Relaxing whilst doing Competition Law is not an Oxymoron

Archive for April 18th, 2013

Law Firms = Cartels

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From Judge Bork himself:

The typical law partnership provides perhaps the most familiar example [of agreement on prices and markets]. A law firm is composed of lawyers who could compete with one another, but who have instead eliminated rivalry and integrated their activities in the interest of more effective operation. Not only are partners and associates frequently forbidden to take legal business on their own …, but the law firm operates on the basis of both price-fixing and market-division agreements. The partners agree upon the fees to be charged for each member’s and associate’s servicse (which is price fixing) and usually operate on a tacit, if not explicit, understanding about fields of specialization and primary responsibility for particular clients (both of which are instances of market division)” The Antitrust Paradox, 1978, p.265.

Bork used this example to criticize the blanket per se  prohibition of price-fixing and market division schemes. Cartels formed amongst lawyers yield redeeming efficiencies (the combination of complementary skills, notably) + there are many law firms and all compete fiercely. Hence, output restriction is not a tenable hypothesis.

This later point ties in well with C‑226/11 Expedia Inc. v. Autorité de la concurrence, a judgment poised to earn a “worst antitrust development Oscar”. Bork’s example casts a bright light on the judgment non-sense: in this case, the Court held at §37  that conduct with marginal market coverage (<10%) ought to be deemed to have appreciable anticompetitive effects as long as it can be categorized as a restriction by object:

It must therefore be held that an agreement that may affect trade between Member States and that has an anti-competitive object constitutes, by its nature and independently of any concrete effect that it may have, an appreciable restriction on competition

In other words, a price-fixing scheme that covers 5% of the market is per se illegal under Article 101(1) TFEU. Again, a dispairing judgment…

Written by Nicolas Petit

18 April 2013 at 5:03 pm