Chillin'Competition

Relaxing whilst doing Competition Law is not an Oxymoron

Archive for November 2017

Regulatory capture and the progressive cause in competition law

leave a comment »

Uncle Sam the monopoly man

For the people of my generation, Ralph Nader is the left-of-centre candidate whose participation in the 2000 election paved the way for George W Bush’s victory. For older people, the name is associated with his activism during the 1970s.

What does Ralph Nader have to do with competition law? Take a look back at the early years. Doing so helps put some issues in perspective.

Regulatory capture is one of these issues. When triggered by the word capture, the Pavlovian reaction of many people is to think as follows: ‘Stigler – public choice – Buchanan – right-wing crank’. Capture is, according to this view, a concern of people who wish they could dismantle government intervention.

It was not always like this. Quite the opposite, in fact. Some readers may not know it, but the fight against government capture by big corporations was a cause of the left in the 1970s, in particular in the US. Some of these ideas are presented in a piece that Ralph Nader published, with Mark Green, in the Yale Law Journal, and which was colourfully entitled ‘Uncle Sam the Monopoly Man’.

In the piece, they explain how regulation is often crafted to serve powerful special interests (read: big companies and industries), as opposed to citizens. The solutions offered by the authors are more interesting than their denunciation of capture. For them, more competition was the answer. They advocated liberalisation and competition law enforcement (i.e. what the European Commission has been doing since the 1990s). In their view, competition law would ensure that regulation is crafted and enforced in a way that serves consumers.

I re-read this piece when writing about some recent regulatory developments.

One of my thoughts is that, no matter how much I may disagree on specific issues (and I certainly do), it is great news that there is an emerging progressive antitrust movement in the US (known as ‘New Brandeis’ and occasionally as ‘Hipster Antitrust’). I will always go for policy-makers that place competition law and its values at the centre of their agenda.

I also thought that Mark Green and Ralph Nader’s paper, even though it was written in the 1970s, provides a valuable template to address the dilemmas around the digital economy.

There is always the question of whether, and how, digital players should be regulated. Some of the authors’ ideas could take us a long way. I draw two main lessons from the article:

  • First, legal barriers to entry should be avoided.
  • Second, it is necessary to create institutional mechanisms to avoid capture (i.e. companies seeking and obtaining special favours from regulators).

How can this template be applied in practice? I will two examples.

Every now and then we read news about big multinational companies shopping around for subsidies in the US (‘O Governor, Won’t You Buy Me a Mercedes Plant?’ is the title of a legendary New York Times article on the subject). Some online platforms have now become big enough to seek special favours in the form of tax breaks and other regulatory advantages (see here for a recent example).

These practices are bad for competition (the advantages obtained depend on firms’ power and ability to influence policy-makers, not on their merits) and are socially destructive (each job created in the region ends up costing a fortune that is not put to better use). Insofar as they do not have any redeeming virtues, they should be prohibited. We are lucky to have a State aid regime in Europe. And it is no surprise that the idea of adopting State aid-like regulation in the US has now been floated.

Another example came to mind following recent news about Uber in London. I arrived in this city before the company launched its services. I remember very well the dodgy and unreliable minicab companies that existed five or six years ago. I also remember that the few reliable companies were just as expensive as regular cabs. No point in using either.

I am just a user of the service, but I find it hard to believe, having experienced what I have, that Uber is not ‘fit and proper’ to provide services in London. I am not surprised that it has been claimed for years that the regulator (Transport for London) is too close to incumbents (read: taxis). We wrote about this here and here.

The UK Competition and Markets Authority expressed its views on these issues a couple of years ago. Its report was unambiguously supportive of new technologies in this industry and warned against unnecessary regulation restricting competition. This is a strong indicator that some of proposals advanced by Transport for London were not intended to protect ordinary Londoners.

Under the approach sketched by Mark Green and Ralph Nader, the CMA’s report would have determined the outcome of the regulatory process. A pity that, as things stand, we have to wait and see whether the ban on Uber is confirmed on appeal.

Written by Pablo Ibanez Colomo

23 November 2017 at 4:03 pm

Posted in Uncategorized

The law on SGEIs in theory, and in practice (the pending Spanish DTT cases)

with 9 comments

f52o6xvage2om4xna9qh

The provision of Services of General Economic Interest (SGEIs) is a key feature of a social market economy. EU Law has always acknowledged this; see Article 106 TFEU, Protocol 26 to the Treaties of the Altmark case law.

In theory, and pursuant to a logic of subsidiarity, Member States enjoy wide discretion t provide these services. In practice, however, the Commission appears to enjoy wide discretion to question Member States choices.

Last week I was invited by ERA (Academy of European Law) to speak at their Annual State Aid conference about SGEIs and, specifically, about a saga of cases on which I have been working for some years and that are now pending before the CJEU (AG Wathelet delivered his incomplete Opinion last September).

The cases are relevant because, albeit paying lip service to Member States’ margin of discretion in this area (or, rather, by an exercise of confusing/meaningless copy-paste like the ones that were the subject of AG Wahl presentation at our recent litigation workshop), the Commission, the General Court and AG Wathelet are actually introducing (discreetly, through the backdoor and in some cases probaby inadvertedly!) novel requirements that would enable the Commission to challenge the provision of virtually any SGEI at the national level. Few people seem to have realized about the relevance of what is going on, but do me a favour: check any SGEI in your Member State and verify whether it complies with the requirements set in these cases…

In spite of the relevance of the legal questions at stake, and of the risk that they pose to the consistency of the case-law, the AG Opinion did not really address them.

For my view on what these questions really are, and on why this case is so relevant and (so far) so problematic, see here:

Services of General Economic Interest (DTT_Lamadrid_ERA 2017)

 

 

Written by Alfonso Lamadrid

15 November 2017 at 2:12 pm

Posted in Uncategorized

Goodbye

with 10 comments

It is time to say farewell. It was fun while it lasted. We did our best to come up with different angles, sometime serious, sometimes purportedly fun. But after 5 few years and many posts, we have run out of interesting things to say.  We started this jokingly and improvising, but it now feels like an obligation, people expect something, but we need to focus our time on other things. We very much hope you will understand.

Indeed, as sad as it may be, after the CJEU’s ruling from yesterday. the endives case is now over. It gave us much food for thought and bad puns, but it is time to move on and discuss other competition issues. Farewell, endives. The blog will continue without you.

If you ask us, these were our highlights (we just had a good laught while re-reading them): see here for the first post,  here for an example of how the blog fostered collaborative thinking, here for a hoax that some took seriously, here for a discussion on enforcement menus, here for a post that I hope will be forgotten and, for a change, here for a more serious comment.

And speaking of food, Commissioner Vestager was kind enough to mention the Syrian lunch served at the Chillin’Competition conference in her Wired interview a few days ago (check it out at minute 28). If you want to follow her advice, you only need to contact our friends at weexistngo@gmail.com

P.S. The immediate reactions to this post by email and Twitter have confirmed what we suspected: the people who say like this blog the most are the ones who don’t really read what we write! 😉  This natural experiment confirms the latest press reports on people sharing links based only on headlines and excerpts 

 

Written by Alfonso Lamadrid

15 November 2017 at 11:26 am

Posted in Uncategorized

The time of the law

with one comment

Ted

[What follows is an approximate transcript of the Ted Chillin’ Talk that never was. I thought of this presentation as a nice occasion to revisit some of the themes in my research and capture their essence in a different format. Comments welcome!]

The discussions we have had so far give us the impression that competition law is a somewhat amorphous creature that has an inclination to expand in all directions and that is shaped, or fed, if you like, by external factors, namely economic analysis and the redefinition of the objectives guiding enforcement. Something that looks more or less like this:

Expansion

My writings, or my personal obsessions, if you prefer, insist that we should not allow ourselves to miss the trees for the forest.

Trees

Put differently: the building blocks of this creature are individual decisions in which a set of principles are applied to concrete scenarios. Law is the stuff of which these decisions are made.

My view has always been that most of the discussions and controversies in this field of ours are, in essence, discussions about the law. Contrary to what many think, they are not so much about the objectives of competition law, or about the role of economic analysis. These discussions are about how we shape an essentially legal discipline.

I will go even further than that. Most, if not all, current problems can be effectively addressed through the law. This brings me back to the title of this presentation. I hope that the coming years become, at long last, the  time of the law.

It makes sense, at this stage, to clarify what I mean by law in this context.

I mean essentially three things:

I mean, first, that the competition law is built around a set of constraints. Competition authorities do not have, and have never had, the discretion to take action whenever they believe, rightly or wrongly, that intervention will help the conditions of competition. It is also insufficient to argue that action will be welfare-enhancing.

Intervention needs to remain within a set out boundaries defined ex ante.

Secondly, law means that enforcement is consistent. What competition authorities do makes sense or should make sense as a whole.

Finally, law in this context is another way of saying that we should aspire to predictability. If intervention cannot be anticipated by stakeholders, we are no longer in the realm of law.

Allow me to be about more precise about these three features.

As I said, substantive competition law is inimical to the idea of discretion. This is particularly valuable when we discuss whether competition law should embrace new objectives, such as fairness.

Whenever we hear that competition law should pursue this or this other objective, the fundamental question we should be asking is: can the objective in question be turned into a set of operational legal tests?

If the answer is no, there is no room for it in competition law. Or, if you want me to put it differently, it would turn competition law into something that is not.

I have written a lot about consistency. Again, I struggle to conceive a legal system which does not aspire to treat like practices alike, and which does not seek to treat the same practice in the same way across provisions.

I have a personal favourite when I discuss this question. When tying is examined under Article 102 TFEU, it is enough to show that the practice gives a distribution advantage to the dominant firm on a neighbouring market.

But tying concerns can also be examined in the context of a merger. In that context, it would not be enough to show that a merger would give the new entity a distribution advantage. It would also be necessary to give evidence of anticompetitive effects.

This inconsistency between Article 102 TFEU and merger control is primarily about the law. I just cannot rationalise why an identical issue would not be addressed in the same way under the two provisions.

The good news about this point is that the Court has made it clear that it cares. We will hear more about Intel later today. To me, this judgment is important in that it signals how much the Court values consistency.

Again, the problem with rebates, which the Court examined in Intel, was no so much about economics, but about the fact that the different types of rebate schemes are not treated in the same way even though they are not fundamentally different in their nature, purpose and likely effects.

Finally, certainty is part of the essence of legal enforcement. Compliance with the law presupposes that enforcement is predictable by stakeholders. As a corollary, whenever a court or an authority change their approach, this change should be made explicit.

Some people in the audience may get the impression that this is self-evident and that they do not need anyone to make this point. But my own impression is that we still have a very long way to go in this respect.

It may seem surprising, but there are still some key concepts in competition law that have never been properly defined.

I have mentioned effects before. Whether we are talking about Article 101, Article 102 or merger control, it seems clear that action in some cases requires evidence of an anticompetitive effect.

Strange as it may sound, there is still much that remains to be clarified about this concept. What do we mean by anticompetitive effect?

Does it mean an impact on the freedom of action of rivals, or of the firms involved in the practice, is enough? Almost certainly not. This is at least the conclusion that I drew in an article I wrote with Alfonso last year, and seems to be supported by the case law.

When we say effect, do we mean anything that disadvantages and slows down rivals? If that is the case, then virtually any practice has an anticompetitive effect, and the division between object and effect becomes insignificant in practice.

If you ask me, I can tell you that I have an idea of what we mean by anticompetitive effect. But you will have to wait for a paper. For the time being, and coming back to something that was discussed earlier today, capable does not mean likely.

Written by Pablo Ibanez Colomo

3 November 2017 at 2:46 pm

Posted in Uncategorized