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Archive for June 8th, 2020

Substantive Legal Tests and Standard of Proof: Rules Lost in Translation? (by Andriani Kalintiri)

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Evidence Standards in EU Competition Enforcement

The CK Telecoms (Three/O2) judgment has revived the interest in issues relating to the standard of proof in EU merger control (and competition law at large). It adds valuable insights on the question. As I read it for the first time, I was, yet again, reminded that there is some tendency by commentators to conflate two separate questions: (i) the standard of proof and (ii) the substantive legal test (and more precisely the applicable threshold of effects – capability, likelihood, certainty).

Our friend Andriani Kalintiri (King’s College London) knows these issues inside out, which is why I immediately thought of inviting her to present them in a post. The judgment, by the way, is very much in line with her own take on the standard of proof.

I leave you with her analysis, which hopefully will complement mine. If hungry for more, take a look at her superb book, from which I have learnt a great deal (on evidence, presumptions and judicial review). It is particularly timely now that discussions on presumptions and the burden of proof are all the rage. Thanks again, Andriani!

There is only one way to start this post. First, with a heartfelt ‘thank you’ to Pablo and Alfonso for the kind invitation! And second, with a confession: that the ‘misconception’ this note hopes to illuminate and caution against – i.e. the tendency to conflate substantive legal tests and standards of proof – has been the cause of many headaches during my research! Indeed, in the EU Courts’ antitrust and merger judgments, one often comes across various references to the ‘plausible’, ‘potential’, ‘probable’, ‘likely’ or ‘actual’ effects that a practice or arrangement must give rise to, in order to be prohibited. Are these references, I was wondering, indications of the applicable ‘standard of proof’ or of something else, and why?

BACK TO THE BASICS

To answer this, let me begin with a simple yet important reminder: competition enforcement takes place under conditions of ignorance and uncertainty (as does law enforcement in general). In an ideal world, courts, authorities, and businesses would possess perfect information and would always make correct decisions about the proper meaning of the antitrust and merger rules and their application. In real life, however, information is incomplete and resources, time and our cognitive capacity are limited. Yet, decisions must still be made, and the rules must be enforced.

Among other mechanisms, legal tests and standards of proof are what allows ‘the show to go on’. On the one hand, the legal tests developed by the EU Courts specify the scope of the vaguely worded antitrust and merger rules by setting out the conditions that must be satisfied for a practice to be prohibited – for instance, where the conduct has caused harm or where there is a stronger or lesser chance of such harm occurring. On the other hand, the standard of proof indicates the threshold, falling short of certainty, that the party with the burden of persuasion must surpass for the evidence to be accepted as proof of an allegation.

SO SIMILAR, YET SO DIFFERENT

­In practice, however, these two thresholds are commonly conflated – for instance, it is sometimes said that different ‘standards of proof’ apply to different types of unilateral conduct. Based on what I have said, a key – albeit not the only – explanation for this tendency may be already obvious: that when we think about competition legal tests and standards of proof, we consciously or subconsciously employ probabilistic language – i.e. we use words such as ‘plausible’, ‘potential’, ‘probable’, ‘likely’ and so on, in relation to both of them. For instance, we may say that a practice will be prohibited when it is ‘probable’ or ‘likely’ to foreclose competition. Or that an allegation is proved when it is ‘more likely than not’.

Despite any illusion of unity though, there are important differences between the two. For one, they serve distinct functions in that they answer different questions. The key question competition legal tests are ultimately preoccupied with is: ‘what level of harm is required for a conduct to be deemed unlawful?’ On the other hand, standards of proof address a different issue – i.e. ‘what level of evidence is sufficient for an allegation to be accepted as true in the eyes of the law?’

Most importantly, the considerations that inform their design – i.e. what the substantive legal test and the standard of proof should be – are different, too. As a starting point, both aim to minimise false convictions and false acquittals since either error entails costs. While, however, these costs are not entirely disassociated (at least in the longer term), they are not identical either – and nor are the factors that underpin their balancing. This discussion is particularly complex, but in rough terms the following may be noted.

As far as ‘erroneous’ legal tests are concerned, their primary costs are chilling procompetitive behaviour and encouraging anticompetitive conduct (including in both instances, the respective harm to competition and consumers). Their balancing in designing the ‘optimal’ legal test – and threshold of effects – largely depends on the nature of the conduct in question in the light of current knowledge about it, and the cost of enforcement as well as business compliance. This explains why the substantive legal test varies practice to practice – cartels, for instance, are not treated in the same way as refusals to supply, for which the required threshold of effects is much higher, given the implications for firms’ incentives to innovate.

By contrast, the primary costs of an ‘erroneous’ standard of proof are the undue interference with the freedom and rights of the defendant and of harm to society. Their balancing in designing the ‘optimal’ standard of proof largely depends on fairness considerations linked to the seriousness of the consequences involved for the person concerned and the specific features of the enforcement model, including any inequality of arms. This explains why the standard of proof is ‘static’ – the same standard of proof (i.e. ‘firm conviction’) applies to cartels and refusals to supply, and rightly so, since the consequences for the undertakings involved and the nature of the enforcement proceedings are the same.

MUCH ADO ABOUT NOTHING?

This discussion is not purely academic for several reasons, but I will confine myself to two.

First, conflating substantive legal tests and standards of proof may lead to confused discussions about what these are or should be. Two examples illustrate this risk. On the one hand, recent reports on digital competition policy suggested, among others, modifications in the burden and standard of proof; more accurately though, these proposals arguably concern the substantive legal test, and should be assessed as such.[1] On the other hand, in merger control it is often argued that the applicable standard of proof is – and should be – the ‘balance of probabilities’ due to the absence of fines and the prospective nature of the analysis. As I have explained elsewhere though, the case law suggests – and rightly so, in my opinion – a much higher standard of proof. The recent judgment in CK Telecoms seems to confirm this: as the General Court noted, ‘the standard of proof (…) is therefore stricter than that under which a significant impediment to effective competition is “more likely than not”, on the basis of a “balance of probabilities” (…)’, although it is ‘it is less strict than a standard of proof based on “being beyond all reasonable doubt”’ (para 118).

Second, substantive legal tests and standards of proof are equally important to the correctness and legitimacy of enforcement. Indeed, ‘correct’ legal tests may not compensate for shortcomings in the design of the standard of proof. Think, for instance, of cartels – the fact that they are rightly subject to a ‘by object’ prohibition could not ‘save the day’, if the standard of proof were too low – say, equivalent to the balance of probabilities (or similar threshold of belief) given the operation of the presumption of innocence. The opposite is also true: ‘high’ standards of proof may not rectify inappropriately formulated substantive legal tests. Think, for instance, of Google Shopping Service: even if the Commission has successfully established a ‘firm conviction’ that the elements of the substantive legal test – as it understands it – are met in the light of the evidence, this will not mean much, if the latter is eventually found to be incorrect.

BACK TO THE FUTURE

Ultimately, it is important to appreciate that substantive legal tests and standards of proof are different rules. Of course, the stricter the substantive legal test, the more difficult it will be to discharge the standard of proof – and vice versa, the stricter the standard of proof, the more difficult it will be to prove in specific cases the constituent elements of the substantive legal test. However, they remain distinct yet equally important for an authority’s decision to be not only lawful but also legitimate. In this regard, the discussion is not about semantics – rather, words such as ‘plausible’, ‘potential’, ‘possible’, ‘probable’, ‘likely’ and so on, may lead to very different perceptions of the applicable threshold of effects or standard of proof, depending on what they actually refer to, and we should thus use them more consciously and accurately to avoid confusion and misunderstandings.

And a final remark, for the avoidance of any doubt: I have no interest to disclose – other than a deep academic fascination with the topic!


[1] For example, in the Report on Competition Policy for the Digital Era, it is noted (p 4) that ‘(…) competition law should try to translate general insights about error costs into legal tests. The specific characteristics of many digital markets have arguably changed the balance of error cost and implementation costs, such that some modifications of the established tests, including allocation of the burden of proof and definition of the standard of proof, may be called for.’

Written by Pablo Ibanez Colomo

8 June 2020 at 5:27 pm

Posted in Uncategorized