[Fair Play] By Thibault Larger, Simon Van Dorpe and Christian Oliver | tlarger@politico.eu, svandorpe@politico.eu and coliver@politico.eu | @frogontheroof and @simonvandorpe | View in your browser GOOD MORNING and welcome to Fair Play, POLITICO’s new competition newsletter. Hardened Flemish newshound Simon Van Dorpe is now on deck, and the fully crewed Fair Play is ready to venture into the stormy open water of antitrust news. This week’s edition came together with help from Cory Bennett, Cat Contiguglia, Anca Gurzu and Joshua Posaner. Do send your latest hot tips to tlarger@politico.eu, svandorpe@politico.eu and coliver@politico.eu. Follow us @frogontheroof, @simonvandorpe and @pepinbossu. We are really keen to hear from you (don’t forget those op-eds!) at fairplay@politico.eu. To be added to the Fair Play mailing list, write to pro@politico.eu. HAPPENING THIS WEEK LES MARDIS DU DROIT: Johannes Laitenberger, DG COMP’s lofty director general, will discuss the “current priorities” in European competition policy on Tuesday at 7 p.m. local time at the ULB. STUCK ON THE TELEFONO: On Thursday, the European Court of Justice will issue an opinion on two telecoms cases. The Italian Council of State wants to know whether the pre-loading of telephony services can be considered as an “aggressive commercial practice” and whether national legislation conferring exclusive powers to sanction those aggressive practices is compatible with EU law. BOSMAN REDUX? Also Thursday, the Brussels Court of Appeal will hear additional evidence in a case that pits Doyen Sports — a Malta-based investment fund that finances football players — against FIFA, whose rulebook bans such third-party ownership since 2015. Jean-Louis Dupont, one of the lawyers on Doyen’s side, became famous after the epochal 1995 Bosman ruling allowed players in the EU to move to another club at the end of a contract without a transfer fee. Dupont told Belgian media this case could be a Bosman II. BALKAN BRIEFING: Yet more on Thursday! EU antitrust chief Margrethe Vestager delivers a keynote speech at the Bulgarian presidency’s European Competition Day in Sofia. One of the event’s topics is the trilogue on improving national competition authorities’ enforcement powers. One of our favorite topics … MONDAY ANALYSIS: WILL MACRON AVOID A TRAIN CRASH? French President Emmanuel Macron is steaming ahead with liberalizing the railways. But to do so he’s taking €35 billion of debt off the SNCF network and placing the burden on the government. Our expert economic analysis is that €35 billion is a very large amount of money. So big, in fact, that we reckon Vestager will have to take a closer look at some of the potential spillover effects associated with giving SNCF a hand out of the swamp. This is no sideshow to the European economy. French railways are the eighth-longest in the world and the EU’s second-biggest freight network after the German railways. Despite the sensitivities of state intervention here — Brussels has already probed far smaller rail debt cases in eastern Europe — we are ultimately giving Macron a 9 out of 10 chance of avoiding any fatal obstacle in Brussels, which fundamentally supports his liberalizing crusade. Read our rail market analysis below to see why we think the French leader won’t be shunted out into the sidings by Vestager, or her successor. At most, she will need to make sure his reforms are tough enough, but she won’t stop him. FIRST, LET’S CATCH UP ON THE NEWS WHAT NEXT IN THE GAZPROM SHOWDOWN? Intriguingly, Vestager raised the prospect of damages at her settlement news conference Thursday. Specifically, she described how the ECJ’s 2017 Gasorba ruling could prove a useful precedent for governments, companies and citizens seeking to claim damages from Gazprom. That will be music to the ears of the Lithuanians, who said that they were looking for ways to “indemnify” their losses from Russian gas pricing. A non-confidential version of the commitments proposal is now available online. MORE BRITISH BLACKMAIL — EU STATE AID RULES IN EXCHANGE FOR MARKET ACCESS: In its framework for a U.K.-EU economic partnership, _la perfide Albion_ said it would “consider” keeping in step with the EU state aid and competition regime, but would only make binding commitments beyond those in a standard trade agreement in return for “commensurate levels of market access.” CFIUS LEAVES AMERICA’S CROWN JEWELS UNGUARDED: A months-long POLITICO investigation by our colleagues Cory Bennett and Bryan Bender found that America’s primary vehicle for protecting domestic technology from foreign governments rarely polices the various new avenues Chinese nationals use to secure access to U.S. technology, such as bankruptcy courts or the foreign venture capital firms that bankroll U.S. tech startups. ELEPHANT ON THE TRACKS MACRON’S GOTTA MOVE ON SNCF: Macron’s first line of defense can always be that he is doing exactly what Brussels wants him to do, as DG MOVE is pressing for a shake-up of the rail market. The only way he can realistically streamline the rail behemoth is to shift the debt. This is what Deutsche Bahn did in 1994. (The Germans say their debt relief was almost identical to France’s in current prices: some €34 billion. Just a coincidence?) But here’s the rub. You cannot just brush €35 billion of debt relief under the carpet in state aid terms. That relief amounts to 1.3 times the amount of aid that Paris grants every year, as shown below. The big question for the Commission is whether Macron is distorting competition by giving such a big leg-up to SNCF._ _ The basic point of state aid rail law leaves a lot up to interpretation: “Under certain conditions, debt cancellation may be considered as aid compatible with the single market if it seeks to ease the transition towards an open railway market, without unduly distorting competition and trade between EU countries.” Macron will argue he is opening the market, but Brussels will need to test those claims. Debt cancellation and restructuring aid to rail companies have been closely scrutinized by the Commission in Greece, Bulgaria, Romania and Poland. The potential problems are clear. For instance, clearing the debt on the SNCF network could lead to a decrease in access charges, allowing trains to gain competitiveness in relation to road hauliers. There could even be questions of whether trains could be receiving an unfair state-backed advantage over short flights. There could also be thorny barrier-to-entry questions raised by French labor rules in any simultaneous settlement with the rail workers. That’s definitely something we hear SNCF’s international rail competitors are worrying about. When asked about the potential competition implications, a European Commission spokesperson said Brussels is holding a “continuing dialogue” with the French government. GREEN SIGNAL LIKELY: In truth, Brussels doesn’t have the political muscle to block Paris on something as big as this. From food labels to deficits, France will always get away with a lot of _parce que c’est la France_. It will be more of a case of how to justify the green light. (Rail debt relief of €14.3 billion in Greece and €114 million Bulgaria were cleared last year.) The first point is that this debt is associated with the network (SNCF Réseau). The European Commission’s thinking on these kind of infrastructure systems is that they tend to be “natural monopolies” anyway. Dropping debt (and subsequently access fees) will help all comers using the train lines and thus boost new entrants and competition. The question of competition with roads is slightly trickier, but the Commission will almost certainly argue that this is part of a welcome “modal shift” away from nasty, dirty trucks. SO NO PROBLEM THEN? Probably the only way that DG COMP could really gum this up is by being very slow to kick the tires on the spillover effects, and by taking a long time to test that France’s liberalization plans won’t throw up other barriers. Greece, for example, had to undergo tough privatizing reform in the railways to get state-aid clearance, and France can expect DG COMP to test that the debt relief is accompanied by meaningful competitive reforms. The Balkan rail probes took six years to clear up. Macron needs certainty well before 2024 … The bigger worry may not emanate from DG COMP at all, but lurk on the economic side. France has finally got its budget deficit in order but the €35 billion debt relief represents an additional 1.6 percent of annual economic output. To stay within the limits of European budget laws, the government is talking about a first payment of €25 billion in 2020 and the remaining €10 billion in 2022. Macron will have to hope that he has got his sums right and that France doesn’t become an _enfant terrible_ on the deficit side again. IN CASE YOU MISSED IT ZUCK’S BEST MOMENTS: On Thursday, Facebook CEO Mark Zuckerberg appeared at a hearing before some members of the European Parliament to apologize for the big data mess his company caused. He followed up with written answers to the questions he didn’t know how to answer or could not answer due to the “lack of time.” We enjoyed these two: * “We are happy to address any questions the European competition authorities may have.” Margrethe thanks you for your cooperation. * “From where I sit it feels like there are new competitors coming up every day […] The business model is advertising. It’s about 6 percent of the global advertising market.” Six? Our back-of the-envelope calculations suggest it may be closer to 40 percent in Europe. TECHNICAL APPENDIX: First we looked at the case law to see in which market it makes sense to calculate such a percentage. The Facebook/Whatsapp decision tells us that advertising markets are national in scope, or at best defined alongside linguistic borders within the European Economic Area. Then it says that online advertising markets are separate from offline advertising markets. It also hints at the idea that display advertising and search advertising are not substitutable, and that advertising on social media websites may be a market on its own. Given data restrictions, we could only calculate Facebook’s share in display advertising in Europe. To make sure that our number fits with the case law, we implicitly assumed that a) everyone speaks English in Europe; b) display advertising only exists on social media websites; c) all of Facebook’s advertising revenues come from display ads. We found that in 2016, Facebook’s advertising revenues were $6.4 billion in Europe; that is €5.76 billion using the 2016 dollar/euro exchange rate. European display advertising revenues were estimated at €14.4 billion. Facebook’s share is then more like 40 percent in 2016. THE PRING-PRONG APPROACH TO ANTITRUST: Assistant Attorney General Makan Delrahim spoke last week about the “prong[s] of antitrust consensus” at the Jevons Colloquium in Rome. His main point was two-fold: The consumer welfare standard in dynamic markets should place greater weight on innovation, choice, and quality; he also defended the tools used in antitrust as being fit for assessing threats in digital markets. Read the full speech. A TINY, TIPSY ONE-MAN CARTEL: The French Competition Authority has fined a trade association in the wine business for price fixing. However, no winemakers were charged with participating in the cartel. The decision qualifies the practices as a horizontal cartel, and only punished the trade association. The French authority also says that it was not a secret agreement, there was no monitoring, and there was no retaliation mechanism. Where is the cartel then? The fine probably says it all: €20,000. These days that doesn’t even get you quarter of a bottle! GOSSIP CORNER PHILIP LOWE, director general for competition at the European Commission between 2002 and 2010, was appointed senior adviser at economics consultancy Oxera. He previously held the same position at FTI Consulting for about two years after a three-year stint on the board of the U.K.’s Competition and Markets Authority. From 2010 to 2013, Lowe was the Commission’s director general for energy. Freshfields hired HAZEL YIN as co-head of its China competition practice. Yin was previously a partner at King & Wood Mallesons’ Beijing office. MANON DERELLE left CRA’s energy practice to work for Baringa partners. MATTHEW CHERRY was promoted to interim head of policy at Payment Systems Regulator in London. Ireland nominated Court of Appeal judge GERARD HOGAN as an advocate general to the European Court of Justice, the Irish Times reported. After more than three years of covering EU competition, tech and telecoms regulation for the Wall Street Journal, NATALIA DROZDIAK will be joining Bloomberg’s Technology team from June 4. _This article is part of POLITICO’s new coverage of competition, antitrust and state aid issues, Competition Pro. This coverage includes the Fair Play newsletter every Monday morning. Email pro@politico.eu to request a complimentary trial._
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