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Archive for October 28th, 2011

The slow death of Article 101(3)

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Yesterday we attended the first session of the annual conference of the Global Competition Law Center (of which, btw, Nicolas is the director). As expected, the conference was extremely interesting, and gave us plenty of ideas for future posts. Here´s one.

Our friend Damien Gerard made a very good presentation in which, following a historical approach, he presented several paradoxes of the modernisation of EU competition law. After he concluded, I posed a question to the panel, asking whether the interplay of the three dimensions of modernisation that Damien mentioned (substantive, procedural and institutional) may have had the effect -or perhaps the object..- of killing Art. 101(3).  The comments that followed showed that this is a widespread concern.

Let me now explain to you how I view this, and why the usual question (who did it?) has no clear answer. My take is that all the usual suspects bear some responsibility:

In the early days of the classic case law, EU Courts paid great attention to Art. 101(3) because they were conscious of the crucial role that the drafters of the Treaty had attributed to this provision. But it wasn´t their task to apply it. They saw it as something too complex and abstract, so they washed their hands off: they left  its application up to the Commission and decided to apply a light standard of review. That is, in fact, where the “manifest error of appraisal”  test of judicial review was born for EU competition law.

For many years, the Commission exercised its monopoly over the application of 101(3). Those were, in a way, the “golden days” of this provision (even though there were some obvious disfunctionalities as a consequence of the centralized system). With the entry into force of Regulation 1/2003 this whole situation changed. The Commission shifted its priorities to focus on the “most serious infringements” which, as a matter of fact, are also the “most obvious” ones. It therefore also washed its hands and left the cases where Art. 101(3) would be relevant to national competition authorities (NCAs) and national courts.

But NCAs and national courts also regard the application of 101(3) as something which is too complex, and, let´s face it, the Commission´s Guidelines on Art. 101(3) are far from being decisively helpful. Couple that with the feeling that undertaking an effects analysis under 101(1) is also too burdensome, as well as with the fact that NCAs have, logically, their own priorities, and what you get is a situation where at the national level there are essentially only “object cases” where 101(3) assessments are reduced to an absolute minimum under the argument that “object restrictions” are hardly redeemable (which, btw, is at odds with all case law departing from European Night Services) There are no available stats on this, but I bet they would be mindblowing.

The Commission hasn´t done much to solve this situation. It has failed to provide case by case guidance, and has instead focused on sanctioning cartels, abuses of dominance (mostly in network industries) and in releasing general guidance; moreover, where an issue appears as uncertain, the usual solution is to adopt a commitment decision. Not really helpful. Furthermore, the Commission has contributed to fostering the confusion by enlarging (with the help of EU Courts) the “object” category (e.g. with regard to information exchanges).

EU Courts, on their part, could also be charged as accomplices. Three pieces of incriminating evidence are (i) the enlargement of the “object” category in T-Mobile; (ii) the ruling in Tele 2 Polska precluding NCAs from adopting negative decisions; (iii) the adoption of distinct standards for the review of 101(3) assessments: would the overly simplistic Premier League Judgement, where the Court says, without providing much support for its assertion, that the exclusivity arrangements at issue do not meet the conditions of Art 101(3) (see para 145 of the Judgment) comply with the Court´s tough stance against the Commission in Glaxo Spain?

What does this imply for competition law:

In my view, this situation is dramatic for EU competition law (well, as dramatic as a legal matter in the competition law field can get, which, to be frank…).  The interplay of all the factors above has led to an overly simplistic view of competition law, to a shifting of the burden of prove, and to even more arbitrariness and uncertainty.

 PS. The painting illustrating the post is “Prometheus bound” by Rubens. As Art. 101(3) in the world of competition law, Prometheus was “credited with -or blamed for- playing a pivotal role in the early history of mankind“. As you know, immortal Prometheus was punished by Zeus to a -quite nasty- eternal punishment: he was bound to a rock where his liver was eaten daily by an eagle,  only to regenerate and be eaten again the following day. Mithology has it that Hercules finally slayed the eagle and freed Prometheus. Will anyone eventually free Art.101(3)?

Written by Alfonso Lamadrid

28 October 2011 at 12:31 pm