This session looks at rule design in competition law. We will focus on Article 101 and Section 1 of the Sherman Act. if you are unfamiliar with the legal texts, start there. The debate in both jurisdictions is roughly similar but plays out differently. the US statute prohibits all agreements restricting trade. Literally, every contract has some restrictive effect (if I agree to sell you an apple, that apple is not available to others) but the Supreme Court since the early days held that the statute should be construed more narrowly by considering the effects of the agreement on the market. However, an effects-based approach has its own problems because it forces the plaintiff/prosecutor to engage in costly assessment of restrictive effects. The result has been that the Supreme Court has suggested that some agreements are restrictive of competition ‘per se’ while others are to be reviewed under a ‘rule of reason’. The judgment below indicates that the Justices are looking for a middle way – consider why this might be so.
In the EU a similar debate existed in the past, when the Court was asked to apply Art 101(1)’s test of restrictions by object or effect using a ‘rule of reason’. This was the result of a concern that the Commission (the sole prosecutor) was reading the notion of a restriction of competition too widely. Now this debate is less pressing, not least because the Commission is taking fewer cases under Article 101 that are not cartels, and with cartels, the anticompetitive nature of the agreement is clear. However, what happens when the welfare effects of an agreement are ambiguous? Must the Commission prove the effects, or can it sometimes find that an agreement is restrictive by object? in the past six years or so, this issue has troubled the courts on numerous occasions. In September, the Court, aided by an able Advocate General, tried to close this discussion in the judgment set out below.
The paper by Colin Diver is one of the most cited papers on rule design; the one by Kerber & Christiansen offers an economic reading of the discussion.
Christiansen and Kerber ‘Competition policy with optimally differentiated rules instead of per se rules vs. rule of reason’ (2006) 2(2) Journal of Competition Law and Economics 215
Diver ‘The Optimal Precision of Administrative Rules’ 93 Yale L.J. 65 (1983)
California Dental Association v Federal Trade Commission 526 U.S. 756 (1999) (please read both Opinions)
Case C‑67/13 P Groupement des cartes bancaires (CB) v Commission, judgment of 11 September 2014 (please read also the Opinion of the Advocate General)
We can discuss the merits of the cases – what are the competition concerns, what are the countervailing arguments?
More generally from the judgment we can discuss the scope of the rules, in teh EU context the role of the notion of restrictions by object, and in the US the role of the so-called ‘quick look’ rule of reason
Then we can generalise further by considering the role of rule making from the perspective of economics and general administrative law patterns.