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Archive for March 11th, 2011

The US Senate´s Antitrust Agenda (and a false debate)

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Herb Kohl, the Democratic Senator chairing  the US Senate Subcommittee on Antitrust, Competition Policy, and Consumer Rights  announced yesterday the Subcommittee´s agenda for the next session of Congress.

The leitmotiv of the agenda is the idea that vigorous antitrust enforcement plays a vital role in ensuring consumer welfare. In particular, it appears that the Senate has its eyes set on the freight railroad industry; prescription drugs; gasoline, natural gas and oil markets; agriculture; media/Cable/satellite; airline competition; the broadband industry; and health care organizations.

In addition to those, some of the items in this agenda might affect EU competition law:

First, Kohl insists on the necessity of a statutory prohibition of resale price maintenance, arguing that the Supreme Court´s decision in Leegin “has the potential to seriously harm discount pricing and retail competition“.

Second, there is a specific mention to online markets and internet search issues. The Senate appears to be ready to conduct hearings on Google´s allegedly discriminatory practices in parallel to the investigation conducted by the European Commission (which we´ve covered here, here, or here), and, in clear reference to the Google/ITA Software controversy, also asserts its willingness to “closely examine the impact of further acquisitions in this sector“. It could be interesting to see how these two  investigations overlap and affect each other.

Thirdly, and somehow related to the last point, is the Senate´s committment to “continue to examine closely how U.S. multinational companies have been affected by different antitrust regimes in various countries“. This is also a debate with which we´ve dealt before and that, to be frank, still perplexes me.  I will explain why in a second.

But first, let´s make clear that, to be sure, Kohl´s agenda appears to be fair in referring to the varios viewpoints that have been expressed on this issue. The document reads as follows:

Complying with the antitrust laws of different countries, which often have differing substantive and procedural rules, is increasingly becoming a burden on U.S. businesses.  Over the past several years, foreign and in particular European regulators have been aggressive in their review of American companies’ business practices.  Some have argued that these same foreign regulators have unfairly used their power to discriminate and hinder American corporations.  On the other hand, many times those bringing complaints regarding the business practices of American companies to foreign antitrust enforcement agencies have been other American companies.   Further, advocates of aggressive international enforcement argue that this enforcement is warranted.   Exploring the validity of these claims will be an important priority for the Subcommittee”

It´s shocking to see how widespread this idea that the Commission only targets US firms is, and how little factual support it has. Here are some reasons why I think that this whole debate should be a non-issue:

– It is a fact that in recent years the European Commission´s stance in some areas, particularly on abuse of dominance cases, has been tougher than that of US agencies (especially under the Bush administration). You may or may not agree with the Commission´s viewpoints ( I, for one, certainly don´t share a lot of the reasoning behind the Microsoft cases and the Google investigation), but it´s clear to me that if  US firms are the main targets of such investigations it´s mainly because in most cases US firms are the dominant players worldwide. In fact, I wish more European firms were in a position to be subject to similar investigations in the US…

– European companies have to live with the precedents set by the Commission and the EU Courts and shape their strategy according to it. Consequently,  if the law were really irrational or established excessively low thresholds for competition law intervention, as some claim, that would mainly be to the detriment of the competitiveness of EU companies.

– In spite of what the record fines on abuse of dominance cases may suggest, the reality is that fines on foreign companies, and US companies for that matter, represent a very small percentage of the total fines imposed by the Commission.

– In contrast to the above, fines on non-US firms represent nowadays  the lion´s share of the the total fines imposed by US agencies. An illustration:  it has been reported that in the past few years 80% of the fines above $ 10 million have been imposed on foreign firms.

– On the merger side, everyone recalls all the fuzz related to the prohibition decision in GE/Honeywell. But has anyone checked how many other acquisitions by US companies have been prohibited by the European Commission?  

– Lastly, if many US antitrust lawyers believe that the Commission only goes after US companies that may be due to the fact that they only mostly pay attention to cases concerning US companies. One should remember, for instance, that the Commission has not only sanctioned Microsoft and Intel for abusive conduct, but also Tomra, Astra Zeneca, Deutsche Telekom, Telefónica, British Airways, to name only a handful of the most recent ones.

Written by Alfonso Lamadrid

11 March 2011 at 6:57 pm