NEW PAPER: Ibáñez and Lamadrid on the notion of restriction of competition
Alfonso and I have just completed a paper on the notion of restriction of competition, which is available for download here. I am quite happy that we finally got around writing something together after such a long time. And it has been fun. It has been one of these papers that does not take you exactly where you expected.
As we were diving into the case law we realised, once again, that the Court is not given the credit it deserves. The case law is remarkably rich and consistent. It provides precious guidance, which, unfortunately, is sometimes ignored. We have the impression that there is still considerable noise in the context of discussions around the notion of restriction of competition.
When we first drafted the introduction, we pointed out that it was hopeless to provide a definition of the notion of restriction of competition. When the first version was completed, we felt confident enough to revisit that claim. The Court has laid down all the necessary elements to identify what amounts to a restriction, whether by object or by effect. These elements are summarised in the flowcharts that you will find below, which can be downloaded here and here.
In essence, a practice that is deemed restrictive is one that is presumed to have a net negative impact on competition. In other words, it is a practice whose anticompetitive effects are presumed to weigh more that the pro-competitive gains that result from it.
As a rule, practices that restrict competition by object are those that are deemed to lack pro-competitive virtues. As a result, they can be safely presumed to have a net negative impact on competition. As shown in Chart 1, the Court typically starts the analysis by asking whether a given practice is plausibly pro-competitive (you will remember that this is the factor that made all the difference in Cartes Bancaires).
‘By effect’ practices, on the other hand, are those that are plausibly pro-competitive. As a result, their net impact on competition may be positive or negative depending on the economic and legal context. We summarise the steps of the effects analysis in Chart 2.
We are grateful to the people who took the time to send comments on the paper. Do not hesitate to send them our way.
Chart 1: Assessing the restrictive nature of a practice
Chart 2: Assessing the likely restrictive effects of a practice
Chillin'Competition 
Great piece that made me think about this whole thing. My conclusion is that us competition people (enforcers, lawyers and the economists) live in wonderland and only a few have run businesses and understand how businesses operate and what competition is, something much more dynamic than these useless rules. Leaving aside cartels the rest is a bluff: market definition, market power and restriction of competition analysis is as scientific as Paul the Octopus. What market definition? 10% test, 20% test, 30% test… What competition? price or innovation, quantity or quality, What market power? a company that controls 40% but does not even supply the rest of the market, a company with 5% market share that fixes retail prices because it believes is good for the price-positioning of its product… For many years vertical restrictions were the trendy thing and competition enforcement up till the 90s is a horror museum of anticompetitive enforcement. The same goes for horizontal alliances and agreements of all sorts that were (still are) penalised more than a naked merger. The enforcement was “modernized” (a brilliant way to say that we fucked it up till now), I would have welcome a public apology from enforcers for all their past enforcement mistakes. There is no guarantee that all the present enforcement is pro-competitive (innovation-driven?) and we may end-up in another “modernization” exercise in a a few years. Until then, the show must go on: the naked emperor’s tale.
Judge Dredd
10 October 2016 at 10:34 pm
Couldn’t agree more! It reminds me of Armentano’s critique to antitrust: watch min.: 13:35-15:00
Jorge
11 October 2016 at 11:14 am
[…] Pablo Ibáñez Colomo (London School of Economics and College of Europe) have written together a paper entitled “On the notion of restriction of competition: what we know and what we don’t know we […]
On the notion of restriction of competition: What we know we don’t know and what we don’t know we don’t know. – Sophismes juridiques
28 January 2017 at 3:49 pm