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Archive for May 25th, 2010

Competition Cassandras

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There is a popular mantra in modern EU competition law. Competition enforcement ought to be case-driven, and substantive guidance to firms shall stem from individual decisions. At last week’s GCLC Lunch Talk, D. Schnichels repeatedly said that to justify that – 18 months following a wide-ranging sector inquiry – the Commission had not yet provided guidance to pharma firms over a number of disputed practices. Cases are in the pipe-line, and guidance will come, soon or later.

This has numerous  shortcomings. First, until a final decision is adopted with respect to each and every practice,  firms are left in a sea of doubt. Some may believe that the practice is not covered by the EU competition rules until a case has been completed (under-fixing problem) . An obvious example is abuse of collective dominance. Other firms,  on the contrary, may be willing to comply, but cannot optimally observe the rules absent substantive guidance on the applicable principle.   An obvious example is patent settlements (reverse payments).

Second, with the influence of economic analysis, cases become increasingly market-specific. The methodology, theories of harm and reasoning enshrined in decisions is growingly topical. As a result, individual decisions have only little normative value.

Regulation 1 provides a solution to (part of) this problem:  under §38 of the Recital of the Regulation, the Commission may provide guidance to firms. To date, however, the Commission has been reluctant to issue such letters. The official reason for this lies in the alleged risk of reintroducing, through the backdoor, a notification procedure similar to the one that existed under Regulation 17/62. The unofficial, but more convincing, reason is that guidance letters generate less press exposure – and political returns – than negative decisions.

Anyway, contrary to the arguments invoked by some EU Commission Cassandras against guidance letters, the UK Office of Fair Trading just proved that  issuing a guidance letter is perfectly compatible with a system of ex post enforcement, and does not entail the resurection of ex ante notification.

(Image possibly subject to copyright: source here)


Written by Nicolas Petit

25 May 2010 at 10:02 pm