Chillin'Competition

[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:

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

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.