Chillin'Competition

[You will find below the feedback I gave to the Commission on the New Competition Tool – you can do so here until the end of today. I would emphasise two aspects about the feedback. First, the importance of the expert consensus to protect the public interes. Second, that it should not be enough to identify competition law problems (perfect markets do not exist, and many potentially problematic features also yield pro-competitive benefits). Under the NCT, the Commission should also show how intervention is likely to improve the functioning of markets and that there is no less restrictive alternative. I look forward to your thoughts].

As an independent academic, I welcome the opportunity to provide feedback on the New Competition Tool (‘NCT’). In accordance with the ASCOLA declaration of ethics, I am happy to clarify that I have nothing to disclose.

Scope of application

If a legislative effort of this magnitude is undertaken, it seems desirable that its scope is as broad as possible. As the experience of other jurisdictions shows, the digital sector is not the only where structural risks and/or obstacles to competition might arise. In the same vein, there would be little reason to confine intervention to a dominance-based test. Option 3, as a sector-neutral, cross-industry tool, seems appropriate.

Goals and relationship with other instruments

The goals of the NCT would need to be spelled out with clarity. The initiative would be easier to justify if it were confined to targeting actual gaps that Articles 101 and 102 TFEU would not be in a position to address. Conversely, the NCT cannot be a means to circumvent substantive standards that apply in the context of these two provisions (see below). The Inception Impact Assessment (‘IIA’) is not wholly unambiguous in this regard.

Expert consensus and experience

It would be essential to ensure that intervention is driven by experience and the expert consensus. Remedial action that is not grounded on a robust body of peer-reviewed literature would not be guaranteed to serve the public interest, might be vulnerable to instrumentalisation and would not allow the targets of intervention to exercise their rights of defence in a meaningful way. In particular, the criteria to establish the likelihood of a market tipping should be as robust (and as grounded on experience and the consensus of experts) as the criteria to establish a collective dominant position within the meaning of Airtours.

The substantive test

The IIA is silent about the substantive test. It should be clear and predictable and ideally accompanied by a set of guidelines. The Commission would have the burden of (i) identifying the competition problems to the requisite legal standard and (ii) showing how intervention is likely to improve the conditions of competition. Requiring the Commission to show (i) but not (ii) would not guarantee that intervention advances the public interest, as the same features that are deemed problematic in some markets also have the potential to yield pro-competitive outcomes. If the latter (ii) is ignored and an adequate balancing is not undertaken, intervention may yield losses for competition in the short and/or long run. Similarly, remedies cannot be treated as an afterthought left to the discretion of the Commission once concerns are identified. The proposed intervention is central to the analysis and the nature of the assessment required.

Standards of intervention under step (i)

The standards of intervention cannot be lower than those enshrined in the case law under Articles 101 and 102 TFEU. In particular, it would not be sufficient to show that there is a ‘risk’ of anticompetitive outcomes or that such outcomes are plausible. Such a threshold of intervention would in effect justify intervention in virtually any instance. In line with the applicable case law (and given that they are potentially pro-competitive or at least ambivalent), it would be necessary to show that anticompetitive outcomes are more likely than not to result from the features considered.

Standards of intervention under step (ii)

The Commission would need to show that remedial action is, on balance, pro-competitive (in the sense that the gains outweigh the losses) and that there is no less restrictive alternative. This exercise is important considering that the NCT could in theory support a wide array of remedies, ranging from information obligations to structural divestitures and interoperability obligations altering fundamentally the functioning of markets. Thus, the more intrusive the remedy, the higher the demands placed on the Commission.