When did the rule of law come to be seen as an inconvenience?
The attitude towards competition law enforcement has changed significantly over the past two years. For a fraction of our community, the focus should be on prohibiting conduct, and this, as fast as possible. This approach is behind proposals to reduce the constraints on administrative authorities (by means, inter alia, of presumptions and the reversal of the burden of proof) and to limit (even do away with) judicial review.
It is an attitude that has had a substantial impact on the way rule of law ideals are perceived. Not so long ago, there was little dispute about the importance of ensuring that the law is clear and can be anticipated by stakeholders, that firms have the means to defend themselves and that there is a robust mechanism for the review of administrative action (if you are curious about the rule of law in competition law, by the way, I very much recommend Ryan Stones‘ PhD thesis).
In the EU legal order, in particular, there was wide consensus about the improvement brought about by the changes which, over the years, infused the competition law system with principles associated with the rule of law. Such ideals were deemed valuable not only in and of themselves, but also insofar as they enhanced the quality of decisions. The perception (at least until recently) was that administrative action had become more robust and less prone to substantive and procedural errors.
Nothing is forever, alas, and many of the tenets we took for granted are questioned these days. We have read, with a great deal of interest, a number of pieces sowing doubts about some core aspects of the system (including the role of advisers). We have also heard claims suggesting that judicial review delays decision-making and frustrates ambitious enforcement.
According to an emerging view, the ideals of the rule of law are little more than a luxury, if not an inconvenience, that the competition law system cannot afford (or that it can only afford at the price of slower, less decisive intervention). For the same reason, it is occasionally suggested that the system would be better-off if some in-built guarantees were curtailed.
I do not intend to discuss here whether or not these views would change the system for the better (any moderately attentive reader of the blog knows where I stand). I am more interested in identifying the moment when these ideas, marginal until not so long ago, reached the mainstream and enriched the intellectual landscape of our field (definitely less uniform than 10 years ago).
I have the impression that there are two crucial factors behind the rising scepticism vis-a-vis rule of law ideals:
- First, judicial review and procedural guarantees have come to be seen by some as devices to protect the rights of firms subject to competition law investigations. Contrary to this view, however, these mechanisms are there, first and foremost, to advance the public interest.
- Second, there is a clear shift in the priorities of enforcement. What seems to matter is swift action. Enforcement errors are, if at all, a second or third order concern. What justifies intervention, according to this view, is intervention itself.
Judicial review and procedural guarantees advance the public interest
Judicial review has come to be seen with scepticism (and occasional hostility) by some in our community. I have the impression that this position stems from the perception that the control of administrative action by the independent judiciary (as much as procedural guarantees) is a concession that is made to firms subject to an investigation. From this perspective, judicial review would be about balancing the protection of individual rights and the general interest.
This is an understanding of judicial review that has featured prominently in influential documents, including the Furman Report. The idea that the scope and/or the intensity of the control of administrative action should be revisited has emerged as a relatively popular one. Some have even floated the idea of making some administrative decisions ‘unappealable’ (a proposal which, while definitely interesting, seems at odds with primary EU law and the general principles on which it is based).
If this understanding of judicial review is accepted, it makes sense to limit (even do away with) the control of administrative action. It would also make sense to see legal challenges against decisions as dispensable dilatory tactics that, on balance, do more harm than good. The sacrifice would be minimal where judicial involvement is seen through these lenses: does it really matter that large and powerful corporations are not allowed to protect their rights? Is it not better to intervene swiftly to preserve competition and protect consumers?
The problem is that this interpretation of judicial review does not reflect its purpose and importance for the system (and particularly so in continental legal traditions). It is often forgotten that the primary aim of the control of administrative action is to protect the general interest, not the interest of individual firms (juger l’administration, c’est encore administrer, as the old saying goes).
A judgment annulling a decision for misconstruing, say, the notion of restriction by object, or the SIEC test enshrined in Regulation 139/2004, benefits society as a whole, not just (not even primarily) the firms challenging the decision. Similarly, the error-correction role of judicial review advances the general interest by ensuring that administrative action is predictable and consistent (and thus aligned with the ideals of the rule of law).
Is rapid administrative action the goal of rapid administrative action?
The scepticism with which the error-correction function of courts is viewed signals a different attitude vis-a-vis administrative action. According to an emerging school of thought, swift and decisive intervention is what really matters, much more than getting it right. Enacting change, more than carefully pondering whether change is warranted, is seen as the priority. And, the argument follows, the institutional setup should adjust to meet this very vision.
Of course, if one accepts that rapid intervention is to be prioritised, even if it comes at the price of enforcement errors, all the institutional mechanisms to correct the said errors (including judicial review and, more generally, rule of law ideals) become superfluous and/or suspect. In itself, this understanding of administrative action is indicative of a reinterpretation of competition law (its objectives, the rationale underpinning decision-making). As such, it deserves to be widely discussed and analysed.
It would seem that enacting change (namely altering market structures, changing business models and redistributing rents) is, according to this view, the very objective of the system. In other words, remedies would not serve a wider goal (such as the protection of the competitive process); remedies are now seen (at least by some) as the goal itself. The moment administrative action is justified by the fact that it takes place, the possibility of an enforcement error disappears (for how administrative action can be erroneous if it is warranted by its very existence?).
Chillin'Competition 
I couldn’t agree more. To some extent this is not new. I recall senior officials at the OFT being quite put out when companies dared to appeal fining decisions in the early days of the UK Competition Act. It has clearly got worse recently, however. I think recent developments need to be viewed in the wider context of the populist political environment, which shall we say is affecting some countries more than others. Populists tend to paint any attempts to protect the rule of law as efforts by self-dealing elites to protect their vested interests in perpetuating complexity over ‘common sense’ and frustrating the ‘will of the people’. In this environment, “lawyer” becomes a term of abuse and unfortunately certain voters (who, we are told by their tribunes, have “had enough of experts”) react positively to that narrative. While this comes up most in other areas, such as immigration or the protection of minority groups using human rights laws, in the UK we unfortunately saw some of that language seeping into the competition law debate, see eg Lord Tyrie’s letter.
Becket McGrath
30 June 2021 at 6:26 pm
Thanks, Becket!
I agree that Lord Tyrie’s letter is an emblematic example of this school of thought.
Pablo Ibanez Colomo
30 June 2021 at 9:41 pm
Absolutely right and very timely. Mr Penrose’s report repeats a lot of this. Lawyers and the hordes of highly paid advisers (etc etc) are seen as throwing sand in another wise perfect system and standing in the way of the consumer interest and so on. What is important is getting it right. No or limited appeal in penal cases or review elsewhere is merely an endorsement of sloppy official work and nobody benefits from that other than officials whose work is not subject to scrutiny. There is no great judicial enthusiasm to quash competition decisions; in fact, most appeals are won usually through gritted judicial teeth. And, by and large, judges exercise quite tough case management decisions about timing, delay, disclosure and so on, as well as control over fee levels. Time to move on from Shakespeare “let kill all the lawyers” (Henry VI, [art 2, Act IV)!
Thomas Sharpe
1 July 2021 at 2:24 pm
Pablo, you are raising very good points. And indeed this is the right moment to be reminded (once again) that, in any legal system worth that name, ensuring checks and balances, effective judicial review, respect for fundamental rights (i.a. right of the defense, presumption of innocence etc) etc cannot be considered a luxury.
luca
2 July 2021 at 9:55 am
Dear Pablo, the point you are making is so abstract that it is not easy to comment. You refer to some people saying things, but the only specific document you mention is a report from a country which is not even a member of the EU (although the picture in the post would suggest you are talking about the EU).
Although the heading of the middle section refers to “procedural guarantees”, examples in the last paragraph refer to errors of interpretation of the (substantive) law, not procedural ones. You may be having a quixotic battle with (imaginary) windmills. Although your academic circles may be populated by people with fringe ideas, I have not heard any serious speaker (at least in the EU, I am less concerned in the situation in third countries, such the UK, which is mentioned in other comments) generally questioning that administrative action must be “predictable and consistent”, or claiming that it is not the role of courts to interpret the law (and therefore the notion of “by object” restriction or SIEC). I have never heard in my circles of this idea of “unappealable” decisions. I would point out, though, for the avoidance of doubt, that predictability of administrative action is not only enhanced by “error-correction” judgments, but also by judgments that confirm that action was lawful. Moreover, I am not sure that one can just assume that “any” annulment “benefits society as a whole”. It has happened that, in practice, it was certain judgments questioning established practice or contradicting prior judgments (of a different chamber) that created, temporarily at least (until the issue would be clarified on appeal), some uncertainty. It is not easy for the authority to decide what to do when you have two seemingly conflicting judgments.
Your criticism of “rapid administration action” in last section appears to suggest that you are in favour of “slow administrative action”, maybe because it leads to less errors. Taken to the extreme, this is a principled recipe for no action, really. I understand that is (probably) not your approach, but it would help to clarify. One can in principle try to enact change rapidly while “carefully pondering whether change is warranted”, the latter not being anyway a guarantee that such “change” will not be annulled by courts. The avoidance of “undue delay”, apart from being part of a fundamental right for those directly concerned (although ironically some companies appear to be happy if their case is delayed), may also be in the public interest, since the public administration may have to act effectively if it is to have legitimacy (just think about vaccines). The trade-off between speed and accuracy/reflection is an old one, but I am not sure it has a lot to do with the “rule of law” as such.
Surely, “juger l’administration, c’est encore administrer”, and it “is often forgotten that the primary aim of the control of administrative action is to protect the general interest”, but that is precisely the point critics may have: some courts may not always consider themselves as part of the enforcement system, taking responsibility for the resulting outcome (which may mean in certain cases that unlawful/harmful conduct is allowed), but rather as “neutral arbitrators” between private and public parties (conflict-solving and not policy-implementing, to take Damaska’s dichotomy), who may be aiming at annulling about half of the cases to illustrate her somewhat “neutral” and impartial stance. Admittedly, part of the explanation is that in a system where the subject of review is the decision (and not the conduct of the undertaking, like in a civil case), it is the observance of the law by the defendant that will be the focus of the review. Besides, EU Courts cannot “redraft” the decision, it can only annul it (same situation arises in most legal systems within the EU). Yet, the fact that the number and “rate” of annulments -regardless of the grounds- tends to be cited in interviews and articles by judges in Luxembourg as evidence that they are doing their job, is not always reassuring or helpful. The perceived need to have a “fixed rate” of annulments may not invite more caution, but rather more action, in the expectation that anyway half of the decisions will be annulled, whatever you do. To be fair, the effectiveness of enforcement is sometimes taken into account, as one can see in recent judgments in hybrid settlements cases, which take a pragmatic approach, in that if the conduct was proven to be unlawful, the companies will not escape their liability, but other judgments may be telling a different story.
Joan
3 July 2021 at 12:15 pm
Thanks, Joan, as ever, for your thoughtful comments. Always a pleasure to read you
It is particularly valuable, from my perspective, that you see the views depicted in the post as ‘fringe’ and as coming from speakers that are not ‘serious’. Perhaps being loud (and pretty much all over the place) is not everything after all!
I liked the provocative suggestion that I might be in favour of ‘slow’ administrative action. As I thought was clear from the post, I was casting doubts about rapid administrative action for the sake of rapid administrative action (as opposed to it being at the service of the protection of a system of undistorted competition). And nobody is in favour of undue delays, I am inclined to believe (that would definitely be a fringe view!).
Finally, you make a really good point on statistics: I fully agree that the percentage of annulments does not say anything about whether judicial review is effective and/or more or less intense. And have explained it in my writings.
Pablo Ibanez Colomo
3 July 2021 at 2:30 pm
Couldn’t agree more, Pablo! In an interview with Bloomberg last week, the former US Secretary of Treasury Larry Summers described the era that supporters of the recent drastic changes of antitrust substantive and procedural jurisprudence wish to return (I.e. the 60s and 70s when concentration is necessarily bad) as a “horror movie”. Interesting and penetrating comment.
Andy Chen
4 July 2021 at 9:06 am
[…] When did the rule of law come to be seen as an inconvenience? (Pablo Ibáñez Colomo — Chillin’ Competition) […]
Reading suggestions – July 2021 – Concurrentialiste Review
5 August 2021 at 5:04 pm
I take the relay from Pablo and move his “quixotic battle with the windmills” into the reality realm.
His contribution is general first because it is about a general legal matter and he might have intended to come with a light, summer discussion.
The question is however well put and, to my surprise too, rarely touched upon by the academics, who mostly seem happy that the European Commission is harsh, especially with the big tech companies.
But truth is that the EU competition enforcement became complacent and it is already far from its raisons d’être. As things – apparently – go well, why should anyone, let alone Professor Pablo Ibanez Colomo, complain? Maybe because he is sharing a blog with a lawyer and lawyers are pissed off that their tactics do not work anymore, this is what most people could think. Those who know Pablo know he always challenges the conventional wisdom and he is doing this on his own considerations.
Returning to the topic raised by the author, the rule of law is indeed of public interest and intended to ensure the main purpose of competition enforcement: credibility. This is the only rational objective of any competition enforcement, not just fixing a specific issue.
In this ambit, the annulments of the decisions of the competition authorities are definitely good and in the public interest, notwithstanding the case. Why? Because it helps the competition enforcement system to self-correct and improve, preventing losing other cases and, importantly, losing its credibility. As no other than Bill Gates said “Success is a lousy teacher. It teaches good people they cannot make mistakes”.
Why I insist on credibility and why I think that is at the core of the competition enforcement?
Because the effects of the competition enforcement are rarely, if ever, felt by the consumers and because the undertakings will make efforts to comply with the competition rules (always a difficult endeavour in the day-to-day conditions) only when they will expect the authorities to treat them fairly and not in an arbitrary manner. If the undertakings will start considering that the competition enforcement is arbitrary and out of the touch of the judicial authorities, they will either not care anymore or even assume the risks associated with the hefty sanctions in this area. This would be end of a sound competitive process and there is always a very delicate balance.
Against this background, the rule of law is essential for the competition enforcement. If legal proceedings are long, it suffice to provide courts with the necessary personnel and other resources in order to settle such important matters in a quick manner and based on a throughout analysis, instead of curtailing their powers or downplaying their importance.
Valentin Mircea
25 August 2021 at 2:39 pm