Seminar 2: Unilateral Conduct

This week we look at a recent decision of the Federal Trade Commission as a way into the economics-based debates that permeate modern antitrust. the majority decision of the FTC was upheld by the Court of Appeals, but what I want to focus on in the discussion is the approach one takes to regulating unilateral conduct and to examine what causes the debate between the majority and dissent: where do they differ and why? I have also included a paper that seeks to compare the approach in the United States with that of the European Union, so we can explore also this third perspective.

Reading

In re McWane (2014) – majority opinion

In re McWane (2014) – dissenting opinion

Schweitzer ‘Parallels and Differences in the attitudes towards single firm conduct: what are the reasons? (2007) EUI Working Paper 2007/32

Further Reading

Mc Wane v FTC 11th Circuit (2015)

 

 

11 comments on “Seminar 2: Unilateral Conduct

  1. Maria de la Cuesta says:

    I would like to focus my post on the difference between the majority and dissenting opinions. It would seem that the most important difference between the two relates to the supposed lack of evidence regarding the effects on competition and the harm to consumers.
    The dissenting voice in the decision accuses the Commission of overlooking the effects of McWane’s conduct on competition and basing its decision on the finding that McWane’s policy amounted to the foreclosure of its rival, Star, which should only be taken as an indirect way of proving the harm to the competitive process. While Wright admits the validity of the Commission’s theory of harm, he is of the opinion that the Commission has used the wrong standards to apply it. In particular, Wright understands that the Commission has not been capable of proving that McWane’s exclusivity program raised Star’s costs, thus preventing the latter from achieving a minimum efficient scale (which I take as to mean ‘preventing Star from competing effectively in the market’?), and the Commission has failed to prove this point because its only evidence is Star’s claim that it needed its own foundry to operate efficiently in the domestic market, while there is no other evidence confirming this.
    In a sense, Wright accuses the Commission of having behaved ‘too much like a European’, or like Schweitzer would say, like what Europeans are wrongly believed to do. In other words, to attribute more weight in the decision to the foreclosure of a rival than to the proof of the harm to consumers.
    In view of this, I have two questions:
    – For the majority opinion, even if applying Commisisoner Wright’s standards, there is evidence that McWane’s program impaired Star’s ability to compete effectively, as well as of the effects of its program on the price of domestic iron fittings. The question that remains is, had McWire tried to preserve its sales through ‘typical procompetitive measures’ – mainly price reductions -, its behaviour would have been cleared by the Commission from anticompetitive concerns? Also from an European point of view?
    – Like Schweitzer points out, EU antitrust is often accused of old-fashioned, being mainly concerned with the protection of inefficient competitors. Instead, its American counterpart is based on much more sophisticated economic models and on consumer welfare concerns. However, the decision in McWane’s case comes up because of the ‘buy American’ clause of a governmental program (ARRA), one of whose main concerns was to protect jobs and the American industry in the wake of the economic crisis, and which was already at the time welcome with reservations as a dangerous sign of protectionism. From this broader perspective, is it not the case that, at the end of the day, American policies were as much concerned with protecting competitors (when they were American) as European were accused of?

  2. Alexandre Ruiz says:

    I think that the discussion about the standard of proof in exclusive dealing cases and whether the Commission successfully proves harm to competition hides one deeper and more fundamental question, which is what antitrust law should be. From my perspective, whereas Commissioner Wright takes a more outcome-oriented approach to competition, the Commission takes a more process-oriented approach.
    On the one hand, by taking a more outcome-oriented (and more progressive?) approach, Commissioner Wright asks whether consumers are worse off due to McWane’s exclusive dealing policy (p. 5-6). This may recall to Bork’s view on what is anti-competitive: if there is no impact on price or output, the restraint is likely to be pro-competitive or neutral. On the other hand, the Commission observes competition through the lens of a more process-oriented (and more conservative?) approach, and says that ‘when a monopolist can impede potential rivals from becoming effective competitors, it can maintain monopoly prices and thereby harm consumers’ (p. 19).
    These two approaches explain why Wright’s level of standard of proof is higher than the one of the Commission. Wright is focusing on the outcome of competition, and for him whether McWane’s rivals were ousted from the market is not so important. What is relevant is whether there was a real impact on price and/or output that affected consumers. This is why Wright’s analysis looks at the minimum efficient scale (MES), among other points (p. 28). If McWane’s competitors could not have had access to MES regardless of McWane’s exclusive dealing policy, those competitors are totally irrelevant because prices could not have been better. Therefore, consumers are not worse off.
    At the same time, the two approaches also explain why the Commission’s standard of proof is lower: due to McWane’s exclusive dealing policy, McWane’s rival Star saw its costs increased and it could not compete effectively. And although the test is not total foreclosure, this conduct is likely to result in consumer harm. Indeed, the Commission repeated several times that McWane recognized that if its rival had entered the market, the prices would have fallen. Thus, the Commission focuses on the competitive process to ensure a satisfactory competitive outcome in terms of prices.
    This said, one might say that all this question picks up on one point mentioned by Schweitzer on predatory pricing: ‘[t]he US predatory pricing test […] reflects the view that the protection of consumer welfare is the ultimate and only relevant goal […] EU competition law takes a fundamentally different stance. It focuses not on the protection of a particular market outcome, but on the protection of the competitive process and of the competitors who participate in it […] it reflects the understanding that competition is a process that results from the exercise of individual rights’ (p. 32-33). And one might be right to see the reflection of the US/EU debate on the Wright/Commission debate, but only partially. I think that unlike the US/EU debate, both Wright and the Commission had in mind the standard of consumer welfare as the ultimate goal (see p. 19 of the Commission’s opinion and p. 5 of Wright’s opinion). It is not apparent that the Commission was thinking of the individual rights of McWane’s rivals. The only difference between them is the approach that each one takes.
    One last point. If we use the vocabulary of conservative v progressive competition law, here Wright would be the progressive, and the Commission the conservative. Indeed, Wright seems to hint that the Commission is being too conservative by ignoring the GTE Sylvania case, when he says that something changed in Antitrust Law since that judgement (p. 2). I wonder, nevertheless, if it is not Wright who is being more conservative than the Commission by sticking with the Chicago dogma.

  3. Katrine Lillerud says:

    Reaction paragraph to readings in course ‘Competition law: Conservative or Progressive’
    Katrine Lillerud 11 October 2016
    Session 2: Unilateral conduct

    Case study:
    Interesting is the minority’s analysis in three steps with regard to finding unilateral conduct/abuse of dominance which is damaging to competition, see p. 23-24 of the dissenting opinion. According to the minority the ‘theory of harm’ and facts of the case must contain: (i) proof of exclusive dealing by the dominant undertaking, (ii) that this hindered competitor to achieve Minimum Efficient Scale (MES) (defined as the size plant that can produce the smallest amount of output such that long-run costs are minimized.”) and raised its distribution costs and (iii) that the dominant firm maintained its power of the pricing resulting in harm to the consumers. The majority, however, is criticized for only showing (i) a significant degree of market foreclosure and (ii) impairment of one or more significant competitors ability to compete, which in the dissenting opinions view is not a sufficient proof of abuse according to the threshold for burden of proof. I must admit I concur with the minority, since impairment alone if minor is not enough to constitute an abuse. All competitors will “impair” each other to some extent.

    Article:
    Its contribution is to the carving out of the main difference between US and EU policy on unilateral conduct. Main points:
    • Focus on end consumer (US) versus focus on the free competition for competitors in the internal market (EU)
    • US Chicago school policy to not interfere versus European attitude of ‘ordoliberalism’, which promotes the stronger role of the state to ensure the free market functions to be as close as possible to its theoretical potential, achieved by regulatory intervention if necessary

    Remark:
    A common denominator seems to be the difficulty for both continents to find an adequate test for abuse of dominance, even after years of practical experience. Why? Is it a lack of use of economists? Is it a lack of access to empirical data? Or is it a lack of understanding of the markets complexity.

    * * *

  4. Magdalen Reeder says:

    The In re McWane majority and dissent disagree that McWane’s Full Support Program was anticompetitive. The majority and the dissent both define the relevant anticompetitive test differently, which leads to different analysis of the exclusionary effects of the program.

    For the majority, McWane’s exclusive dealing was anticompetitive if it prevent the rival from reaching efficient scale or from accessing the “downstream market.” (Majority opinion, p. 19.) The way the majority defines the test is almost tautological: the behavior was anticompetitive if it “prevented rivals from meaningfully competing and had a substantial anticompetitive effect on competition.” (Majority opinion, p. 20.) With that as the test, the majority is free to look at a range factors that indicate competitiveness, even bringing in McWane’s internal statements.

    The dissent argues for a more rigorous economic standard to be applied. It references an article from Yale Law Review, defining the critical issue as “[w]hether the exclusionary rights arrangement will so limit remaining supply available to rivals that it will lead them to bid up the price of that supply, thereby increasing their costs to the point that the purchaser obtains power over price.” (Dissent, p. 10.) To the dissent, the analysis used by the majority to determine a link between foreclosure from the market and competitive harm is not specific enough. (Dissent, p. 34-35.)

    I am not sure whether the broader interpretation adopted by the majority or the more rigorous analysis undertaken by the dissent is a better judge of anticompetitive behavior. However, it is difficult to find an objective standard in majority’s opinion. Using the majority’s standard, how difficult is it for companies who want to adopt exclusive dealing to know whether or not they will be considered anticompetitive? Does the majority’s stance discourage behavior that both the majority and dissent agree is sometimes pro-competitive? If so, to what extent should this factor in the Commission’s decision?

  5. Alice says:

    I like Schweitzer’s idea that competition rules and their enforcement cannot be the same in different contexts. She shows that market conditions, normative structures and enforcement environments in the EU and the US are too different to apply competition law in the same manner in both side of the Atlantic.
    It emphasis the subjective nature of competition law: a competition law is good according to a specific economic model. There is no objectively superior competition rule.
    Competition laws in the US and in the EU have been enacted to respond to economic policy concerns. However, they were not the same in the US and the EU. The Sherman Act was a reaction to the accumulation of wealth and power in the hand of private companies. It has been enforced to dampen private power and guaranty competitive market structures until the Chicagoan revamp. From then, American antitrust enforcement has focused on the protection of consumer welfare and efficiency. This fundamental change has been supported by a strong political will to create and support American’s “champions”.
    In Europe, the political concern at the origin of competition law enactment and enforcement is the completion of the common market.
    Each style of competition rules and their enforcement comes from a different political impetus and respond to a particular context. It makes no sense to consider that one model is superior over the other; law is subjective and can be understand only in a specific context.

  6. Anna Nowak says:

    Despite ideas and arguments presented by Schweitzer’s in the paper, one may observe in the literature some (strong) critique coming down to EU Competition Law not being like US one. Indeed, there could be an impression that EU Competition Law has to justify whenever it departs from the American philosophy of antitrust, an obligation that does not exist the other way round. However, as far as the EU should draw on vast American experience to improve its own law (also because some theories, like economic analysis, develop quicker and more smoothly there), it is neither possible nor desirable for it to align EU Law with its US counterpart, exactly what Schweitzer is trying to prove.

    As far as the exploitative abuse is concerned, the author briefly describes the fear of American scholars to get involved into “price fixing” regulatory moves. But this fear, and thus critique, stem from the American presumption that all forms of competition are a price competition, what also Mueller put the emphasis on last week. Apart for this presumption being possibly ill-fated (following the analysis of Mueller), Court of Justice of EU simply took a different stand (according to it: “price competition does not constitute the only effective form of competition or that to which absolute priority must in all circumstances be given”, formulated in Case 26/76, para 21). This different perception of nature of the competition could explain (along with arguments put forward by Schweitzer) why EU perceives as indispensable and innocent what US considers regulatory and pernicious.

    Still within the framework of exploitative practices (also for predatory pricing), but also for the refuse to deal mentioned by Schweitzer, the case-law of the CJEU shows that there is no intention to overuse these bases to condemn undertakings. At the same time, and supposing that the prohibition of dominant position is impossible (because at the time of Treaty of Rome delegations would not agree to that and now it is too late), a broad scope of “abuse of dominant position” seems a smart move. Indeed, it may be narrowed down by the Commission and the Court but just in case, the wording of the article “keeps their options open”. In a supranational structure like EU, with much more unpredictability and much more dangerous particular interests of members than in US, with perspective of losing members or gaining new ones, the flexibility given by the formulation of art. 102 secures a strong competence of the EU to keep the competition undistorted, and then the European economic project sound.

    Looking at this issue, as described in the paper, from the “conservative/progressive” perspective, the answer is, probably as the author intended, impossible to give. Traditionally, US antitrust is considered progressive, however the very idea of the article is that the comparison is not really aimed at finding the better and the worse one, then let alone any straightforward judgments or hierarchisation.

  7. Elena says:

    Contrary to the stance of the Court in Brown Shoes, in McWane’s case, both in the majority and dissenting opinions, there is no room for political intents or spirits of the law. The economic religion dominates in this occasion. The exclusionary conduct under scrutiny, the Full Support Program promoted by McWane, seems to have produced a foreclosure effect on potential competitors, and in particular on Star. This is what the Commission concludes after inferring that McWane’s conduct has impaired Star’s expansion to the domestic fittings market by preventing it to achieve a minimum efficient scale. This view is the one that, at the beginning of his opinion, commissioner Wrights seems to endorse when admitting that there ‘is ample record evidence demonstrating that the Full Support Program harmed McWane’s rival Star’. Nevertheless, commissioner Wright contradicts his own opinion when concluding that ‘Star’s growth rate was identical before and after McWane stopped enforcing the Full Support Program [so such program] had almost no impact on Star’s ability to enter and grow business’.

    In any case, majority and dissenting opinions agree, such a foreclose effect does not suffice in order to determine the unlawful monopoly maintenance on the part of McWane. McWane’s liability depends on the validation of the effective harm produced to competition (and not just to one competitor). In order to prove such harm, both parties rely upon efficiency arguments and upon the ultimate goal of maximizing consumer welfare. In the view of the Commission, the harm to consumer welfare is confirmed by the fact that McWane monopolised the only distribution channel, thus keeping away any possible competitor (and thus being in a position of rising prices and reducing output in the domestic fittings market). Wrights argues that it is not at all proven that if Star had entered the domestic market, prices would have fallen and consumers would have been better off.

    Both opinions seem to me quite speculative, being the difference that one (Wright’s) assumes that the self-regulated market will maximize efficiency, and the other (Commission’s) presumes that the invisible hand theory is likely to be the most efficient solution, but such efficiency has to be proven by the monopolist (see page 30 of Commission’s opinion).

    It may be my European bias, but I strongly believe that without competitors exercising their individual’s rights, there cannot be (a fair?) competition. In this sense, I agree with Schweitzer that protection of competitors is not in opposition to protection of competition. So I hope that, by the application of Article 102 TFEU, it would have been necessary just to prove McWain’s exclusionary conduct and its foreclosure effect in order to determine McWain’s liability for unlawfully monopolizing the market.

  8. stavros says:

    Schweitzer’s piece does a lot of good work in disentangling the ideological background and clashes in an allegedly neutral, objective even scientific field. Schweitzer puts the more economic approach into perspective. After an excursion in the historical background the jurisprudential battle for the soul of Art. 102 TFEU, she comes to a revelation: both EU and US single conduct laws aim to distinguishing between impediment competition and performance competition or between anti-competitive and pro-competitive foreclosure. The differences are to be found on the fact that the EU system protects competition as such, the right to compete and promotes market integration, whereas US antitrust pursues solely consumer welfare and always asks for verifiable market effects in the market place (p 22).

    This is a different story from the dominant, well-spread one (Whish and Bailey (7th ed) pp 174-177). According to the latter the Court is protecting the competitors not the competitive process. In any Competition the most efficient or the fittest person will win: this is an inevitable part of the rivalry process. This would suggest that, if a firm ends up as a monopolist simply by virtue of its superior efficiency, this should be applauded, or at the very least not be condemned. But the Court’s case law imposes a special responsibility to dominant undertakings prohibiting them from engaging in practices that are perfectly legitimate for non-dominant players. By doing so the Court harms also their economic freedom, since the champion of the competitive process is not rewarded but constrained. In addition, the Court sets formulaic and inefficient law, since business practices of dominant firms that did not have, or could not have any harmful effect on consumer welfare are condemned (over-enforcement – false positive). The Court also relies on bad economics and obsolete concepts such as competition on the merits, normal competition (reflecting complete competition), and special responsibility. This also explains why the ECJ’s case law imposes regulatory obligations to dominant companies. Such an approach generates perverse results for it condemns the very thing that it aims to protect: competitive behavior. The origins of all these evils are to found in the Ordoliberal School of thought that affected the drafting of the Treaty provisions. Schweitzer effectively deconstructs this narrative and demolishes the various misrepresentations of the School (eg. the as-if standard).

    This narrative aimed to replace the Court’s obsolete form-based approach with a more economic approach that sought to bring EU Competition Law in line with modern economic thinking. In other word it aimed at a ‘smooth revolution’ (M. Monti) that embarked in the Guidance Paper (2009). The Guidance Paper is nothing but an ingenious ideological document. It summarizes and operationalizes the previous consensus (as emerged in the debates over the 2005 Discussion Paper) while it re-conceptualizes the concept of abuse as anticompetitive foreclosure that leads to consumer harm (foreclosure that harms as efficient competitors as the dominant undertaking). Exploitative abuses are totally forgotten; they are not an enforcement priority.

    However, even though someone would expect this reform towards a hands-off approach to completely imitate the Antitrust Revolution it is true that it is smoother (see Davies, Chalmers and Monti, EU Law, 1044-1045). The Commission still does not need to show actual or potential consumer harm directly, a strong inference can be drawn that consumers will suffer if the undertakings that are foreclosed are as efficient as the dominant firm.

    However, remarkably, the Court resisted to the new religion, which as any new religion included elements of the past and brand new elements, and aimed to eventually substitute the former for the latter. In Intel and Post Danmark II the Court makes clear that the as efficient competitor test (AECT) is ‘one tool among others’. When a loyalty-inducing mechanism is demonstrated there is no need to demonstrate effects by means of an AEC test (Intel, 145); the practice is ‘by its very nature, capable of restricting competition and foreclosing competitors’ because a foreclosure effect occurs not only where access to the market is made impossible for competitors. Indeed, it is sufficient that that access be made more difficult’ (paras 88 and 149). In Post Danmark II the Court considers irrelevant the application of the AECT because the emergence of an as-efficient competitor was by all practical means impossible due to the structure of the relevant market; and, second, in a market such as the one in this case, the presence of even a less efficient competitor may contribute to intensifying the competitive pressure (paras 59-60; similarly AG Kokott’s Opinion at points 71-72). These two cases are a partial denial of the Guidance Paper: the methodology of the paper (which summarizes Court’s case law) will apply to certain practices (eg. low cost pricing, margin squeeze) but it is not exhausting the content of abuse. In other words the Court denies the Commission’s move to add certain parameters in finding an abuse to the existing ones and forge a single test for finding abuses of dominance.

    To me the approach of the Court even though it could be associated to the Ordoliberal School (…which is a conservative school because of its association with CDU?) it is actually progressive because it protects the market as an institution of liberty and opportunity and enables ‘equal freedom for all’ (in a more sophisticated way than French delegation envisioned it ‘broad, non-specific prohibition of discrimination’). Here comes an issue that generally fascinates me: the fluidity of labels such as conservative and progressive. As we saw in the drafting of the Rome Treaty the French pole was the ‘progressive’ one and the German-ordoliberal the ‘conservative’. Nowadays, though, things have changed and the economically informed, form-based approach of the Court that echoes Ordoliberal concerns may be more progressive than a hands-off approach that focuses entirely on consumer welfare and uses the elusive concept of consumer harm so as to reduce the ambit of competition rules. From this angle Antitrust Revolution and its smooth European equivalent may be ‘counter-revolutions’, reactionary movements that make further concessions to powerful market players in the name of consumer protection (isn’t this a new populism?).

    What also strikes me is how the consumer welfare paradigm actually functions. For instance, it is puzzling that it could accept statements such the ones in Trinko (‘monopoly pricing is an important element of the free-market system’). Accepting that the consumers may suffer from a dominant undertaking exploiting its position and charging supra-competitive prices (Commission Report 1994) should imply that exploitative abuses are a top priority (how come we expect that the market will self-correct in the short or medium term, Schweitzer, p 26). In this regard, even a MEA could aggressively pursue exploitative abuses. But it doesn’t.

    Be that as it may, it seems to me that at certain points Schweitzer overstates the differences between EU and US antitrust. For instance, regarding exploitative abuses both systems converge to a conservative point that competition authorities are ill-suited to pursue those harmful practices (pp 25-27). In addition the divergence regarding predatory pricing (pp 27-33) is not necessarily linked to a theoretical disagreement and each system’s position does not necessarily derive from a single antirust school. In practice there is an increasing convergence between US and EU antitrust. Schweitzer sheds good light on the reasons of divergence (pp 37-41). But it still remains to be explained what causes the convergence.

    Nonetheless, we can still talk about two different systems of understanding and applying competition rules. This is not because the EU antitrust school does not look always for verifiable effects or because it is essentially Ordoliberal (for instance the Jeffersonian model in the US could be seen as the functional equivalent of the Ordoliberal paradigm). It is because a) the Antitrust Revolution changed in the fate of US antitrust, while b) the Commission and the Court have shaped an economically informed form-based approach and apply competition rules in a system with specific goals such as market integration and social market economy, and institutional set-up. (This approach could be also labeled as a ‘true effects-based’ approach. Post Danmark II is an exemplary case in this respect).

    Specifically, we see that the EU system prefers to err on false positives and that the Court is not necessarily confined to finding consumer harm to condemn a practice as anticompetitive abuse. In addition, the Commission, despite the Guidance Paper, on many occasions has the same methodology as the Court and adopts structural and behavioral remedies in the ‘hidden side of enforcement’ so as to ensure a level playing field or liberalize a sector and simultaneously engineer a competitive market structure. This enforcement style lies at the opposite side of the Chicagoan light weighed antitrust, however it is not at odds with this school and it is not necessarily Ordoliberal. Is this enforcement style a conservative option? Furthermore, the Commission ascribes to many of the Chicagoan aspirations yet its enforcement style is quite different. The Court on many occasions echoes Ordoliberal concerns yet its jurisprudence is richer and more multifaceted. Such a system should be labeled as conservative or progressive?

    Lastly, Schweitzer maps out some of the differences between the two systems regarding unilateral conduct and she also elucidates the underlying reasons of these differences. More importantly, she reconciles us with divergence: there are good reasons for the EU system to be as it is and we should be uncritically allured by the calls for convergence that are not neutral but ideological (they include value-judgments) and, therefore, should be assessed as such. Yet, unmasking a narrative and deconstructing ideology is itself an ideological task. On certain occasions Schweitzer attempts to shape and conceptualize EU competition law according to her own understanding of Ordoliberal thought. This leads to the conclusion that regulatory aspirations and non-economic goals do not have and should not have role in EU Competition Law (p 27). As a description of the law this claim appears to me inaccurate. From a normative point of view, Schweitzer has to persuade us a) that this is the best account of the Ordoliberal School and b) that this should be the European School of antitrust.

  9. Maria Ana Barata says:

    The oppositional arguments between FTC’s majority opinion and FTC’s dissent opinion (i.e. Commissioner Joshua D. Wright) regarding McWane, Inc. case led to different conclusions on the analysis of the anticompetitive effects caused by the McWane’s Full Support Program (if any).

    Different conclusions regarding the McWane’s Full Support Program were reached because both FTC’s majority opinion and FTC’s dissent opinion adopted (i) different relevant anticompetitive tests, (ii) different burdens of proof regarding the effects on competition (see pp. 13/14 of the Mc Wane v FTC 11th Circuit (2015): “failed to carry its burden to demonstrate that the Full Support Program resulted in cognizable harm to competition”) and (iii) gave different importance to the evidence that harm was caused to consumers (see p. 44 of the Mc Wane v FTC 11th Circuit (2015): “It is enough to show that anticompetitive consequences are a naturally-to-be-expected outcome of the challenged conduct”).

    An interesting point between both opinions was the link between (1) the fact that Star’s costs have increased, and (2) the conclusion that McWane’s Full Support Program caused exclusionary effects (hence anti-competitive). Regardless of the impact provoked by McWane’s Full Support Program, if Star did not achieve a minimum efficient scale, would McWane’s presence in the market be seen as anticompetitive? (see pp. 14 of the Mc Wane v FTC 11th Circuit (2015): “Specifically, he suggested that the government had failed to show that Star’s inability to afford its own foundry was the equivalent of its being unable to achieve minimum efficient scale, failed to link the market foreclosure to McWane’s alleged maintenance of monopoly power, and miscalculated the relevant foreclosure share”). How does this support/defeat the thesis that behaviours of monopolists shall be under a stricter review?

    Finally, one could argue that, more relevant to analyse the anticompetitive behaviour caused by McWane’s program than the fact that Star’s costs increased, is the decision of Serampore Industries Private not to enter the domestic fittings market (i.e. foreclosure effect on potential competitors – see p. 9 of the Mc Wane v FTC 11th Circuit (2015): “The Commission and the ALJ also found that the Full Support Program was a “significant reason” that another distributor, Serampore Industries Private, decided not to enter the domestic fittings market). This highlights the distinction between “harming competition, not just a competitor”.

  10. Galyna says:

    Schweitzer tries to give counterarguments to American criticism of the European competition law – saying that it is about protecting competitors and not competition. The author points out that “Article 82 is not only about protecting outcome efficiency, but is about protecting individual rights of competitors at the same time”. I do not find her counterargument persuasive. I think that protecting individual rights of competitors is exactly why it is being criticized by American lawyers and scholars as “protection of competitors”. In this regard, American antitrust law does consider protection of individual liberties as protection of competitors, in particularly taking into account the fact that, according to the author, the European competition law does not require to verify any decrease of competition or efficiency in marketplace.

    Nevertheless, I would agree with the author’s argument that the European competition law tries to protect competition process itself, whereas American law focuses only on consumer welfare. In my view, American approach can be and should be criticized, because it can neglect far-reaching consequences of entities’ conduct. In short-term perspective such a conduct can be seen as positive for consumers (when we apply the criteria of consumer welfare and efficienciy). But on the other hand, this approach does not take into account that in future entities’ behaviour on the market can change significantly (in case if no or little competition exists) and then such a conduct will not be advantageous for consumer welfare anymore.
    European competition law, contrary to American law, tries to foresee and prevent some anticompetitive conduct in long-term perspective and to prevent potential harm for consumers. In addition, I support the author’s argument that “undistorted competitive process will tend to maximize wealth and consumer welfare”.
    Thus, I think that analyzing consumer welfare at the moment when the conduct in question is analysed is not enough to protect competition on the market. In order to protect competition, we should take into account possible effects that such a conduct in question may cause in future.
    Hence, I would not take for granted that American approach is progressive and European is conservative.

  11. Agnieszka Jablonowska says:

    McWane Inc. offers a systematic insight into the application of Section 2 of the Sherman Act by the U.S. antitrust authorities (here the FTC, based on Section 5 of the FTC Act). The reading of the case also shows the central importance the economic approach in the U.S. cases concerning unilateral conduct – an approach, which, to my mind, is less categorical in Europe.

    According to Section 2 of the Sherman Act: “Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony…”. The wording of the statute could suggest that, under U.S. law, achieving a monopolist position in the market is as such considered unlawful. However, even a quick look at the case law shows that this is not the case. Possession of the monopoly power is only one of the conditions. The monopoly power must also be willfully acquired or maintained through anticompetitive conduct, “as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident” (McWane, p. 13). This interpretation is based on the same rationale as the European notion of the “abuse” of the dominant position (Article 102 TFEU). Nevertheless, it is not clear to me whether the U.S. law also considers that the dominant position carries with itself a certain level of “special responsibility” (as the CJEU does, see e.g. judgments in case C-322/81 Michelin, C‑457/10 P AstraZeneca). McWane reveals nothing to suggest that. It seems that the U.S. authorities are rather focused on the economic impact of the analysed practice, and potential differences in their assessments refer mainly to the degree of evidence required to prove the negative impact on competition (as illustrated by the arguments put forward by the majority and by the dissenting commissioner).

    Another interesting point refers to the determination of relevant market. Similarly to the merger cases, also the monopoly power is analysed by reference to the relevant market. In McWane, Brown Shoe is even cited as one of the points of reference (p. 15), which shows that the benchmarks of analysis can be similar in both types of proceedings. The FTC does not only apply the SSNIP test, but also mentions other circumstances, such as targeted price differences, which were possible because the market for domestic fittings constituted a price discrimination market. It is very interesting to see how the regulatory environment (ARRA) can have an impact on the determination of the relevant market in antitrust cases.

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