, Neelie Kroes, said the penalty against Intel, the equivalent of $1.45 billion, was justified because the company had skewed competition and denied consumers a choice for chips.

Ms. Kroes said Intel had “used illegal anticompetitive practices to exclude its only competitor and reduce consumers’ choice — and the whole story is about consumers. ” She said Intel’s practices had “undermined innovation.”

…

Paul Otellini, chief executive of Intel, said the company would appeal.

“We believe the decision is wrong and ignores the reality of a highly competitive microprocessor marketplace,” Mr. Otellini said. “There has been absolutely zero harm to consumers.”

Giuliano Meroni, president of A.M.D.’s operations in Europe, said the decision would “shift the power from an abusive monopolist to computer makers, retailers and above all PC consumers.”

Ms. Kroes said Intel had pursued a strategy aimed mainly at excluding A.M.D. by paying computer makers and retailers to postpone, cancel or avoid A.M.D. products entirely.

The European Commission, which is the E.U.’s executive arm, also found that Intel “went to great lengths to cover up its anticompetitive actions,” Ms. Kroes added.

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Here are some (draft) slides and materials from my course in International Antitrust and Policy at U.C. Berkeley.

• Segment 1: Introduction
• Segment 2: Horizontal Agreements in the U.S. and the EU
• Segment 3: International cartels at work

As always, everything is licensed under a Creative Commons attribution only license. The (ever evolving) syllabus is here. By the way, weary as I am of the cloud for privacy and policy reasons (I like to control my tools, not vice versa), Google Docs is one great app that just keeps getting better.

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Here are some initial reactions to the Commission Guidance to Article 82 in no particular order.

• The Commission confirms that exclusion is a derivative antitrust offense. There is only one type of harm to competition, namely consumer exploitation. Exclusion is relevant only if and to the extent it leads to exploitation. (Para. 19) Antitrust conservatives will like this. However, as the Commission giveth it taketh away, namely with a hair trigger standard for exploitation. Consumer harm is recognized at all levels (FN. 15), and in both the short and the long run. Moreover, consumers may be harmed by a loss in innovation, market dynamism, and variety of choice. Even a loss of business rivalry as such may harm consumers, so that “the protection of rivalry and the competitive process outweighs possible efficiency gains.” (Para. 29) The Commission thus reclaims the consumer welfare concept, the favorite meme of antitrust conservatives in paring back the reach of the antitrust laws, as a foundation for a progressive antitrust policy. This proves what commentators have observed all along, namely that the consumer welfare paradigm is not necessarily a rule of non-intervention.
• Technological tying, in the eyes of the Commission, is worse than contractual tying, because it makes a “tying or bundling strategy a lasting one.” (Para. 52) Here, the Commission also includes a negative externality of technological tying in the anticompetitive calculus, namely that “technological tying … reduces the opportunities for resale of individual components.” (Id.) The latter is very much in keeping with recent policy statements in favor of modularization and open systems.
• Cross-subsidies may qualify as predatory, even if the firm is not dominant in the predation market. Tucked away in FN. 39 is the following statement.

  The Commission may also pursue predatory practices by dominant undertakings on secondary markets on which they are not yet dominant. … While the dominant firm does not need to predate to protect its dominant position in the market protected by legal monopoly, it may use the profits gained in the monopoly market to cross-subsidize its activities in another market and thereby threaten to eliminate effective competition in that other market.

  This seems to say that a firm that is lawfully dominant in the market for product A could be liable under Art. 82 for using its profits to subsidize predatory pricing in the market for product B, in which it is not (yet) dominant and where A and B are unrelated.
• The Commission does not like Trinko. Really. For a refusal to deal “it is not necessary that there is actual refusal on the part of a dominant undertaking; ‘constructive refusal’ is sufficient. Constructive refusal could, for example, take the form of unduly delaying or otherwise degrading the supply of the product or involve the imposition of unreasonable conditions in return for the supply.” (Para. 23). Moreover, having obtained a dominant position as a result of previous legislative protection from competition and now being under regulatory compulsion to grant access to essential facilities is an argument for, not against, imposing an antitrust duty to deal. A dominant firm can’t complain about a duty to share

  where regulation compatible with Community law already imposes an obligation to supply on the dominant undertaking and it is clear, from the considerations underlying such regulation, that the necessary balancing of incentives has already been made by the public authority when imposing such an obligation to supply. This could also be the case where the upstream market position of the dominant undertaking has been developed under the protection of special or exclusive rights or has been financed by state resources. In such specific cases there is no reason for the Commission to deviate from its general enforcement standard and it may show likely anticompetitive foreclosure without considering whether the above three cumulative circumstances are present.

The Commission Guidance is clearly a response to the DOJ’s recent report on single firm conduct. Time to check the FTC’s website.

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Today, the European Commission published its preliminary report on the competition inquiry into the pharmaceutical sector. The New York Times, which misleading headlines its article “E.U. Accuses Drug Makers of Gouging Consumers,” reports:

The European Union accused drug companies on Friday of adding billions of dollars to health care costs by delaying or blocking the sale of less expensive generic medicines.

One common tactic, said Neelie Kroes, the European competition commissioner, was for drug companies to amass patents to protect active ingredients in the medicines — in one case, 1,300 patents for a single drug.  Another tactic, she said, was for pharmaceutical companies to sue the makers of generic drugs for ostensible patent violations, which tended to delay the availability of the lower-cost products for years.

Hyperbole aside, as the report itself states, it “does not seek … to each any conclusion as to whether certain practices described in the report infringe EC Competition law.”

More to come, but until then, check out the preliminary report and its executive summary; also online are several fact sheets, a press release and Commissioner Kroes’ comments.

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The EC fined four companies 1.3 billion euros ($1.66 billion) for price fixing.  Reuters (via the Washington Post) reports:

The EU’s antitrust chief on Wednesday fined car glass producers Asahi, Pilkington, Saint-Gobain and Soliver more than 1.3 billion euros ($1.66 billion) for price-fixing, the largest sum ever levied by the EU for a cartel.

France’s Compagnie de Saint-Gobain SA must pay 896 million euros ($1.14 billion) - more than any other company has been fined before.

The European Commission said the four companies control 90 percent of the glass used to make European cars, a market worth 2 billion euros in 2003.

EU Competition Commissioner Neelie Kroes said the companies fixed prices over a period of five years. She said the fines were high because European industry had to “learn the lessons the hard way.”

…

The EU said it increased Saint-Gobain’s fine by 60 percent because the company was a cartel repeat offender. It was fined last year for an EU-wide window glass cartel, following earlier fines for a Belgian flat glass cartel in 1988 and a similar cartel on the Italian market in 1984.

The statement of Neelie Kroes can be found here.

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In industries governed by standards, it is not always easy to identify the goal of antitrust intervention. Neelie Kroes defined it as follows:

When a market develops in such a way that a particular proprietary technology becomes a de facto standard, then the owner of that technology may have such power over the market that it can lock-in its customers and exclude its competitors’. Where a technology owner exploits that power, then a competition authority or a regulator may need to intervene. In essence, the competition authority has to recreate the conditions of competition that would have emerged from a properly carried out standardisation process.

This definition makes a collaborative standard setting process the normative benchmark even for de facto standards that evolve as a result of the operation of the marketplace.

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The EU Commission on Monday announced that it is investigating the French drug maker Sanofi-Aventis for obstruction of justice. As part of its crack-down on the pharmaceutical industry, the EU conducted a dawn raid at Sanofi-Aventis, but was refused access to documents without a French search warrant:

The commission’s allegation centers on Sanofi-Aventis’ refusal to let inspectors examine and copy relevant documents until the French authorities produced a national search warrant, the commission says. The European antitrust regulator was raiding the pharmaceutical company’s headquarters in France, as part of a wider inquiry into the sector. Under European antitrust laws, companies have an obligation to cooperate with the commission’s inspectors, including full access to important documents.

A press report is here.

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The Financial Times Deutschland reports, according to Marketwatch, that

the European Union’s competition authority will take action later this year against Intel Corp. over the semiconductor giant’s sales and distribution practices.  The Financial Times Deutschland said the EU had acquired enough evidence to act to keep Intel from selling its microprocessors at a discount to PC companies.  The paper said the EU could fine Intel up to 10% of its annual sales, or $4.1 billion.

Thompson Financial (via Forbes.com) reports that:

The European Commission is planning to bar some of Intel Corp.’s sales practices to curb the company’s market power in Europe, Financial Times Deutschland reported, citing sources in Brussels.

Commissioner for competition Neelie Kroes has already made a ‘factual’ decision, the paper said, with the decision to be published in late summer.

According to the EU plans, Intel will have to stop marketing its processors at discount prices to PC-manufacturers.

In addition, the EU intends to ban Intel from paying marketing cost subsidies to retailers, if Intel demands exclusivity in return.

I would link to the FTD article but my German is poor.  Perhaps one of my fluent-in-German co-bloggers can link to and/or report on the original article.

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The Commission published a White Paper on Private Damages Actions. While EU law clearly provides for the compensation of victims of antitrust violations, many member states have been slow in updating their rules of civil procedure to make the enforcement of such rights commercially viable. The white paper contains recommendations as to collective redress (class actions and representative actions), availability of the pass-on defense and, as a flip side, indirect purchaser actions, offensive collateral estoppel rules for final, non-appealable decisions by competition authorities, and somewhat more relaxed discovery rules. As to the latter, a key component (since US style discovery is neither possible nor desirable), in my view, is the ability of the courts to draw negative inferences from the non-production of materials.

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