Telecoms package: Czech Presidency wraps it up - and rubs it in

Posted on April 30, 2009 | Filed Under communication technologies

A few weeks before the European elections, the Czech Presidency of the EU Council - proud to have achieved some sort of consensus on the “telecoms package” in the usual closed door “trialogue” negotiations - accords an interesting role to the elected representatives of the European citizens (press release):

“Now it is up to the European Parliament to rubber-stamp it at its plenary session on 6 May.”

Of course, this is exactly the way it will be [update 7 May 2009: I was wrong on that]. As the press release of the Presidency says, a “final deal with its [the Parliament’s] negotiators was struck on Tuesday 28 April.” And “Member States gave their consent to the deal on Wednesday 29 April at a meeting of the Committee of Permanent Representatives (Coreper I).”

And after the rubber-stamp by Parliament, there needs to be one more decision: the Council (meeting on 12 June) will have to approve of the “deal”. Will this also be just a rubber-stamp? Of course not, because the Council uses more refined instruments, if you trust the Czech Presidency: “a seal of approval”. [Not that it would make a real difference, because it is also just a “formal seal of approval”]

So, while we wait for the official full and consolidated texts, the information that is available suggests that the “final deal” might well be ”such a deal of skimble-skamble stuff”, as Shakespeare put it (King Henry IV, Part I, Act III, Scene 1).

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Hamlet, with the Prince disappearing: US Supreme Court in fleeting expletives case

Posted on April 29, 2009 | Filed Under fundamental rights

“The result is not simply Hamlet without the prince, but Hamlet with a prince who, in midplay and without explanation, just disappears.” Justice Breyer, dissenting from yesterday’s U.S. Supreme Court’s decision in the FCC v. Fox Case (full text here), heaps scorn on the FCC’s change of policy in monitoring broadcast indecency (see our previous posts here, here, here, here and here) . To Breyer, the FCC had not given any substantial reason for abandoning its previous policy which tolerated fleeting expletives, but just put forward “28 words (repeated in two opinions)”, which do “not explain the transformation of what the FCC had long thought an insurmountable obstacle into an open door.” But for the majority, Justice Scalia found that the agency’s reasons for expanding its enforcement activity were “entirely rational” and the policy change - “spurred by significant political pressure from Congress” - therefore was neither arbitrary nor capricious (the standard for judicial review under the US Administrative Procedure Act).

At first view, it is a patently absurd case. But then - as Justice Scalia, writing the opinion for the majority, reminds us - the US Supreme Court “is one of final review, ‘not of first view’”. And so, underlying the f- and s-words, there are some interesting remarks on judicial review of (indpendent) agency decisions. Justice Breyer, in his dissent, writes:

“I begin with applicable law. That law grants those in charge of independent administrative agencies broad authority to determine relevant policy. But it does not permit them to make policy choices for purely political reasons nor to rest them primarily upon unexplained policy preferences. Federal Communications Commissioners have fixed terms of office; they are not directly responsible to the voters; and they enjoy an independence expressly designed to insulate them, to a degree, from “‘the exercise of political oversight.’” […] That insulation helps to secure important governmental objectives, such as the constitutionally related objective of maintaining broadcast regulation that does not bend too readily before the political winds. But that agency’s comparative freedom from ballot-box control makes it all the more important that courts review its decision making to assure compliance with applicable provisions of the law—including law requiring that major policy decisions be based upon articulable reasons. …
[T]he FCC’s answer to the question, “Why change?” is, “We like the new policy better.” This kind of answer, might be perfectly satisfactory were it given by an elected official. But when given by an agency, in respect to a major change of an important policy where much more might be said, it is not sufficient.” [emphasis added]

Justice Scalia, apart from his usual slurs against those dissenting from his views (for instance he accuses Justice Breyer of “stacking the deck”), directly opposes Breyer:

“Not so. The independent agencies are sheltered not from politics but from the President, and it has often been observed that their freedom from presidential oversight (and protection) has simply been replaced by increased subservience to congressional direction. […] Indeed, the precise policy change at issue here was spurred by significant political pressure from Congress. Regardless, it is assuredly not “applicable law” that rulemaking by independent regulatory agencies is subject to heightened scrutiny. […] There is no reason to magnify the separation-of-powers dilemma posed by the Headless Fourth Branch, […] by letting Article III judges—like jackals stealing the lion’s kill—expropriate some of the power that Congress has wrested from the unitary Executive.”

But even as the Supreme Court remanded the case, one key issue remains open: the constitutionality of the FCC’s new policy under the First Amendment. As there was no lower court opinion on this question, the Supreme Court declined to address this issue:

“It is conceivable that the Commission’s orders may cause some broadcasters to avoid certain language that is beyond the Commission’s reach under the Constitution. Whether that is so, and, if so, whether it is unconstitutional, will be determined soon enough, perhaps in this very case.”

And in the light of the new U.S. Administration and the changes it brought/brings also at the FCC, there might be some hope for the broadcasters in Justice Breyer’s dissent, where he - in parentheses - points out that:

Of course, nothing in the Court’s decision today prevents the Commission from reconsidering its current policy in light of potential constitutional considerations or for other reasons.

In the meantime, expect the Supreme Court to address some other issues of utmost importance, such as the “nine-sixteenths of a second exposure of the breast of performer Janet Jackson”. As SCOTUSBLOG writes, the “wardrobe malfunction” has been “ready for the Supreme Court to act upon it since late February”.

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“let your own discretion be your tutor”*: advocate general on the “regulatory holidays”-case

Posted on April 23, 2009 | Filed Under communication technologies

The case C-424/07 Commission v. Germany is, as I have written before, of a highly symbolic nature, as it comes down to the long awaited showdown between the Commission - or specifically Commissioner Reding - and Germany on the powers of the regulatory authorities versus the power of national lobbies politics. Today, the advocate general delivered his opinion in this case, and it amounts to a small reprimand for the Commission in questions of style, but to a complete victory for the Commission in substance.

Just briefly for a little background: Germany had amended its Telecommunications Act in 2006, after “the incumbent German telecommunications operator (Deutsche Telekom) had lobbied for the broadband network it intended to create to be exempted from regulatory intervention (namely compulsory access at regulated prices)” (quoted from the advocate general’s opinion, Nr 31). The text (here in German) sets out the definition of new markets:

“A ‘new market’ is a market for services or products which are significantly different from currently available services or products in terms of their effectiveness, their range, their availability for a large number of users (mass-market capacity), their price or their quality from the point of view of a knowledgeable buyer, and which do not simply replace those products.”

Section 9a of the Telecommunications Act then introduces a rule of regulatory exemption of new markets in its first subparagraph, and an exception to that rule in its second subparagraph:

“1.      Other than as provided in the following subparagraph, new markets shall not be subject to regulation within the meaning of Part 2.

2.      When certain facts allow the assumption that in the absence of regulation, the development of a sustainable competitive market in the area of services or telecommunication networks would be impeded in the long term, the [German NRA] may, in derogation from subparagraph 1 above, submit a new market to regulation within the meaning of Part 2, in accordance with Paragraphs 9, 10, 11 and 12. In order to assess the need for regulation and in imposing specific measures, the [German NRA] will take into particular account the objective of promoting efficient investment in infrastructures and of supporting innovation.”

The Commission was furious, as the new text seemed to deprive the national regulatory authority of part of its regulatory tool-box, as the law had laid down a general rule that new markets should not be regulated, and if it is absolutely unavoidable to intervene, promoting investment would be a paramount regulatory aim (even though article 8 of the framework directive also lists other regulatory aims of equal importance).

Just days after the amended act entered into force, the Commission started infringement proceedings and announced it would go to the European Court of Justice as soon as possible. The advocate general found that the “Commission’s impetuousness is regrettable, particularly in the light of its duty of loyal cooperation with Member States. However, this is not enough to conclude that Germany’s subsequent observations in response to the letter of formal notice and the reasoned opinion were not duly considered by the Commission. As such, the present action is admissible.” (Nr 42). And from then on it’s downhill for Germany:

A) Regulatory exemption for new markets 

“It would come down to a policy choice: to restrain regulation, and suffer the associated effects of substantive market power, in order to favour investment in infrastructure.
53.      In normal circumstances, Germany would be allowed to make such a policy choice; but not when there is Community regulation of the telecommunications sector. Here, the choice has already been made by the Community legislature to submit this sector to regulation, with all the possibilities for intervention that it entails. 
54.  … Germany cannot reverse the decision of the Community legislature and, as a rule, exempt these new markets from regulation. …
57.      The Commission Guidelines state that evolving conditions in new markets may be disturbed by regulation; but, at the same time, that these markets should not be foreclosed at their outset by undertakings with significant market power. This puts a special duty of care on NRAs when intervening in these markets, particularly in the light of the possibility of delaying that intervention to a time when competitive conditions have stabilised. The Commission Recommendation, and its reference to market power acquired because of ‘first-mover’ advantages, should also be read in this light.
58.      It is therefore clear, as regards exempting new markets from regulation, that the step from mere cautionary recommendations to a binding legal rule was unintended by the Community legislature.
59.      As a result, Germany cannot institute a rule of regulatory exemption for new markets, as it does in Paragraph 9a(1) of the TKG.”

B) Limiting of the discretion of the German NRA by giving priority to a particular regulatory objective

“NRAs have been set up and given particular powers by the Community regulatory framework for a reason: they are expected to be insulated from certain interests and to reach their decisions governed only by the criteria established in that framework.
64.      As such, I believe that the balancing of the regulatory framework’s objectives lies with the NRAs. Article 8 of the Framework Directive expressly assigns the pursuit of these objectives – and therefore their balancing – to NRAs, not to the national legislature.
65.      This creates an institutional arrangement whereby the task of the national legislature is limited to ensuring that NRAs take all necessary measures to pursue those objectives, as the Court has confirmed on several occasions. Even the autonomy of the Member States as regards the organisation and structuring of the NRAs has been subordinated to this pursuit. 
66.      This also presupposes that it is NRAs, faced with specific assessments, which are better placed to decide how those different objectives are to be balanced in order to maximise them. In other words, a decision by a national legislature to give priority to one particular objective would, in fact, affect the way in which the Community legislature intended the specific market assessments to be made: by the NRAs, taking into account the different objectives on a case-by-case basis. The absence of a system attributing priority as between the objectives laid down in the Community regulatory framework, and the consequent discretion granted to the NRAs, was therefore fully intentional on the part of the Community legislature.
67.      Thus, Germany cannot limit the discretion of the German NRA regarding intervention in new markets by subjecting it to conditions, such as those laid down in Paragraph 9a(2) of the TKG, which give priority to one particular regulatory objective.”

*) Shakespeare, Hamlet, Prince of Denmark, Act III, Scene 2

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“not limited to the media”: ECHR and ECJ expanding press freedom to non(traditional)media

Posted on April 21, 2009 | Filed Under fundamental rights

Of course it might be a bit premature to draw far-reaching conclusions from just one judgment each of the European Court of Human Rights and of the European Court of Justice - nevertheless, I’d like to draw your attention to these judgments which seem to indicate a broader view of the beneficiaries of press freedom than we were previously accustomed to.

1. The more recent judgment comes from the ECHR in an Art 10 case concerning access to information. The case Társaság a Szabadságjogokért v. Hungary is notable primarily for the strong view the Court puts forward as regards access to state-held documents. The Hungarian Constitutional Court had denied to release a complaint made to him by a Member of the Hungarian Parliament requesting the constitutional scrutiny of some recent amendments to the Criminal Code. The Court found that the “Constitutional Court’s monopoly of information thus amounted to a form of censorship”, and concludes that “the interference with the applicant’s freedom of expression in the present case cannot be regarded as having been necessary in a democratic society.” It is a brief judgment well worth reading in full (see also the coverage in the ECHR-Blog, which alerted me to the case). But the point I want to stress here is that the ECHR explicitely states that the applicant, the Hungarian Civil Liberties Union, as an NGO is to be regarded as a “social watchdog” and its activities warrant similar Convention protection to that afforded to the press. Paragraph 27 of the judgment reads:

“In view of the interest protected by Article 10, the law cannot allow arbitrary restrictions which may become a form of indirect censorship should the authorities create obstacles to the gathering of information. For example, the latter activity is an essential preparatory step in journalism and is an inherent, protected part of press freedom (see Dammann v. Switzerland (no. 77551/01, § 52, 25 April 2006).  The function of the press includes the creation of forums for public debate. However, the realisation of this function is not limited to the media or professional journalists. In the present case, the preparation of the forum of public debate was conducted by a non-governmental organisation. The purpose of the applicant’s activities can therefore be said to have been an essential element of informed public debate. The Court has repeatedly recognised civil society’s important contribution to the discussion of public affairs (see, for example, Steel and Morris v. the United Kingdom (no. 68416/01, § 89, ECHR 2005-II). The applicant is an association involved in human rights litigation with various objectives, including the protection of freedom of information. It may therefore be characterised, like the press, as a social “watchdog” (see Riolo v. Italy, no. 42211/07, § 63, 17 July 2008; Vides Aizsardzības Klubs v. Latvia, no. 57829/00, § 42, 27 May 2004). In these circumstances, the Court is satisfied that its activities warrant similar Convention protection to that afforded to the press.” (emphasis added)

2. In a wholly different subject matter, the European Court of Justice (ECJ) also came to the conclusion that “journalistic activities … are not limited to media undertakings”. The Case C-73/07 Satakunnan Markkinapörssi and Satamedia concerned article 9 of the data protection directive, stating that “Member States shall provide for exemptions or derogations from the provisions of this Chapter, Chapter IV and Chapter VI for the processing of personal data carried out solely for journalistic purposes […] only if they are necessary to reconcile the right to privacy with the rules governing freedom of expression.”

The company at the heart of the dispute collects public data from the Finnish tax authorities for the purposes of publishing extracts from those data; the published information comprises the names of approximately 1.2 million natural persons whose income exceeds certain thresholds “as well as the amount, to the nearest EUR 100, of their earned and unearned income and details relating to wealth tax levied on them.” These data are also transferred to a sister company, which distributes them by a text-messaging system. Data protection authorities wanted to prohibit this SMS-service.

The ECJ first stressed the necessity to interpret notions relating to press freedom broadly. Nr. 56 of the judgment reads:

“In order to take account of the importance of the right to freedom of expression in every democratic society, it is necessary, first, to interpret notions relating to that freedom, such as journalism, broadly. Secondly, and in order to achieve a balance between the two fundamental rights, the protection of the fundamental right to privacy requires that the derogations and limitations in relation to the protection of data provided for in the chapters of the directive referred to above must apply only in so far as is strictly necessary.”

It then stated that the exemptions and derogations provided for in Article 9 of the directive apply not only to media undertakings but also to every person engaged in journalism and that the fact that the publication of data within the public domain is done for profit-making purposes does not, prima facie, preclude such publication being considered as an activity undertaken ‘solely for journalistic purposes’. And thirdly, the ECJ holds that the transport medium does not matter; Nr. 60 and 61  read: 

“60   Thirdly, account must be taken of the evolution and proliferation of methods of communication and the dissemination of information. As was mentioned by the Swedish Government in particular, the medium which is used to transmit the processed data, whether it be classic in nature, such as paper or radio waves, or electronic, such as the internet, is not determinative as to whether an activity is undertaken ‘solely for journalistic purposes’.

61     It follows from all of the above that activities such as those involved in the main proceedings, relating to data from documents which are in the public domain under national legislation, may be classified as ‘journalistic activities’ if their object is the disclosure to the public of information, opinions or ideas, irrespective of the medium which is used to transmit them. They are not limited to media undertakings and may be undertaken for profit-making purposes.”

3. Summing it up: ECJ and ECHR have clearly moved to grant traditional press freedoms not only to traditional media, but also to SMS-information services (and, if implicitely, bloggers!) and NGOs engaged in “the creation of forums for public debate”.

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ECJ: possibility to recoup losses is no precondition for finding predatory pricing

Posted on April 18, 2009 | Filed Under communication technologies

Two down, one to go: on 2 April 2009 the European Court of Justice decided another one of our “top 3 pending cases” for 2009: In the judgment C‑202/07 P, France Télécom SA v. Commission, the ECJ for once did not follow the advocate general’s opinion (see here for our view on this opinion), and dismissed the appeal of France Télécom against the decision of the CFI of 30 January 2007, T-340/03. [In this judgment the CFI had upheld the Commission decision of 16 July 2003, COMP/38.233 - Wanadoo Interactive, imposing  a fine of € 10.35 million on Wanadoo Interactive (then a subsidiary of France Télécom) for abusing its dominant position by charging predatory prices for broadband products (mainly in the year 2001).]

The ECJ relies heavily on formal and procedural arguments, but there are some clear words on the “recoupment of losses”-topic. The key argument is here:

“109 Thus, the Court of Justice has held, first, that prices below average variable costs must be considered prima facie abusive inasmuch as, in applying such prices, an undertaking in a dominant position is presumed to pursue no other economic objective save that of eliminating its competitors. Secondly, prices below average total costs but above average variable costs are to be considered abusive only where they are fixed in the context of a plan having the purpose of eliminating a competitor (see AKZO v Commission, paragraphs 70 and 71, and Tetra Pak v Commission, paragraph 41).

110 Accordingly, contrary to what the appellant claims, it does not follow from the case‑law of the Court that proof of the possibility of recoupment of losses suffered by the application, by an undertaking in a dominant position, of prices lower than a certain level of costs constitutes a necessary precondition to establishing that such a pricing policy is abusive. In particular, the Court has taken the opportunity to dispense with such proof in circumstances where the eliminatory intent of the undertaking at issue could be presumed in view of that undertaking’s application of prices lower than average variable costs (see, to that effect, Tetra Pak v Commission, paragraph 44).

111 That interpretation does not, of course, preclude the Commission from finding such a possibility of recoupment of losses to be a relevant factor in assessing whether or not the practice concerned is abusive, in that it may, for example where prices lower than average variable costs are applied, assist in excluding economic justifications other than the elimination of a competitor, or, where prices below average total costs but above average variable costs are applied, assist in establishing that a plan to eliminate a competitor exists.

112 Moreover, the lack of any possibility of recoupment of losses is not sufficient to prevent the undertaking concerned reinforcing its dominant position, in particular, following the withdrawal from the market of one or a number of its competitors, so that the degree of competition existing on the market, already weakened precisely because of the presence of the undertaking concerned, is further reduced and customers suffer loss as a result of the limitation of the choices available to them.

113 The Court of First Instance was right therefore to hold, in paragraph 228 of the judgment under appeal, that demonstrating that it is possible to recoup losses is not a necessary precondition for a finding of predatory pricing.”

It is certainly an important victory for the Commission and makes it easier for DG Competition to pursue claims of predatory pricing.

So the next (and last) important case fromour top 3-list for 2009 is the case C-424/07 Commission v. Germany iconcerning the Geman “regulatory holidays”. Here the advocate general’s opinion is expected for 23 April 2009.

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