Chillin'Competition

Relaxing whilst doing Competition Law is not an Oxymoron

Archive for April 2012

The Economist Corner (III): “Intent” in Article 102 cases

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For this third edition of The Economist Corner we have invited Hans Zenger. Hans used to be a member of the Chief Economist Team at DG Comp and is currently Senior Consultant at CRA. He’s is not only one of the most brilliant economists in town, but he’s also a great gruy.

 As noted here some months ago, and even though there remains much to be done, Hans will also be one of the co-authors (the others will be Miguel de la Mano, Renato Nazzini and myself) of the Article 102 chapter of the next edition of Faull & Nikpay’s The EU Law of Competition. 

We leave you with his ruminations on the role of intent in Article 102 cases. This topic, and many others, are dealt with in his article “Loyalty Rebates and the Competitive Process”, which is forthcoming in the Journal of Competition Law & Economics.)

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In criminal law, proof of intent plays an important role in establishing the scope of liability. If A intends to benefit at the expense of B, then A is probably up to no good. In antitrust, this principle has all too easily been extended to unilateral conduct law. The problem is that the intent of benefitting at the expense of others is essentially what generates the beneficial outcome of a market economy:

• The prospect of “exploiting” consumers is what provides firms with an incentive to produce valuable products that improve over existing varieties.

 • And the prospect of “excluding” rivals from making sales is what provides firms with an incentive to cut price to expand output.

In other words, the self-serving intent to “exploit” and “foreclose” is a cornerstone of the competitive process.

Adam Smith succinctly explained this in 1776: “It is not from the benevolence of the butcher, the brewer, or the baker, that we can expect our dinner, but from their regard of their own interest … By directing that industry in such a manner as its produce may be of greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention.”

If one too readily transposes the zero-sum logic of criminal law to unilateral conduct investigations, then Smith’s conclusion constitutes a paradox: If A intends to benefit at the expense of B, how could that possibly be good for B? But as Schumpeter has explained, “There is no more of a paradox in this than there is in saying that motorcars are traveling faster than they otherwise would because they are provided with brakes.”

The evidentiary value of intent evidence in Article 102 cases therefore has its limits. Perhaps not surprisingly, regulators on occasion have shown a tendency to read too much into such documents. As Judge Easterbrook has noted, “firms ‘intend’ to do all the business they can, to crush their rivals if they can … Rivalry is harsh, and consumers gain the most when firms slash costs to the bone and pare price down to cost, all in pursuit of more business. Few firms price unaware of what they are doing; price reductions are carried out in pursuit of sales, at others’ expense. Entrepreneurs who work hardest to cut their prices will do the most damage to their rivals, and they will see good in it. You cannot be a sensible business executive without understanding the link among prices, your firm’s success and other firm’s distress. If courts use the vigorous, nasty pursuit of sales as evidence of forbidden ‘intent,’ they run the risk of penalizing the motive forces of competition.”

Written by Alfonso Lamadrid

11 April 2012 at 11:31 am

Chillin’ Competition goes running

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We’ve returned from our holidays with recharged batteries and with plenty of new ambitious and perhaps unfeasible projects that we’ll be disclosing here in due course.

One of our blog-related aims for the coming months is to boost one of the most characteristic market failures in legal markets: not to much competition, but rather too many competititons.

We observe with interest that in our little antitrust world there are almost more prizes, awards and rankings as there are antitrust law specialists. To be sure, we’ve also contributed to this by creating the Worst-Antitrust development Prize and our Antitrust Oscars, but there are many more: just think of Concurrence’s new Writing Awards, of the Jacques Lassier Prize; of the many law firm directories ranking firms and lawyers such as Chambers, The Legal 500, Best Lawyers, IFLR,  Global Competition Review’s Annual Awards, or in GCR’s well-known and recently-published 40 under 40 – by the way, don’t you also get the impression that some people must have lied about their age?  😉 -.

The problem with some of these sometimes pricey prizes is that they are inherently subjective. Whereas most of us admit that absolute neutrality and objectivity are unrealistic aspirations (a dozen recent complainants before the European Commission seem to think differently), some things in life can still be measured objectively.  That’s why we at Chillin’ Competition have decided to create the first objective legal competition:  we’re creating the “Fastest Antitrust Expert” Award.

The news of the Spanish professor who got sued because of an antitrust-related story that he wrote on his blog led us to question our way or life. “Should we run marathons instead of blogs“, we thought. This profound thought led both Nicolas and myself to register to run the Brussels 20 k on May 27th. 

In the context of a mutually encouraging exchange of  emails (which in essence consisted of Nicolas saying that my two previous running times reveal that I’m slow and of me responding that he’s short-legged) we came up with the idea of opening our challenge to all readers of this blog. These are the rules:

  • The “Fastest Antitrust Expert” Award is open to all readers of Chilling Competition: public officials, lawyers, academics, students and, basically, to anyone who has registered for the 20k and who registers on the blog.
  • Registering yourself with us is easy: you can either send us an email or write your name in a comment to this post; you must however do that before 1 May.
  • On 2 May we will publish the list of names of those of our readers who are taking part in the 20k;
  • In the weeks before the race we will be organizing some more stuff open to all participants (I have in mind something like Nicolas cooking pasta for everyone the night before the race…).
  • The Prize: the winner will get an special interview at “The Friday Slot” as well as a pair of Li-ning running shoes.

Written by Alfonso Lamadrid

10 April 2012 at 6:06 pm

Costs in EU Competition Law

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Competition lawyers often get lost in the semantics of costs…

To help clarify how and why costs are used in competition proceedings, the Brussels School of Competition (BSC) will organize on 9 May a half-day compliance seminar (this seminar was due in early 2012, but was rescheduled).

Amongst other things, this seminar intends to review recent case-law developments, in particular the recent judgments handed down by the EU Courts in the Post Danmark (C-209/10) and Telefónica (T-336/07) cases. Hopefully the Tomra ruling will also be out by this time.

In line with the interdisciplinary spirit of the BSC, this seminar attempts to “blend” competition law and economics. Under each selected topic (see  agenda here), it thus brings together a team of one lawyer and one economist, who will seek to provide an integrated perspective on the issue.

This event is a joint initiative of the BSC and of the Institute for European Legal Studies (IEJE) of the University of Liege (ULg). The registration form can be found here.

Written by Nicolas Petit

4 April 2012 at 10:32 am

Posted in Events