Chillin'Competition

I have just uploaded on ssrn (see here) a paper on the The Evolution of EU Antitrust Policy: 1966–2017, which I jointly authored with Andriani Kalintiri (King’s College London) and which is coming out in the Modern Law Review later this year. The article is available on an Open Access basis under a Creative Commons licence (so make the most of it).

Before I say anything about our project I should let the world know that we are really grateful to Wouter Wils, who read the paper very carefully and whose comments substantially improved it.

Wouter was the ideal person with whom to exchange views on a piece that examines how the European Commission’s policy in the area of competition has evolved over the years.

We felt that there were two ways in which we could contribute to shedding light on this question.

First, the conventional wisdom does not seem to be grounded on particularly robust and reliable data. To address this issue, we built a database with all formal Commission decisions applying Articles 101 and 102 TFEU since 1966 (when the Court of Justice set the tone with the two seminal judgments in the field).

The database is, of course, also open access. You can access it via the publisher’s early view version of the article (see here).

Second, we had the impression (rightly or wrongly) that a vocabulary and a conceptual framework to trace the evolution of EU competition policy were both missing. Without them, discussions tended to remain superficial, and were occasionally obscured by purely semantic points.

So what is it that we have done?

It is of course is a little longer than what follows, but we have come up with a way of identifying the different categories of cases that the Commission may wish to pursue when enforcing Articles 101 and 102 TFEU, which you see below.

Some cases form the core of competition policy. This category, which comprises in particular cartels, encompasses the most egregious violations. There is no doubt about the fact that they are prohibited and warrant fines, and remedies are easy to administer. As far as these practices are concerned, the real challenge for an authority is to detect the infringement and to deter future violations (hence the label ‘detection-deterrence’).

The second layer is called ‘trade-enabling’ and concerns the traditional administrative practice on market integration and the distribution of goods (absolute territorial protection, export bans and so on). This category captures one of the peculiarities of the EU system: these cases differ from ‘detection-deterrence’ practices in that they concern intra-brand competition (think Consten-Grundig).

The third layer (‘market-protecting’) concerns the practices that may be lawful or unlawul depending on the context (what we would call today ‘by effect’ conduct) and which can be addressed by the usual reactive remedies (a one-off obligation not to do something). Think of vertical restraints like exclusive distribution, franchising and so on.

The fourth layer (‘market-shaping’) is the ‘final frontier’ of the system. These are cases where the lawfulness or unlawfulness of the practice is context-dependent and which, in addition, require the administration of proactive remedies (a duty to license an intellectual property right, setting of the terms and conditions of access to an infrastructure, a structural divestiture), which, at least to some extent lead to the re-shaping of the competitive process (a product is re-designed, a firm is no longer vertically-integrated or a business model is changed).

What do we observe? It looks like enforcement has progressively moved to the core and the edges (toward the most egregious ‘detection-deterrence’ violations, on the one hand, and towards the ‘final frontier’ of ‘market-shaping’ enforcement, on the other).

Take a look at the graph. As you see, there is a nice mix of the three inner layers, and little appetite for adventure into the ‘final frontier’, during the formative period. These policy priorities are suggestive of an attempt to develop a body of precedents clarifying the circumstances in which ‘by effect’ behaviour is lawful.

Since 2005, however, enforcement seems to have moved towards the core and the edge of the competition system. The precedent-setting function of enforcement had declined substantially by the end of 2017 (and old-fashioned ‘market integration’ cases had all but disappeared). On the other hand, the Commission seemed keen to take action in cases involving proactive intervention (requiring firms to re-design their products, as in Microsoft I and II, or leading to structural divestitures, as in E.On).

Time will tell whether this trend will continue. This said, we felt that the project ended at the right time. It looks like enforcement against cartels might decline; on the other hand, traditional ‘market integration’ cases seem to be making a comeback, which we do not know whether it will be sustained over a longer period of time; finally, ‘market-shaping’ enforcement (in particular in the digital sector) shows no sign of slowing down (quite the opposite).

We will see. One thing is clear: we will be keen to re-examine the question in 2030 to take stock of the evolution. In the meantime, we would really welcome your comments. Thanks in advance!