09.10.11

Cablegate: Competition Commissioner Neelie Kroes Accused of “Undermin[ing] Support for Intellectual Property” in Microsoft Case

Posted in Antitrust, Cablegate, Europe, Microsoft, Patents at 10:22 am by Dr. Roy Schestowitz

Summary: A look at accusations from private companies, directed at the mere enforcement of interoperability and fair competition

“Attack” on IPR (the sacred cow) is how the US described Brazil's choice of a mostly American/international standard, OpenDocument Format.

In the following Cablegate cable (several parts culminating in ¶11), the sort of nonsense Kroes had to cope with for merely pressuring (or punishing) a monopoly abuser can be seen. It it also being rebutted in the cable.

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PP RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV RUEHSR
DE RUEHBS #0172/01 0371546
ZNR UUUUU ZZH
P 061546Z FEB 09
FM USEU BRUSSELS
TO RUEHC/SECSTATE WASHDC PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE
RUCPDOC/USDOC WASHDC
RUEAWJA/DEPT OF JUSTICE WASHDC

UNCLAS SECTION 01 OF 03 BRUSSELS 000172

SENSITIVE
SIPDIS

JUSTICE FOR C. HARROP
STATE PLS PASS TO FTC FOR J. PARISI
PLEASE PASS TO USTR
STATE FOR E, EUR/ERA, EEB/TPP
NSC FOR KRISTINA KVIEN

NOT FOR INTERNET DISTRIBUTION

E.O. 12958: N/A
TAGS: ECIN [Economic Integration and Cooperation], ECON [Economic Conditions], EFIN [Financial and Monetary Affairs], EINV [Foreign Investments], ECPS [Communications and Postal Systems], EUN [European Union]
SUBJECT: EU COMPETITION AUTHORITIES HOPE TO MAKE GOOD U.S.-EU
COOPERATION EVEN BETTER

¶1. (SBU) SUMMARY. DG Competition officials told USEU January
14 they hope to work closely with the Obama Administration to
improve already strong U.S.-EU competition policy cooperation.
Officials in the DG Competition Chief Economist’s office and
International Unit said bilateral cooperation has been strong
on mergers and cartels but can improve in the antitrust area.
The officials hoped that an Obama DOJ will move closer to FTC
positions on mergers and unilateral conduct by firms. DG
Competition’s chief economist stressed the increasing role of
economic analysis in EU competition case review, and said
high-profile cases against Intel and Microsoft support this
trend and have not weakened EU support for IP protection. The
officials seek to cooperate with the U.S. on support for new
competition agencies in India, China and elsewhere. While the
Competition Commissioner and Director General will change late
this year, DG COMP’s keen interest in engaging with new senior
U.S. officials offers a good opportunity to deepen this
important relationship. END SUMMARY.

DG COMP OFFICIALS SEEK TO IMPROVE ALREADY STRONG U.S.-EU
COMPETITION COOPERATION
——————————————— ———

¶2. (SBU) Dominique Van Der Wee, Unit Head for International
Relations at the European Commission Directorate General for
Competition (DG COMP), told USEU January 14 that Competition
Commissioner Kroes, Director General Philip Lowe, and other DG
COMP officials value highly their existing close relations
with U.S. competition officials at the Federal Trade
Commission (FTC) and Department of Justice (DOJ). Van Der Wee
said DG COMP sees a difference in antitrust enforcement
attitudes between FTC and DOJ, however, and expressed the hope
that incoming Obama DOJ officials will move toward FTC’s “more
aggressive” positions, particularly on mergers and unilateral
conduct by firms. He said that existing bilateral cooperation
has been strong on mergers and cartels, but can improve in the
area of unilateral conduct. He noted that a U.S.-EU agreement
in fall 2008 to establish high-level regular phone calls on
unilateral conduct cases, to function as an “early warning”
system of major actions, has yet to be implemented fully; he
hoped this could resume with incoming officials by March.

¶3. (SBU) Van Der Wee said there is “enormous interest”
throughout DG COMP in meeting incoming senior FTC and DOJ
officials, perhaps at the ABA Conference in Washington March
25-27.

¶4. (SBU) On February 2 USEU EconMin heard the same message of
cooperation from DG COMP chief economist Damien Neven and two
members of his team (Oliver Stehmann, deputy chief economist,
and Miguel de la Mano, economist). Neven said his office has
had good relations generally for the past few years with the
economists’ teams at FTC and DOJ, although in 2008, relations
were less active due to the pending U.S. presidential
transition. He said he had suggested recently to DOJ that the
annual chief economists’ exchanges be restarted, possibly in
July this year, and seemed to get a positive response. Neven
explained that working level contacts on mergers have
continued to be particularly strong, noting extensive DG COMP-
FTC discussions during consideration in late 2007 and early
2008 of Google-DoubleClick merger (NOTE: which both the U.S.
and EU approved. End note).

BUT CHALLENGES REMAIN OVER ANTITRUST COOPERATION
——————————————— —

¶5. (SBU) Neven noted that antitrust cooperation has been more
complicated, and suggested that more extensive U.S.
confidentiality requirements may limiting useful information
exchange after the USG has opened an investigation. He said
this leads the U.S. side “to ask lots of questions but not be
able to share as much.” (Note: U.S. and EU rules on
confidentiality waivers differ in some respects, but the U.S.
can share information with waivers. End note).

¶6. (SBU) Neven also pointed to the “wide gap” between FTC and
DOJ over unilateral conduct, which he said had made it more
difficult to establish points of common concern with the USG.
He said DG COMP hopes that the DOJ enforcement report on
Section 2 of the Sherman Antitrust Act was an “outlier,” in

BRUSSELS 00000172 002 OF 003

advocating a “more extreme position,” and thought this view
would change under the Obama team. (Note: the 2008 report
covered unilateral conduct by firms, and was not endorsed by
FTC. End note). Neven did say that Deputy Director General
for antitrust and mergers Nadia Calvino’s one conference call
in 2008 with DOJ and FTC was very productive, however, and
hoped these could continue.

ROLE OF EU CHIEF ECONOMIST IN CASE REVIEW
—————————————–

¶7. (SBU) USEU asked about Neven the evolving role of the Chief
Economist’s office in DG COMP review of competition cases.
Neven said there has been a consistent trend for stronger
economic input on “theory of harm” into case analysis, with
measurable results. (Comment: EU competition law has evolved
from a purely legal analysis to more emphasis over the last
decade on economic impacts in evaluating antitrust and merger
concerns. End comment). Neven highlighted the example of the
RyanAir-Aerlingus merger report from 2008, which contains 100
pages of economic analysis (of 400 total).

¶8. (SBU) Neven’s office details one to three staff to specific
DG COMP case teams, he continued. He said his team is
increasingly involved in sectoral inquiries, with three of his
staff working on the ongoing pharmaceutical inquiry. (Note:
DG COMP issued a preliminary report on its major
pharmaceutical inquiry in November; the final report is
expected in mid-2009). Neven’s office was less involved in
the influential 2005 energy sectoral inquiry, which led to the
proposed EU 3rd energy liberalization package. (Note: this
package remains under consideration by the EU Council and
Parliament. End note).

¶9. (SBU) Neven underscored, however, the “schizophrenic”
nature of his office, which remains independent from the case
teams even as it supports case review. He noted that the non-
horizontal merger guidelines, adopted a year ago, have led to
the issuance of different analyses than would have earlier
been the case. He also said his office had been heavily
involved in state aid review of the many recent financial
sector bailouts, and has played a strong policy development
role here.

CHIEF ECONOMIST: KEY CASES SUPPORT TREND TOWARD ECONOMIC
ANALYSIS, DON’T UNDERMINE IP RIGHTS
——————————————— ———

¶10. (SBU) USEU asked Neven’s views on Intel’s concerns that
the Commission’s seven-year case against the firm for
potential antitrust violations has been “politicized.” He
said it was strange that Intel didn’t respond to the
Commission’s second Statement of Objections (SO) charging the
firm with potential violations. He thought the European Court
of First Instance (CFI) correct in tossing out in early
February Intel’s argument for an extension of its time to
prepare its case. He said Intel may think the Commission has
been very selective in reviewing evidence, but said Intel has
itself been very selective in arguing its position. He said
that both SOs against Intel were economic effects-based,
rejecting Intel’s argument that the Commission dropped an
effects-based position in its second SO. At Intel’s hearing
last year, Neven said a “junior member” of the legal team had
stood up and said “remember the case law,” which doesn’t
directly require effects-based analysis, which Neven
considered the basis for Intel’s (unjustified) claim that the
Commission is ignoring economic effects in evaluating the
firm’s case.

¶11. (SBU) USEU raised concerns increasingly expressed by the
private sector concerns that DG COMP decisions have begun to
undermine support for intellectual property (IP) rights in
Europe. Neven disagreed with this view, declaring that the
2004 Microsoft decision was a special case soundly based on
refusal to supply, with the decision and subsequent CFI
decision expressly recognizing IP rights. His staff explained
that the recent Article 82 guidance paper incorporated these
experiences and lays out how to operationalize such special
tests.

BRUSSELS 00000172 003 OF 003

INTEREST IN COOPERATION ON THIRD COUNTRIES
——————————————

¶12. (SBU) Van Der Wee said DG COMP seeks to develop a
coordinated approach with the U.S. on technical support for
new third country competition agencies, beginning with India,
currently establishing its agency. He added that DG COMP also
seeks to encourage China to join the International Competition
Network (ICN), which may require asking Taiwan to change its
nameplate at ICN, a sensitive issue.

COMMENT
——-

¶13. (SBU) DG COMP clearly expects the advent of a new
Administration will bring changes to U.S. competition
enforcement, and hopes this will “bring the U.S. closer” to EU
positions on unilateral conduct and other key issues.
Competition Commissioner Kroes’ term will end with the
European Commission changeover at the end of this year, while
Director General Philip Lowe will be replaced by Alexander
Italianer, a Dutch economist with whom USEU has strong ties.
EU perceptions of prior U.S.-EU divergences in approach on key
competition issues may be exaggerated, but DG COMP’s keen
interest in engaging with new senior U.S. officials offers a
good opportunity to deepen this important relationship. END
COMMENT.

MURRAY

There are several cables related to this, but they do not show anything of particular interest, so we skip them. █

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