Seminar 2 – Abuse of Dominance: making a new policy (17 October 2013)

This and the next seminar are connected: here we examine why the Commission felt the need to reform the law, how it went about doing so and with what possible results. Next week we look at some recent judgments to see what the ECJ has made of this policy reform.

In this seminar the readings are designed to help us think about why the Commission considered it necessary to change its approach to Article 102 enforcement, the challenges of the use of a more economics-based approach, and the salience of the resulting Guidance.

Reading

Compare and contrast the following

Case C-62/986 AKZO Chemie BV v Commission [1991] ECR I-3359

Report by the EAGCP – “An economic approach to Article 82”

Communication from the Commission: Guidance on its enforcement priorities in applying Article 82 of the EC Treaty to abusive exclusionary conduct by dominant undertakings [2009] OJ C45/7

(The Report above is a tad long, perhaps focus on the first part and then on the section on predatory pricing)

Secondary literature (pick a selection from the list below)

A-L Sibony ‘Limits of Imports from Economics into Competition Law’ In Lianos & Sokol (Eds.) The Global Limits of Competition Law (Stanford, 2012)

D.J. Gerber ‘The Future of Article 82: Dissecting the Conflict’ In Ehlermann and Marquis (Eds.) European Competition Law Annual 2007: A Reformed Approach to Article 82 EC (Hart, 2008) Available from: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2159343

A.C Witt ‘The Commission’s Guidance Paper on Abusive Exclusionary Conduct – more radical than it appears?’ (2010) 35(2) European Law Review 214

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14 comments on “Seminar 2 – Abuse of Dominance: making a new policy (17 October 2013)

  1. Jonas von Kalben says:

    The report by the EAGCP “An economic approach to Article 82”, supports an “effects-based” rather than a “ form-based” approach to competition policy. This differentiation seems misleading, as the interpretation and function of European Competition Law has always been based on “effects”. For example, regarding Art. 102 TFEU “the concept of abuse is an objective concept relating to the behaviour of an undertaking in a dominant position which (…) has the effect of hindering the maintenance of the degree of competition still existing in the market or the growth of that competition.” (Case 85/76 Hoffman-La Roche v Commission [1979] ECR 461, paragraph 91). Therefore, I think Gerber puts it much more precisely, when outlining the differences between the “consumer welfare approach” and the “competitive distortion concept”: While the latter concept analyses the effects on “competition as a process”, the former looks at the effects on “results produced by that process” (see Gerber, ‘The Future of Article 82: Dissecting the Conflict’, p. 50). It turns out that both approaches are “effects-based” but only refer to different contents.

    The shift of concepts (from “competitive distortion” to “consumer welfare”) implies a change of the normative foundation of competition law. The major difference appears to be, that the “consumer welfare approach” refrains from “translating” economic theory into legal doctrine. As Gerber points out, if “anticompetitive” equals “harm to consumer welfare” (as determined by certain economic criteria), there is no room for legal inquiry to take other factors into account or to rely on legal analysis of prior cases and ideas about the injury to the competitive process; overall, as a consequence the importance of legal expertise gives away to the weight of economic analysis (see Gerber, ‘The Future of Article 82: Dissecting the Conflict’, p. 51 et seq.). When waiving the translation of economics into law, the representatives of the “consumer welfare approach” seem to underestimate the importance of this process of “transformation”. For example, one important aspect that has to be taken into account during this process of “transformation” is the fact that competition authorities and courts have to be in a situation to implement competition law at reasonable costs. Competition law therefore has to take into account which information is available. If certain information is not available or is to be obtained only under unreasonable costs, it might be necessary to use assumptions based on experiences on typical chains of causation. I am not sure that the report by the EAGCP takes this point efficiently into account when stating at p. 3: “An “economics-based approach will naturally lend itself to a rule of reason approach to competition policy, since careful consideration of the specifics of each case is needed, and this is likely to be especially difficult under per se rules.”

    According to Art. 3 (3) TEU the European Union shall establish an internal market that – according to Protocol (No 27) on the internal market and competition – includes a system ensuring that competition is not distorted. Even if the expected outcome of this system is the economic welfare of the Union (see Gerber, ‘The Future of Article 82: Dissecting the Conflict’, p. 44), this normative decision indicates that the aim of competition law is the protection of the competitive process and not the protection of its results – which are in anyway unpredictable because of nature of competition as a “process of discovery”. Hence, the effects on consumer welfare should not be regarded as an element of the competition law offence. This is not to say, that competition law should not be designed by taking into account the economic effects of certain conduct.

    Finally, I would like to make a point on the second role of economics Gerber identifies next to the “normative” role, which my arguments above referred to. The “fact-interpretive” role of economics is supposed to describe the way economics is used to identify correlations and potentially causal relations between certain kinds of conduct of dominant firms and changes in market conditions (see Gerber, ‘The Future of Article 82: Dissecting the Conflict’, p. 48). The “consumer welfare approach” seems to drastically raise the standards of proof to show infringement of competition law. This might be a reason why the commission more often than not uses the instrument of commitment decisions instead of the infringement decisions to avoid these high standards of proof. This development is not only contradictory but also very dangerous with a view to rule of law.

  2. Delphine Defossez says:

    The main aim of article 102TFEU is to fight abuse of dominant position. Therefore, it is a rather economic based approach that the EU has taken with regard to competition. However, in order to achieve this main goal, other factors need to be taken into considerations such as fairness, economic freedom, etc. Since this article has been developed mostly through decision, then no guideline is to be found with regard to clarifications of the development of the law in that area. The main problem is that the concept of distortion of competition is interpreted differently by the different actors involved (CJEU, DG, Commission, etc). Furthermore, it is rarely explained how those secondary goals are linked to the main goal. Moreover, those goals cannot be taken as a standalone test but rather form part of a broader picture.
    It should be kept in mind that article 102TFEU requires an abuse of the dominant position. It is not illegal per se for a company to have a dominant position on the market. What is illegal, however, is when that company takes advantages of its position in order to influence the market. The reason why there is a need to fight this kind of actions by firms, is that when the market is distorted then consumers are the first one to be harmed. One of the main focuses of the Commission is to protect consumers. This is a rather new approach as before the Union focuses mostly on economic freedom. Nevertheless, this approach can be dangerous as it seems that the threshold to prove that article 102 has been infringed will raise dramatically.
    The Commission wants to insure that the competition is not restricted in the internal market. That does not mean that Commission protects competitors but it protects the market itself. This is also why having a dominant position is not illegal under EU law, as it may well be that a company is better at marketing its products than another one. Traditionally, the Court always stressed out the importance of determining the relevant market by looking at 3 variables, namely the geographical, the temporal and the product market. Whereby, the geographical covers the territory within which the traders operated. Whereas the temporal criterion relates to the duration of the dominant position and to the fact that it can be seasonal activities. In order to determine if the product market criterion is fulfilled, the Court will look at the interchangeability of the product, United Brands. Nonetheless, in the Guidelines provided by the Commission there has been no references to those critera.

    I agree with A.C Wit that the new guidance for article 102TFEU will reduce it scope, as right now consumer protection is playing a more important role than it had before. Therefore, if companies arrive to have a dominant position and abuse it without actually harming the consumer, then it will be regarded as lawful. If we recall the ruling of the CJEU in Woodpulp, in which it clarified that the territorial scope is not restrained to the Europe itself but may also cover agreements, made by enterprises outside the Union, affecting Union trade.
    With this newest approach in which consumer protection plays a bigger role, one may wonder whether the case-law of the CJEU will not enter into conflict with the new ideas developed. For instance, we may ask ourselves whether the definition given by the CJEU in United Brands, of the term dominance is not too broad. Or whether we will need to adapt it and only focus to market power only.
    Commission has a strong input not to interfere with the market unless necessary. Furthermore, the dominant company can try to justify its conduct by showing that the conduct is objectively necessary or by demonstrating that its conduct produces substantial efficiencies which outweigh any anticompetitive effects on consumers. That may lead to a more lenient approach to article 102.

  3. Tiago Andreotti says:

    The EAGCP Report argues in favor of an economics based approach to enforcing rules on the abuse of a dominant position, applying therefore a rule of reason instead of the per se rules (p. 3 “An economics-based approach will naturally lend itself to a “rule of reason” approach to competition policy”).

    My first comment is that this strong division between the “per se” rules and the rule of reason as the authors of the Report established and the way that they were used does more harm to the discussion than helps in creating an efficient enforcement system. It seems to me that the question is not one of choosing between a “per se” rule or the rule of reason, but one of degree; the question is whether the competition enforcement system should be closer to a “per se” rule, were presumptions would be used to impose infringements on companies engaging in behavior that prima facie is legally considered to be an abuse of a dominant position, or should it be closer to a pure rule of reason, where in each and every single case the Commission would have to articulate an economic theory and put forward strong evidence to demonstrate that the action executed by a market player caused an economic harm? The way the argument is framed seems to give only two options, while it is most likely that the right one falls somewhere in between.

    The Report gives some justifications on why an effects-based approach (the rule of reason) is preferable. First, it argues that using categories of conduct as proxies for what consist on anticompetitive behavior is problematic, as alternative practices can serve the same purpose (p. 5) It is true that other practices may provide for anticompetitive conduct, but it doesn’t follow that using categories to manage anticompetitive behavior is problematic; the problem is whether these alternative practices are allowed.

    The second argument is that a single behavior might have both pro-competitive and anti-competitive effects depending on the situation of the market at the time (p. 6). Even though this is correct, the fact that the same behavior might be create positive or negative effects does not by itself justify a change in the enforcement approach for competition law.

    The Report actually frames the problem properly in the following passage, when discussing the choice of a per se rule or a rule of reason: “In both cases, however, the competition authority must balance the likelihood of false positives […] and false negatives […], as well as likely magnitudes of the costs for competition of both types of errors.”

    What in fact the proposed change is doing is diminishing the probability of false positives while increasing the probability of false negatives, in other words, increasing the probability of competition law infringements going undetected.

    This of course is a policy choice that has to be made, but the argument laid down by the authors is on its face unconvincing. As changes in regulatory systems have costs, the authors should have applied the method they were proposing for the Commission in enforcing Competition Law so they would have a strong case on why change is needed: first identify a consistent story of why a change to the effects-based approach is necessary, identifying the economic theory or theories on which the story is based, as well as the facts which support the theory as opposed to competing theories. At most the Report was successful in identifying a consistent story, but failed to put forward an economic theory supported by facts on why the change is necessary.

  4. Karin Fløistad says:

    The judgment C-62/986 in our reading material makes inter alia clear important procedural rights in the enforcement of competition law. The right of procedural guarantees also in the field of competition is affected by the entering into force of Article 47 of the Charter of fundamental rights in the EU. Imposing administrative fines in competition enforcement cases are sanctions of a criminal nature. This classification in human rights law gives procedural rights to the parties regardless of its classification in national law.

    The impact of the Article 47 has also been discussed in recent decisions from the CJEU regarding the extent of judicial review of the assessments by the Commission that are essentially ‘of an economic nature’. There has been a traditional deference accorded by the European Courts on assessments by the Commission of an economic nature. It is argued that the case law based on Article 47 may substantially affect the degree of judicial review of the evidence presented and analysed by the Commission including the conclussions drawn from the evidence. It follows from recent case law (Schindler Chalkor and KME), in accordance with the principle of effective judicial protection, enshrined in Article 47 of the Charter and Article 6(1) ECHR, that it is required of the European judicature to be awarded unlimited jurisdiction or, more precisely, ‘the power to assess the evidence, to annul the contested decision and to alter the amount of a fine’. This may have great consequences in complex cases of possible abuse of a dominant position.

  5. Marita Szreder says:

    The Commission’s move towards a ‘more economic’ approach to article 102 in recent years has been spurred by the apparent deficiencies of the more ‘formal’ approach. As pointed out by Sibony, a ‘more economic’ approach is generally considered progress. But by what standards should the two approaches be assessed? According to the OECD, a desirable approach to competition practices should be: accurate (i.e. “based on widely accepted economic principles and yielding minimal costs from false positives and false negatives”), administrable (easy to apply), applicable (covering wide scope of conduct), consistent (predictable), objective and transparent.

    The ‘more economic’ approach can be described as more nuanced, rule of reason approach, concentrating more clearly on the effects of each scenario as opposed to the structure of the market. As such it could be considered more accurate. I think that this is true as far as a risk of false positives goes, but not necessarily true when it comes to a risk of false negatives. An accompanying shift in the burden of proof as well as the intrinsic difficulty of predicting the future could both contribute to a greater risk of false negatives. Without doubt, a system based on detailed economic analysis of each case must be by implication less administrable and applicable. The EAGCP report values a ‘more economic’ approach for its ability to bring about more consistent results, but I’m personally not sure if that would be the case. All in all, there is no single economic theory setting out the standard of assessment (the opposite seems to be suggested by the report); there is always a risk of differing theories being applied to different cases. In-depth economic analysis of anti-competitive effects in each case could potentially also make the system less transparent. So, in line with what Sibony has said, it can be concluded that “more economics does not always mean better law”. So, is the Commission really that afraid of false positives? Is this what caused it to change its approach?

    The above, however, is based on what might be seen as a more narrow conception of the ‘more economic’ approach, described by Gerber as ‘fact-interpretative’ role of economics. The alternative would be to think of the change of approach in normative terms, which of course would be far more radical. This would involve a change of goal of article 82 from distortion of commpetition to protection of consumer welfare. Unfortunately, the Commission’s guidance is not unequivocal on this point, which only adds to overall confusion. In any case, it does not seem to be proposing changes that would be as radical as the ones recommended in the EAGCP report (at least in the ‘fact-interpretative’ sense).

    Importantly, a move to a ‘more economic’ approach does not only signify a change in legal reasoning that leads to a particular outcome, but potentially also a move to different outcomes. The decision in Akzo Chemie might be taken as an example of ‘formal’ approach analysis. We can only wonder if the case would be decided the same way under a ‘more economic’ approach as envisaged by the EAGCP. While Akzo was quite open with its intent (finding of threats), the market shares of Akzo and ECS changed only insignificantly during the relevant period, so it could be difficult to establish competitive harm, especially if it was defined in terms of consumer welfare.

  6. Céline Estas says:

    It seems obvious that the Akzo case belongs to the so called “form-based” approach of competition policy. Indeed, it clearly matches with the description in the EAGCP report because it is focused on the category of conduct, which was predatory pricing. In fact, Akzo deals basically with the conduct in itself. The main part of the decision concerns the determination of the costs, in order to demonstrate the anti-competitive intent of Akzo. That is the conclusions drawn by Sibony. Moreover, Akzo does not use arguments based on the competition harm.

    But, in my opinion, we cannot say that the approach that prevails now in EU competition law is only a “form-based” approach because the Commission appears to give weight to effects that create consumer harm.

    The question of the effects on consumer welfare is important nowadays because the Commission considers it as an aim of competition law. In the Communication, the accent on consumer welfare clearly comes out the text, for instance: “the Commission will focus on those types of conduct that are most harmful to consumers” (§5). Another example is that the justifications brought by the undertakings should “outweigh any anticompetitive effects on consumers” (§ 28). From my point of view, the accent on consumer welfare demonstrates that the approach adopted by the Commission takes into account the effects of the conducts of undertakings. Indeed, my last example appears to be what the report establishes for the effect-based approach: “This implies that competition authorities will need to identify a competitive harm, and assess the extent to which such a negative effect on consumers is potentially outweighed by efficiency gains.” (p. 3). Therefore, even if the approach of the Commission is still divided into categories of conduct, the effects of those conducts are not forgotten.

    The last element that attracted my attention is the relevance of the recoupment period in predatory cases. This period is not mentioned in the Akzo case, which is basically focused on the analysis of the costs. As it is stated in the Communication, the ECJ did not require the proof of a recoupment period (Tetra Pak case). However, the recoupment period seems to play a role in the case-law, as pointed out by Sibony. Even though, it was used by the Court as a supporting element linked to the anti-competitive intent, and not for the demonstration of the consumer harm. This use of the recoupment element leads to two points. First, from the view of Sibony, the way in which the recoupment was used by the court is not appropriate, because it is integrated in the existing legal reasoning. Second, in the EAGCP report, an important role is given to “the recoupment ability of the predator” in assessing the competition harm.
    Thus, it would be interesting to determine to what extent the existence of a recoupment period should be used to demonstrate consumer harm, and where this argument should take place in the legal reasoning.

  7. Theodosia Stavroulaki says:

    After reviewing the reading material one question came to my mind: Has the Commission actually moved towards a more economic approach regarding the application of Article 102 TFEU? Has it actually achieved its goal? After reviewing the Akzo case I could easily reach the conclusion that the Commission has changed its approach when applying Article 102 TFEU since to a certain extent it has abandoned its formalistic justifications when it evaluates the legal and economic facts of a case. Such a formalistic approach is obvious in the Akzo judgment where the Court evaluates Akzo’s business strategy by using general non economic terms and without conducting an in depth analysis of the relevant market and its characteristics. The Court focuses on Akzo’s intentions and not on the actual effects of its business conduct on consumers. For example it is stated in the judgment regarding the existence of an a abuse of a dominant position (para 64-65): “According to the Commission, Article 86 does not make costs the decisive criterion for determining whether price reductions by a dominant undertaking are abusive (point 77). Such a criterion does not take any account of the general objectives of the EEC competition rules as defined in Article 3(f) of the Treaty and in particular the need to prevent the impairment of an effective structure of competition in the common market. A mechanical criterion would not give adequate weight to the strategic aspect of price-cutting behaviour. There can be an anti-competitive object in price-cutting whether or not the aggressor sets its prices above or below its own costs, whatever the manner in which those costs are understood (point 79). 65 A detailed analysis of the costs of the dominant undertaking might, however, according to the Commission, be of considerable importance in establishing the reasonableness or otherwise of its pricing conduct. The exclusionary consequences of a price-cutting campaign by a dominant producer might be so self-evident that no evidence of intention to eliminate a competitor is necessary. On the other hand, where the low pricing could be susceptible of several explanations, evidence of an intention to eliminate a competitor or restrict competition might also be required to prove an infringement (point 80)”. What is dangerous when the Courts apply EU Competition rules in a formalistic way is that a number of business conducts which may enhance consumer welfare and innovation might be found illegal only because the Courts are reluctant to take into consideration the specific characteristics of the relevant product market, such as barriers to entry, the position of the competitors, the cost structure of the undertakings etc. On the other hand, the traditional formalistic approach concerning the application of Article 102 TFEU leads to legal certainty and predictability.

    Taking due account of the above trade offs a crucial question appears: Does the Commission’s Guidance Paper represent a clear shift from the Commission’s historical per se approach towards a more effects based approach? From the Guidance paper it is clear that the Commission is reluctant to abandon its traditional approach and move merely towards an economic approach. As a consequence, on one hand the Commission adopts economic terms in order to evaluate business strategies when applying article 102 TFEU, on the other hand it repeats a number of general, vague, formalistic statements which clearly originate from its traditional per se approach. For example, a traditional formalistic approach is clear in paragraph 1 of the Guidance Paper, where it is stated that dominant undertakings have a special responsibility not to allow their conduct to impair genuine undistorted competition on the common market. Furthermore, in paragraph 20 of the Guidance paper it is stated that when the Commission undertakes an evaluation of an exclusionary conduct it will compare the actual or likely future situation in the relevant market with an appropriate counterfactual, such as the simple absence of the conduct in question, while in paragraph 20 it is stated what there may be circumstances where it not necessary for the Commission to carry out a detailed assessment if it appears that the conduct can only raise obstacles to competition and that it create no efficiencies. In paragraph 23 it is stated that the Commission will intervene only where the conduct concerned has already been or is capable of hampering competition from competitors which are considered to be as efficient as the dominant undertaking while in paragraph 24 it is argued that in certain circumstances a less efficient competitor may also exert a constraint which should be taken into account by the Commission.

    Furthermore, even in cases where the Guidance paper adopts a more economic approach, it does not provide the business community and the Courts with the analytical framework necessary for applying such an economic approach. For example, in paragraph 30 the Guidance paper analyses the conditions under which an efficiency defence by a dominant undertaking may be accepted and proved but it does not provide the appropriate guidance for the balancing test between possible efficiencies and restrictions on competition. However, such a framework has been introduced by the Commission for the application of article 101 para. 3 TFEU.

    To sum up, although the Commission published the Guidance paper in order to adopt a more economics based approach when article 102 TFEU applies, it did not succeeded in introducing a clear framework under which economic considerations can be entailed. As a result it is hard for the business community and the Courts to use an economic based approach when article 102 TFEU applies. I consider that the role of the Court of Justice will be crucial regarding future developments in the application of article 102 TFEU. It will either support the Commission’s new approach by entailing economics principles in its justifications or it will support the traditional formalistic approach of the well established case law. In this case legal uncertainty will be created regarding the application of article 102 TFEU which will have a considerable impact on business strategies and on the application of EU Competition law at national level.

  8. Sara Perez says:

    The Commission’s policy toward predatory pricing is an example of previously established case law reformed by incorporating economics into the law. The Commission moved away from a price-cost approach to finding predation, as adopted by the court in AKZO, because the key facts that indicate predatory pricing have “little to do with the predator’s cost; rather, they concern[] the target’s ability to get access to finance or reliable information” (EAGCP 53). In changing its approach to Article 82 enforcement, the EAGCP endorses an effects-based approach to competition policy, within a broader economics-based approach. In particular, the EAGCP asserts that by focusing on the anti-competitive effects of a company’s commercial practices, with specific practices analyzed in terms of their outcomes, and balancing these effects on consumers with the efficiency gains of the anti-competitive business behavior, competition law will overall protect consumer welfare.
    Looking only at predatory pricing, we can see both pros and cons to adopting an effects-based approach to Article 82 enforcement. By moving away from a form-based approach, antitrust policy can better protect consumers from seemingly innocent business practices that lead to anti-competitive results. However, one issue I had with the EAGCP’s policy is the use of ‘’predatory intent” in determining anticompetitive conduct. To establish anticompetitive conduct in test market predation, the EAGCP states that, among other things, evidence that a “well-defined strategic model of predation are satisfied and that the conduct of the predator is consistent with that theory,” must be established. While there are other ways to prove predatory pricing (looking at recoupment, average avoidable costs, etc.), using firm strategy and intent to establish predation may lead to discrimination. As Sibony notes, legally savvy companies know how to avoid a finding of intent of predation. I’m not too knowledgeable about the Commission’s power regarding discovery, but how successful would they be in obtaining a company’s private records, correspondence, etc. to establish their underlying strategy?

  9. Mariajo says:

    The development of the more economic approach adopted by the commission for enforcement priorities in Article 102 TFEU is to me less of a question whether it is a “good thing” or a “bad thing”, in contrast to some of the comments above. In my opinion it was a “necessary thing”.
    I see a parallel here to the US Supreme Court’s judgment in Leegin which we discussed last week. One of the implicit arguments driving the majority opinion was, in my opinion, that of consistency. The Court did say, that there was no reason for upholding a different treatment of vertical restraints depending on whether they were in the form of resale price maintenance (Dr. Miles per se rule) or in any other form (rule of reason). If I am not mistaken, the Court followed the following logical steps:
    1) If… we are not sure whether a certain market behavior has pro- or anticompetitive effects generally, we apply a rule of reason approach
    2) ..and… in fact, we are not sure whether resale price maintenance has pro-competitive or anti-competitive effects
    3) …then a rule of reason approach must be applied to this type of behavior (= hasta la vista per-se rule of Dr. Miles!).
    To me, the Commission was forced to follow the same logic of consistency, albeit not within the narrow category of vertical restraints, but in respect of the consistency between the enforcement priorities of Article 101 and 102 TFEU. In fact, the Report by the Economic Advisory Group stated that the “economics based approach presented in this report is a step in the right direction […] consistent with the reforms of Article [101] and merger control”. Earlier in the 2000s the Commission had adopted a range of guidelines providing for potential exemption of practices which would normally be caught under Article 101 TFEU. I think it is fair to say, that these guidelines cover exactly these practices where the pro- and anticompetitive effects are uncertain. If the Commission was prepared to provide for such exemptions by introducing economic analysis and using consumer harm as the defining measuring rod for anti-competitive effects, it would have proven difficult to stick to a more formalistic approach (Tiago, I’m with you, to me “effects-based vs formalistic approach” is a matter of degree and not black or white) in cases of Article 102, where pro- and anticompetitive effects are just as unclear. I might be wrong on this one because, curiously enough, the Guidance Paper does not say one word about consistency considerations. Nonetheless I think sooner or later the Commission would have been faced (or was already faced) with pressure to explain why it were justified to apply two divergent approaches in Art. 101 and 102 TFEU.

  10. Heikki says:

    What I found interesting is that already in the AKZO case (1991) the Court reasoning went somewhat beyond formalistic criterion (e.g. price/average costs ratios) especially when the Court considered the question of intention motivating the abused behaviour. Moreover, the Court in AKZO defined “abuse” as an objective concept that relates to dominant behaviour, “which is such as to influence the structure of market where . . . the degree of competition is weakened . . .” Nevertheless, the resoning of the Court was primarily done in order to classify AKZO’s behaviour along ex ante formalistic categories.

    EAGP Report strongly promotes effects-based rather than form-based approach to competition policy. They argue inter alia that this would make circumventing rules less easy. This seems to me a typical form-over-substance or spirit-over-letter argument. The report’s approach is incredulous towards classifying behaviour against ex ante established formal categories. The basic argument is also invoked that ex ante prohibitions often lead to inflexible markets and less innovation. The report presents how predatory pricing is just one example of a practice, which is hard to classify with per se rules. As the report notes, predatory pricing poses a difficult challenge for antitrust authorities because the matter is one of low prices. This difficulty also raises a risk that authorities easily misclassify cases or make circumvention of the rule easier. To that end, Finland’s recent Valio-case from 2012 presents an example of a very difficult judgement: in this case the outcome was particularly unfavourable to customers and lead to almost instantaneous increase in the price of milk throughout the market. This alone, however, should not allow concluding that the case is an example of a false positive decision.

    The EAGP report provide instead an “economic toolbox” of relevant arguments which could be used to judge suspicious practices more resonably. To me, the report nevertheless seems to fail in establishing how the “rule of reason” approach would enhance predictability and effectiveness. An economic toolbox in the hands of judges and bureaucrats might not lead to consistent and predictable outcomes. After all, this is the standard tradeoff associated with “non-dirigiste” approaches to enforcement and regulation.

  11. Samantha Palladino says:

    My initial reaction to the Communication from the Commission was that the Commission’s alleged “guidance” did not provide all that much concrete guidance at all. To be fair, it offers definitions (for e.g. “dominance”) and lays out factors for assessing the defined terms, however, it also requires weighing the pros and cons or potential benefits or negative impacts of any enforcement procedures. And, the dominant can attempt to justify its actions based on efficiency (albeit, with the burden of proof). And, the Commission states that the Communication is without prejudice to the courts’ interpretations of Article 82. As I write this, I realize that this weighing and evaluating is a staple of much of the law that I have studied. I think my reaction to the seeming inadequacy of the Commission’s guidance is due to the fact that when anything is cloaked in “economic” terms or analysis, I equate that with more concrete, definitive, and objective answers. Aside from reading opinions by Richard Posner, I have little experience with economics and its role in the law. Or, I have little experience with discussing is, even though if I think about it, it plays into a lot of what I have studied and read. However, I keep expecting “economic” theories to offer me something more concrete and less flexible because I think of economics and numbers and numbers as something “hard” and definitive. This concern was particularly salient when I was reading about dominant position abuses, and lead me to wonder whether there is any way to avoid the label while becoming premier in one’s industry. I suppose that part of the point of competition law is precisely that, to avoid having one dominant leader, but, what if someone is the best, should their success and innovation not be rewarded? I appreciate that to some extent, the rewards must be stymied for the sake of overall consumer welfare or further innovation and continued creativity, but I have a difficult time accepting some of the enforcement when it seems like the guidelines for it are so arbitrary. But, then when reading AKZO, I was able to understand the depth of the analysis undertaken by courts; when actual practices and company policy’s are provided, it is easier to appreciate that it might not in fact be so “random” when a company is penalized for violations. What I do not know, however, in my limited exposure to competition law is whether AKZO is unique in its in-depth analysis or not.

    I understand that Sibony’s article aimed to describe the various techniques that that one could use to import economics into the law but her introductory remarks on the limits of an economic approach to competition law made me wonder whether there is in fact any other approach to competition law?

  12. Sylvi says:

    The stated intent of the Commission Communication is to “provide greater clarity and predictability as regards the general framework of analysis which the Commission employs in determining whether it should pursue cases concerning various forms of exclusionary conduct” and “to help undertakings better assess whether certain behaviour is likely to result in intervention by the Commission under Article 82.” However, it reads more like statement as to the Commission’s policy position regarding dominant undertakings – and even read as such, it fails to set forth a clear standard. On the one hand, this is unsurprising given its aim to adopt an economic approach to Article 82 – reliance on economic theories in the analysis and administration of the law is by its nature a complex undertaking that is not easy to outline. In fact, an attempt to do so could run the risk of undercutting judicial efficiency by requiring decision-makers to fit their legal analysis into an unclear interpretation of prevailing economic theories. Yet the Commission fails to even provide courts with helpful guidelines that would assist in the application of economic theories to the law; rather, it simply makes vague, general statements without much concrete guidance as to the application of the approach in practice. For example, I noted the same lack of framework as Theodosia in para. 30 – how should courts determine whether the four “cumulative conditions” have been fulfilled?

    Furthermore, it was unclear to me how the report necessarily represented a “shift” from a “form-based” approach in favor of an “economics-based” approach to competition policy, if it is intended to be contrasted with the Akzo case. It seemed to me that the Court in Akzo did allow economic theories to at least SOMEWHAT inform its application of Article 82; at the very least it did not apply wholly formulaic rules to arrive at its conclusion. Although its position that “a market share of 50%” is in itself “evidence of the existence of a dominant position” is a certainly a fairly form-based presumption of dominance, the Court went on to state that “other factors confirmed Akzo’s predominance in the market,” suggesting that “very large shares” are not the sole determinant of market predominance. The Court further noted that the “criterion of legitimacy [of competition by means of price] to be adopted is a criterion based on the costs and the strategy of the dominant undertaking itself,” which to me seems consistent with an “effects-based” approach. When coupled with the Commission’s statement that the report “is not intended to constitute a statement of the law and is without prejudice to [courts’] Interpretation of Article 82,” I am not sure what the real practical value of the Communication is.

  13. Itsiq Benizri says:

    As it has been well established by the ECJ jurisprudence, it is not the dominant position that is forbidden, but only the abuse of such a position. Therefore, the concept of abuse must be defined. As competition is seen by european institutions as a foundation for peace in the market, the abuse should qualify the measure that would disrupt the market. Thus, one should still determinate from which point of view one should appreciate if there is or if there is not a market disrupting due to an abuse of dominant position. The Report and the Communication of the Commission as well talk about a shift from the competitive distorsion model to the consumer welfare model : the absuse should not be considerated anymore from the market competitors point of view, but from the consummer one.

    The first effect of this shift is that the first model focus on forms, while the second aims to focus on effects. However, somehow, both of these models are evaluating the effects of the abuse. Two things are changing : the strenghtness of this effects-based approach, and the point of view of the market disrupt evaluation. In the competitive distorsion model, since a dominant position is not forbidden in itself, the judge would check if there is an abuse and if this abuse caused a distortion of competition. Even if the decision follows a formal approach, an effects-based approach is still implied in the rule. Once the prohibited fact is established, it is supposed to disrupt the market, this is to say to affect the competitors. In the consumer welfare model, the effects-based approach has another meaning. It is about leaving any implied approach and to choose a pragmatic one: no fact should be considered as prohibited in itself. One should always consider if it has good or bad effects for the consummer. It is only if the effects are bad for the consummer that the fact should be considered as forbidden. So the changing is in the demonstration.

    The second effect of this shift is that this methodoly implies a shift from the per se rule to the rule of reason. A consequence of this intern shift concerns the appreciation of the violation of the law. With a forms-based approach, the violation could always be determined from the true begining, this is to say when the fact occurred. With an effects-based approach, this is still possible, but it becomes harder.

    The third effect is that this new approach will create a casuistry. Therefore, this would probably affect legal certainty. However, the uncertainty that would appear would be limited, and it would be more and more limited as decisions will be produced with regard to the effects-based approch. But, still, it is hard to imagine the same level of legal certainty for a per se rule and for a rule of reason. This is not a negative point, as long as it produces more fair decisions, which should normally be the aim of such a shift.

    The final effect is that this approach leads to create a judge-expert, this is to say that is transforms the judge into an expert. Indeed, this one has to integrate the economic approach, and to evaluate the situation through it. We discussed during the first seminar about the relationship between the judge and the expert. If the relationship between the judge and the expert is already a good question, this question becomes harder when the judge becomes himself the expert.

    To conclude, I would say that, beyond the changing in the approach, I see a transformation of the role of the judge. This transformation might be a very interesting point for further analyze.

  14. Haukur says:

    I take the export report as essentially a utopia of how to reach the perfect solution to the problem of abuse of dominance. By assessing every case on the merits of its actual effects, rather then against a rudimentary rule of thumbs we would probably have a good competitive environment where dominant firms would never be unwarrantedly deemed to have abused their position. The cost of enforcement would however probably skyrocket due to the complicated case-by-case assessment. That in turn would either decrease total societal efficiency through higher enforcement costs, or, if enforcement costs would be caped at the same level, lead to less efficient enforcement.

    We could take this logic of the report into another familiar legal context. Lets hypothetically say that I was unhappy about a speeding ticket I received the other day when hurrying to catch my flight to Reykjavik. I would argue that a more economic approach should be taken to the enforcement of the traffic rules, especially with regards to the maximum speed limit. I was acting in the best interest of the road consumer when minimising my usage time of the traffic infrastructure, while at the same time I was concerned for my own safety and did thus drive rather safely considering the driving conditions and my driving abilities. I did exceed the speed limit by a slim margin, but strict enforcement without assessing every case from an economic point of view is a total nonsense and harms the efficiency of the road system.

    I think that we can draw from this that realistic enforcement strategies will, to some extent, always have to influence the design the rules of the market place. Complete accuracy is perhaps achievable at a very high cost, but at some point we will always have to balance accuracy and enforcement costs.

    I think that the Commission guidelines try to recalibrate this balance sensibly. They move towards more accuracy, without sacrificing too much off the simplicity and enforceability of the old system.

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