Chillin'Competition

Relaxing whilst doing Competition Law is not an Oxymoron

Protecting the ‘law’ in competition law

with 12 comments

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

12 Responses

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  1. Dear Pablo,

    just for clarification reasons I would like to ask you (ii) “who” in particular is discussing to set law aside from competition law (enforcement) and (ii) how this should in view of “them” take place and (iii) why this would lead ultimately to “courts… would not interfere” (meaning: no chance to be heard in court in terms of fundamental rights if a company is subject to the said measures)?

    The language should be, in case such concerns/allegations are addressed, very precise and assignable. Bird´s eye view “vage” formulations when addressing such concerns are from my point of view as dangerous as in other contexts, e.g. politics.

    To be more specific, I would assume that you are talking about the trend towards more ex ante regulation, e.g. on EU level the “new tool”, (please correct me if I am wrong) via codified law, as discussed recently by legislators on EU/national level.

    Such ex ante regulation could to a certain extent replace by legislation – pre-defining legal requirements for ex ante antitrust enforcement – in certain fields ex post antitrust law enforcement/assessment by antitrust authorities/court law. Just to emphazise this, such ex ante regulation would be set by the legislator via legislation, legally pre defining via codified law legal requirements.

    Where is the lack of legitimacy?! Obviously, (1) codified ex ante law is law itself – stemming from the legislator (enjoying democratic legitimaty), however I admit not ex post court law; (2) ex ante codified law itseld is subject to legal court review; (3) the application of ex ante codified law is subject to legal court review. The general approach of ex ante regulatory itself cannot be held as liable for its possible misapplication (thus not leading to the assumption that “law” would not interfere or be set aside by ex ante regulation).

    Please consider my comment as devoid of purpose if I anticipated the concerns you addressed wrong, however, clarifying words would be in any case nice.

    Christian E.

    24 September 2020 at 2:18 pm

  2. This reminds me of the discussion in the UK where the previous Chairman of the CMA wanted to curtail the powers of the CAT and was complaining about the fact that the CMA could not act swiftly and “efficiently” because of the rule of law….

    Makis

    24 September 2020 at 6:50 pm

    • It’s not clear to me that this risk has gone away in the UK – we may know more when we see the report of Sir John Penrose in a couple of months. Increasing the (already prodigious) power of state bodies and reducing the rule of law in the review of the exercise of those powers seems a very dangerous path to tread…

      Sophie L.

      25 September 2020 at 2:05 pm

      • As has been noted elsewhere, we are facing rule of law issues on a number of fronts in the UK right now but at least this aspect is part of a wider trend. Hopefully both can be seen off, while ensuring that legitimate concerns are addressed. Personally, I would rather see workable regulations or codes introduced to address behaviour that competition law is perceived as not addressing, rather than competition law being bent out of shape of becoming entirely arbitrary and based on ad hoc adjudication by authorities. We had experience in the UK before 2000 of a more discretionary administrative approach to competition law, based on (entirely form based) registration of restrictive agreements and political intervention in markets that were identified as raising concern (with remedy powers reserved to ministers). To put it politely, it was not a good system and the move to a more legal prohibition regime mirroring Articles 101 and 102 TFEU under the Competition Act 1998 was a massive improvement. I still remember how we celebrated the final repeal of the Restrictive Trade Practices Act with a glass of wine in the office. We will see how far that CA98 regime can be defended, now it is being decoupled from the EU regime. So far, attempts to dilute the CAT’s oversight have fortunately been resisted. It is of course ironic in the circumstances that the Commission is now looking with interest at the surviving bit of that pre-2000 regime, ie market investigations.

        Becket McGrath

        1 October 2020 at 6:41 pm

    • Re you comment, Makis, these are quotes from the Furman Report (pp. 105-107)

      “Appeals systems can contribute to the competition authority’s risk aversion (…) The competition authority should have an appropriate margin of appreciation to reach decisions on digital cases that are likely to be particularly complex and may require elements of expert judgment” (…)”

      Alfonso Lamadrid

      28 September 2020 at 4:47 pm

  3. Thanks for your reply, Pablo.

    Your post mentions “public bodies” discussing this, from Australia to Germany. Do you have any source where a public body discusses this topic? It would be interesting to read, since I am not aware of this. In particular for Germany I would be sure that I would hsve heard of

    Christian

    24 September 2020 at 8:06 pm

    • If you read the piece again, you will see that I am not referring to these public bodies, as you appear to imply. Thanks so much for the interest!

      Pablo Ibanez Colomo

      24 September 2020 at 9:39 pm

      • Thanks for clarification, Pablo, and sorry if I got you wrong. Maybe I was confused by finding the introductionary passage referring to the recent trends discussed by public authorities put in context with the following passages on discussions on “putting law aside”, which have nothing in common.

        Christian

        25 September 2020 at 9:05 am

  4. Dear Pablo,

    You claim that “the Court of Justice has crafted the law in a way that ensures that action by competition authorities reflects mainstream consensus positions.”

    In addition, your argument is that “the concerns or conjectures insufficiently supported by theoretical and empirical evidence do not justify intervention”.

    While indeed empirical evidence about the facts relevant to the case should support a claim (a hypothesis of alleged harm to the market), I am not sure what place in the due legal process should have “theoretical evidence”?

    That said, the argument that the law crafted by the Court “reflects mainstream consensus position”, while indeed interesting, could be a conjecture itself since one cannot easily discern the mainstream consensus position in highly contested issues (not least if one can be easily skewed by a search engine).

    Indeed, the proposed remedies outside the competition law or shifts in burden of proof sought within, may be well off the mark.

    However, at the same time, political conjectures may reflect real concerns about platform economies better than the current mainstream consensus positions, whichever that is.

    That said, the competition law is flexible and open to possibilities to reinvent through some old (ordoliberal) approaches solving attempts to monopolize the trade (through acquisitions), or seek for inspiration in its old antitrust conceptions, if “consumer welfare” starts to be an elusive concept to grasp in a particular case.

    For one thing, while the law should remain law it cannot operate in a political vacuum as well.

    zoransretic

    29 September 2020 at 7:12 pm

    • Thanks very much for the comment!

      You ask a great question on the role of theoretical evidence in competition law disputes. If you think of Airtours and Cartes Bancaires, you will realise the important role it can have in practice. In the two cases, the theoretical insights made it possible to understand the market dynamics and potential pro- and anticompetitive effects of some practices and transactions.

      Second: when an issue is highly contested, there is by definition no consensus. The question is: can one change the rules absent consensus? As you can gather from this and other posts, I am not sure it is a good idea.

      Finally: there is no doubt that competition law might change. The question is whether a new competition law based on conjectures is preferable. My take? It would be for those who want to change the law to persuade the rest of us.

      Pablo Ibanez Colomo

      30 September 2020 at 8:26 am


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