Chillin'Competition

Ideas originating in North America cross the Atlantic sooner or later. The view that competition law should be concerned with choice, rather than with a particular measure of welfare, or another objective, seems to be gaining popularity in the EU. In addition to the references to choice found in Commission decisions and other statements of policy, there is a growing strand of literature emphasising the importance of choice in the competitive process.

You have certainly guessed from the title that I am quite sceptical about this move, and that I find express reliance on choice by competition authorities to be problematic in certain instances. More than anything, I see this trend as the repetition of past mistakes. As such, it also provides a suitable topic for the first post of the year, when we all think about resolutions. Indeed, ‘don’t repeat past mistakes’ is probably the best resolution of which one can think. Before I forget, by the way: happy 2015 to all!

There is already quite a lot written on competition law (or antitrust) and choice, which means that the main arguments are already well-known. Saying that competition law should be about choice amounts in a way to stating the obvious. Preserving the sources of competitive pressure to which firms are subject can be expected to lead to increase choice for consumers, in the same way it can be expected to lead to lower prices.

It is also abundantly clear that the competitive process often leads to what look like choice restrictions. By definition, selective distribution limits choice for consumers, insofar as they may only be able buy the product in question from certain retailers. Yet such systems are known to be pro-competitive (they tend to promote competition and thus choice). They fall outside the scope of Article 101(1) TFEU altogether in certain instances. The same can be said of franchising. It would certainly enhance choice to have McDonald’s hamburgers sold alongside Pizza Hut products. However, the ECJ held very clearly in Pronuptia that franchisors may take steps to protect their know-how and their reputation without infringing Article 101(1) TFEU.

In light of the above, it is not clear why choice as such would be advocated after the experience acquired over many decades. I do not believe choice advocates claim that we should prohibit altogether selective distribution, franchising or other vertical restraints. I am certain that they accept free-riding as a concern that can justify choice restrictions in such and other instances, and I am also sure that they accept the idea that the protection of the competitive process tends to lead to increased choice. In this same vein, I do not think they have in mind an alternative, internally coherent and fully-fledged standard revolving around choice.

What are we left with, then? It is difficult to tell. My impression is that choice could be useful in practice as something akin to a ‘back-up’ quasi-standard; that is, as a contemporary abracadabra that would allow for intervention when conventional analysis would not. Remedial action is not warranted under the established framework? Well, one can always resort to the vague idea of choice to make a case for intervention. It may not be as robust as a properly articulated theory of harm, but it may sound plausible and, hey, sure nobody is heartless enough to be against consumer choice.

If this is really what is going on, there is every reason to be concerned. It shows, first and foremost, that the lessons of history are easy to forget. We have come a long way to make enforcement sensible and predictable. It would seem, however, that the temptation to rely on nebulous concepts will never fade. Expanding the boundaries of intervention will always be appealing. The good news is that EU competition law is now much better equipped to deal with insufficiently robust and/or poorly articulated claims.