Relaxing whilst doing Competition Law is not an Oxymoron

Archive for September 24th, 2020

Protecting the ‘law’ in competition law

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PlasticsEurope raises concerns on French law banning BPA

Competition law is undergoing an exciting – perhaps unprecedented – period of reform and change. Public bodies and academic institutions are evaluating, from Australia to Germany (and indeed the EU), whether it is necessary to introduce adjustments to the discipline to ensure that it is up to emerging challenges, namely digital and sustainable development. The perception that it may not be able to adapt to a changing landscape is driving the demand for broader, faster and more intrusive competition law.

The desire to move fast and decisively to tackle perceived threats to the competitive process is understandable. The wish to improve the system for the better, in turn, is commendable. The fact that competition law is deemed to be a major part of the response to some of the most pressing concerns in society, finally, says a lot about the continuing relevance of a field that was introduced in a different economic and technological landscape and that has proved capable of adapting to new demands.

The zeal for change, however, sometimes goes as far as to question some of the pillars of the field. The fact that competition policy is enforced through law is now openly criticised in some quarters. The argument is relatively straightforward: freed from the legal shackles, intervention would be faster, more effective and more responsive. Underpinning this position there is the idea that the law is inherently conservative and insufficiently reactive to emerging issues. It sees with suspicion the EU courts’ dislike of sweeping changes and preference for incremental adjustments to legal doctrines.

The solutions, according to these proposals? Increase the resources and the leeway given to competition authorities. Where the law requires a finding of infringement, the said infringement should, if at all, be presumed; thus, it would be for firms to show either that the practice or transaction does not adversely affect competition or that its positive aspects weigh more than any anticompetitive effects. Courts, on the other hand, would not interfere with the choices made by authorities absent manifest errors of assessment.

These proposals, in essence, amount to turning competition policy, a field traditionally driven by law, into one driven by discretion. Such an approach would afford authorities a virtually unconstrained margin of appreciation to decide when to intervene, and how. Insofar as they do, these ideas advocate a Copernican transformation of the field: the centre would move away from the courts towards administrative agencies.

It is difficult to avoid the conclusion that doing away with the law – and, in effect, changing an essential feature of the system – would be too high a price to attain the policy objectives sought by the most ardent reformers, no matter how noble their intentions. It would make the discipline more contentious, more prone to errors and less effective. Perhaps worse, the perceived legitimacy of intervention would inevitably suffer – for how can it be otherwise, if administrative action cannot be meaningfully challenged?

It is occasionally forgotten, but the purpose of the law is not to slow down policy making, or to check whether intervention fits within a set of pre-defined pigeonholes. Its point is instead to ensure that it is sound and in the general interest.

One cannot deny that the case law, as defined by the Court of Justice over the years, limits intervention by competition authorities. It is also true that the case law evolves at a relatively slow pace. These constraints, however inconvenient in individual cases, are far from capricious. They reflect the lessons of experience, which are incrementally incorporated into the acquis of the discipline. They also reflect an awareness of what competition law can realistically achieve in practice.

Removing these constraints would give a false sense of freedom to authorities. In some respects, doing away with legal boundaries to administrative action would make these same authorities realise that, even if not limited by law, they will always struggle when implementing complex and demanding remedies for which they are not adequately equipped. In other words, the law, rather than a barrier, often signals the barrier itself. There is wisdom underpinning the judgments in Magill and Bronner, whether or not this wisdom is enshrined in law. Regulating the terms and conditions of access to an input will always be a daunting task for a competition authority.

In other respects, the perceived sense of freedom would make authorities less able to resist pressure from stakeholders and, similarly, to manage their resources effectively. Experience and expertise, as reflected in the law, are precious assets to prevent regulatory capture – capture implies a loss of freedom, and a far more problematic one from the perspective of the general interest. Once an authority is nominally able to achieve virtually any outcome and to intervene in virtually any instance, the expectation that it can and will take action against every perceived or actual concern will be created sooner or later.

Finally, doing away with the law significantly increases the risk that intervention will not be based on the best available evidence. Over the years, the Court of Justice has crafted the law in a way that ensures that action by competition authorities reflects mainstream consensus positions. Mere concerns or conjectures that are insufficiently supported by theoretical and empirical evidence are not deemed robust enough to justify intervention. And for good reasons: if conjectures warranted action, there would be no effective limits to intervention by competition authorities.

One can try and make the argument that waiting for a consensus to emerge is a luxury that society cannot and should not afford. Ultimately, however, this argument is one based on faith, not on evidence. The concerns expressed may or may not materialise as described. The hard evidence may or may not be eventually available. It is certain, on the other hand, that transforming the institutional setup to turn competition policy into a discretionary tool to achieve the desired outcomes without effective judicial review is an even more extravagant luxury into which society should not even contemplate indulging.

Written by Pablo Ibanez Colomo

24 September 2020 at 1:01 pm

Posted in Uncategorized