Chillin'Competition

Relaxing whilst doing Competition Law is not an Oxymoron

The Concept of Abuse in EU Competition Law

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Note: The new release of Competition Law Journal features a book review that I wrote this past summer about Pinar Akman’s interesting book: The Concept of Abuse in EU Competition Law: Legal and Economic Approaches.  I took advantage of the opportunity to voice out some perhaps not-so-frequent views on competition law in general and Article 102 in particular, mainly casting doubt on the convenience of upholding efficiency as its single, sacred, overarching goal and raison d’être. It is reproduced below:

The interest, apparent complexity and the peculiar nature of competition law stem to a great extent from the abstract nature and impreciseness of its main concepts. Most other areas of law have settled and well understood central notions. Competition law, by contrast, is premised upon particularly nebulous or malleable concepts (fortunately for those of us that make a living out of it, and perhaps not so much for those directly subject to it). Ask most lawyers about what a ‘restriction of competition’ is and you will get a surprising variety of theories, and most likely some striking silences. And whereas competition law concepts are open enough to accommodate different – often conflicting – interpretations, no other concept gives rise to the same level of controversy as the notion of ‘abuse of dominance’.

Indeed, despite longstanding efforts – including some notable recent ones by enforcers on both sides of the Atlantic – we still lack a precise idea of what an abuse of dominance is. Moreover, it has become common for partisans of different schools or viewpoints to point at the obvious irrationality of their counterparts: those ‘irrational ordoliberals’ on the one side, or those ‘irrational neoliberals’ on the other, both cross-criticized for obviously lacking any merit in their arguments. Article 102 elicits passions that move discussions away from ideally Cartesian legal debates and closer to those touching on more profound and vital issues such as religion, politics and football.

Our inability to come up with satisfactory rules to distinguish legitimate and illegitimate unilateral conduct by dominant firms has provided fertile ground for the creativity of both practicing lawyers and academics (and, to be sure, of competition enforcers as well). Focusing only on the academic domain, Pinar Akman’s book is preceded by an endless list of publications having as their object – but perhaps not as their effect – the clarification of Art 102 TFEU.

Against this background, Pinar Akman’s book stands out as a particularly original contribution to this debate, and one that is definitely worth reading. The book is very innovative in its approach, it is well written, and it visibly is the result of thorough research, reflection and drafting. Akman’s work is deliberately theoretical; it is not aimed at providing a systematic and thorough account of cases; it stays true to its stated purpose of proposing a ‘completely fresh approach’ to Art 102 TFEU, and it does indeed submit thought-provoking ideas.

The Concept of Abuse in EU Competition Law is grounded on the author’s arguable assumption that “the approach that has been adopted by EU authorities to date is far from desirable or appropriate and sometimes is even far from rational“. Consistent with this critical stance, the book seeks not to provide an analysis of the case law and decisional practice, but rather to propose its radical overhaul. This is boldly announced in its very first paragraph:

The reader of this book is invited to put to one side her preconceptions of the prohibition of abuse of a dominant position in Article 102 TFEU, in particular those directly resulting from the judgments of the Court of Justice (ECJ). Fortunately, this is not asking for too much; after all, the ECJ is not legally bound by precedent.”

It is often said that the first phrase in any literary work should create a tension prompting the reader to continue the story. I acknowledge that the bold view of precedents as preconceptions made me read the rest of the book with increased interest.

Following a detailed introduction to basic economic concepts and standards relevant to the analysis of Art 102 TFEU (Chapter 1), the book offers a particularly interesting interpretation of the history of the drafting of the EEC Treaty (Chapter 2). The author is of the view that the historical roots of Art 102 TFEU have a role to play in its current and future interpretation (this despite the fact that ‘originalist intent’ theories have never held sway in EU law, rather the contrary). More specifically, Akman posits that the current ‘ordoliberal’ interpretation of Art 102 TFEU that the book criticizes (as too formalistic and too concerned over fairness to small and medium-sized enterprises) is partly due to the wrong assumption that ordoliberal theories inspired the drafting of the Treaty. The second chapter of the book thus attempts to rebut the influence of ordoliberalism in the origins of Art 102, and concludes that the drafters were mostly concerned about efficiency. It is beyond the scope of this brief review to discuss the merits and influence (or lack thereof) of ordoliberal competition policy, but one often has the feeling that a less sanguine view of ordoliberalism would be appropriate, not only in this book. In any event, the logical conclusion derived from the theory presented in Chapter 2 is that the ‘fresh’ interpretation of the concept of abuse of dominance provided in the book – which, as explained later, hails efficiency as its only sacred tenet – would therefore have more of a historical/teleological/originalist support than that currently prevailing.

Chapters 3 and 4 of the book discuss the ideal benchmarks of ‘consumer welfare’ and ‘fairness’– which are regarded as conflicting objectives – and the extent to which they have influenced the enforcement and interpretation of Art 102 TFEU. Chapters 5 and 6 in turn apply those insights to two categories of abuse ‘unfair (excessive) pricing’ and ‘discrimination’; in doing so, Akman offers interesting ideas on these two categories of abuse, which have traditionally received less attention, notably on the part of enforcers, but that currently seem to be gaining traction. In sum, the author posits that fairness concerns have played a role in the development of the provision, and that it is doubtful that the same can be said about consumer welfare.

Chapter 7 undertakes a review of the Commission’s Guidance Paper (concluding that it does not fully endorse the consumer welfare standard that the Commission purports to have adopted), and Chapter 8 presents the author’s constructive alternative to current legal tests for abusive conduct. Akman believes that unilateral conduct by a dominant firm can be qualified as abusive when it is cumulatively (i) exploitative, in the sense of leading to allocative inefficiency; (ii) exclusionary, in that it leads to the exclusion of competitors; and (iii) does not give rise to efficiency gains.

The book is plagued with novel and thought-provoking views and approaches with which, quite naturally, not all readers will agree. This reader, for one, disagrees with many of those, nevertheless worthy, ideas. Whereas the case law and the Commission’s decisional practice might certainly present inconsistencies, the critique developed in this book is, in my view, perhaps too far-fetched in its defence of efficiency as a goal admitting no exceptions.

The perils of swinging the pendulum too far on the efficiency side are most visible in the third prong of the alternative legal test proposed in Chapter 8 of the book (‘conduct that leads to a (non-trivial) increase in efficiency and that has an efficiency explanation should not be found abusive’). If we were to legitimize any conduct – no matter its exploitative or exclusionary effects – bringing about a ‘non-trivial’ increase in efficiency, wouldn’t we be devoiding Art 102 TFEU of practical significance? For is there any conduct that does not generate some degree of efficiency?

It is, I believe, arguable that efficiency is to be held as the sole and overarching goal of any public policy or legal order, including competition law and policy. This is not to say that efficiency lacks importance. Much to the contrary, efficiency considerations – particularly long-term ones – have a fundamental role to play in competition law as one, perhaps the most important, dimension of merit-based competition. But merit-based competition requires a prior level playing field and the guarantee that companies maintain the freedom to compete and, above all, that consumers retain the freedom to choose. In this sense, efficiency could be regarded more as a valuable proxy than as an absolute value. It might be ‘unfair’ to just present and not develop these ideas, but after all this is merely a brief review, and I have already doubled my word limit.

To conclude, congratulations to Pinar Akman for a brave, original, and valuable contribution to the open debate over the concept of abuse in EU competition law.

Written by Alfonso Lamadrid

16 December 2013 at 2:09 pm

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