Chillin'Competition

A few days ago, Global Competition Review issued the first edition of its survey of antitrust academics. As you can see here, it features 25 scholars working on the legal, economic and management dimensions of our field.

It was a pleasure to share some thoughts on the direction of competition law and policy and even more of a pleasure to discuss, for once, issues that wholly unrelated to antitrust (or indeed the law). Global Competition Review has been kind enough to allow me to reproduce the interview on the blog (tip: scroll to get to the non-legal stuff).

What is the next academic “frontier” for antitrust law or economics?

The implementation of complex remedies is the most obvious challenge for authorities in the next few years. Traditionally, a decision finding an infringement was the end of a case for a competition authority. No longer. Enforcement, in particular in digital markets, is far more ambitious. Agencies are now far less reluctant to engage in the sort of far-reaching intervention from which they shied away for decades. They do not hesitate to interfere with the design of products, to question the core of firms’ business models or to deal with exploitative conduct. These cases are inevitably more complex and demanding, and this in a number of ways. First, the authority must design (or at least approve) an appropriate remedy, typically in the form of a positive obligation (and not just a cease-and-desist order). Second, this remedy must be subsequently implemented and monitored. As a result, uncertainty may extend well beyond the date when the decision finding an infringement is adopted. Some recent cases involving Apple and Google go to confirm this point: disagreements about whether the remedy, as implemented by the firm, brings the breach to an end can go on for years.

Our community is only starting to realise how much this kind of ambitious enforcement is transformative. Competition law has been, for a long time, about establishing infringements, the remedy being, if at all, an afterthought. If this trend continues, the discipline, and debates in the field, will revolve primarily, if not exclusively, around remedies. At present, our field is imperfectly equipped to deal with this shift in the centre of gravity. It seems to me that the legal framework will have to be adjusted and a new kind of expertise developed.

What is the most important academic debate currently taking place within the competition community?

I would say that the most important debate is the one that is not taking place (and that, if you ask me, should be taking place). Until the beginning of the 2010s, there was wide consensus about what makes competition law legitimate: it was all about process. I mean process in a wide sense, as encompassing not only procedural aspects but also the substantive and economic side of things. Whether or not intervention is justified in a given case would follow the process, under this approach. It would all depend on whether the theory of harm matches the facts of the case, whether the economic and legal context has been considered in its full complexity and whether agency action remains within the boundaries of what is allowed by law. Under this understanding of competition law, review courts are central: it is for them to check whether process has been followed.

Things are now changing. It would seem that, for many, what makes competition law legitimate is not whether the appropriate process has been followed, but whether the outcome that is deemed desirable is reached. Competition law would then be legitimate where it produces a particular result (typically, a finding of infringement). Under this novel understanding, competition law would not be ‘fit for purpose’ if, for instance, it leads to the finding that a practice implemented by a digital platform is incapable of restricting competition, or that it is on the whole procompetitive. By the same token, judicial review is seen with suspicion. If a court comes to the conclusion that the agency had erred in law or fact, it is deemed an obstacle to enforcement, rather than as a safeguard.

People will of course have different views about the wisdom of this shift. What matters is to acknowledge the shift is underway and discuss its consequences.

Which competition agencies (if any) are pushing the boundaries (rightly or wrongly) of antitrust law or economics the most and why?

Allow me to mention, first, that it is not wrong for a competition agency to test the boundaries of its powers. It is what they are expected to do and what they should do. The flipside, of course, is that courts may conclude that their analysis in individual cases goes beyond what the law permits. The European enforcement model is more conducive to agencies testing the limits of the discipline. Add to that excellent, well-trained staff and the experience acquired over decades and you get the ideal mix. I have followed with a great deal of interest what the French Autorité de la concurrence and the Italian AGCM have been doing (the latter’s decision in Android Auto and Amazon are most intriguing). I also look forward to the outcome of the European Commission’s investigations into Apple’s practices, as they hint at novel interpretations in more than one way.

Most important academic paper or book you’ve written and why?

The Shaping of EU Competition Law, published by Cambridge University Press in 2018, is, I believe, my most important work for several reasons. First, because it crystallises my thoughts of several years. It is in a way the culmination of a path that started with several shorter pieces. Second, because it is also quite ambitious: I compiled a comprehensive database of all Commission decisions and all EU courts judgments. Third, because it is a more mature piece of work than my PhD (which gives me the hope that my best research is yet to come!).

Most important academic paper or book you’ve read and why?

I admire many competition law scholars, but I will go for Marc Galanter’s classic Why the Haves Come Out Ahead. It is, I believe, a must-read for any legal academic. It encapsulates what we could contribute to society (and we should all aspire to do as scholars). It addresses an important problem (the limits of legal change and the factors that explain why the powerful get their own way), adds to our understanding of the world and creates a meaningful framework for addressing it.

Is corporate capture undermining the integrity of academic research?

It is very important to be aware of the risk of capture, but I believe that this risk has been somewhat overstated (at least in Europe, which is what I know well). The community has reacted effectively and put robust mechanisms in place. By and large, claims of academics being captured should be taken for what they are, more often than not: just another corporate strategy to advance some stakeholders’ interests.

Do you accept paid work from private companies?

No, and never will. I am happy to explain why. Us academics are the most privileged people in this community. We are paid by our institutions literally to think and write. I believe this status comes with a duty to avoid actual or potential conflicts of interests, provided that our personal circumstances allow for it. And my personal circumstances happen to allow for it. I am immensely fortunate to have a secure, well-paid job at a leading institution. Plus, I do not have extravagant hobbies and have a habit of reminding myself of how lucky I am.

What are your hobbies outside of academia?

As said above, my hobbies are not extravagant. I enjoy running and reading non-competition stuff (Amélie Nothomb’s Premier Sang and Irene Vallejo’s El Infinito en un Junco, both widely translated, are the highlights of this year). I also enjoy cycling, hiking and trying vegan places with my partner (if you happen to be in London, we recommend Sazzy & Fran for breakfast/brunch, En Root for lunch and great music as well as What the Pitta for a cheeky takeaway).

Following my first post on the Android judgment, in which I addressed some of the issues that have become clearer after the General Court’s analysis, here is the second part, discussing those where further clarity will be needed. As ever, I really look forward to your comments (and, as ever, nothing to disclose).

What needs to be clarified after the Android judgment

The point at which an anticompetitive effect can be said to exist.

As mentioned in the first post, the judgment is valuable in that it confirms what an effect is not. It is not just a competitive advantage, and it is not merely a limitation of a firm’s freedom of action. If these factors alone are not enough, what is the point at which an anticompetitive effect exists? How to differentiate it from a mere competitive disadvantage? This is one of the issues where the Android judgment fails to shed enough light.

Suffice it to focus on the MADA aspects of the decision to illustrate this idea. The judgment covers at length the main competitive advantage identified by the Commission, namely the ‘status quo bias’ from which Google’s products would benefit and which would derive from the pre-installation of these products in smartphones.

Claims of ‘status quo bias’ raise a number of factual questions, in particular whether rival applications can be pre-installed alongside Google’s (thereby nullifying any competitive advantage) and how pervasive pre-installation was.

What matters, in any event, is that the ‘statu quo bias’ is as such insufficient to show that a practice leads, or has the potential to lead, to foreclosure. Decades of experience – including in technology markets – show that even a significant competitive advantage does not necessarily result in exclusion and that it may well be compatible with thriving competition (one needs to look no further than the Microsoft/Skype decision).

In this regard, the judgment does not offer anything by way of an approach to distinguish between advantage and effects within the meaning of the case law. It touches upon the issue, but ultimately leaves it open and unaddressed (see para 565, which ends up speaking of a ‘significant competitive advantage’). This is one of the blind spots that will hopefully be explored in the near future.

This point is not a minor or esoteric one. The development of a comprehensive toolkit to evaluate anticompetitive effects (and tell them apart from mere competitive advantages) is a necessity if the assessment is to be meaningful. In the absence of effective analytical tools, establishing foreclosure would be a mere formality, not an actual informed scrutiny of the impact of potentially abusive conduct in the relevant economic and legal context. It would be sufficient, in practice, to point to a competitive advantage.

As things stand, a toolkit exists, but only in relation to some practices. As a result, distortions will persist unless the issue is directly addressed by the EU courts. If gaps remain in the case law, the evaluation of anticompetitive effects will only be meaningful for some categories of conduct, not others. The meaning of foreclosure – and the nature and depth of the scrutiny – would therefore vary depending on the practice. It would be difficult to justify or rationalise this reality.

As far as price-based conduct is concerned, for instance, the EU courts already rely on an operational toolkit (including the ‘as efficient-competitor test’). As a result, the potential impact on competition can be meaningfully ascertained. In addition, the coverage of the behaviour has emerged, since Intel, as a helpful tool with regard to both pricing and non-pricing strategies, and it has proved particularly illuminating in some recent cases.

The Android judgment shows that an operational toolkit is missing in relation to other conduct, including tying. As a result, there is some way to go to achieve consistency within Article 102 TFEU case law (and, indeed, EU competition law at large – for instance, it has long been acknowledged in EU merger control that a significant competitive advantage is insufficient to establish foreclosure).

The benchmark against which effects are assessed

One of the reasons why this case is so fascinating is that the but-for world (the famous counterfactual) is not straightforward to establish. This is so for at least two reasons.

First (and as mentioned above), the practices at stake in the case create competition, in the sense that they sustain an ecosystem that provides opportunities for rivals to expand their business. Second, it is far from clear that alternative monetisation strategies would have given rivals more opportunities to thrive (look no further than the iPhone to realise what may happen when other business models are relied upon).

In the specific circumstances of the case, accordingly, it may well be that, in the absence of the contentious behaviour, there would have been less, not more, competition. If this is so, it would not be possible to argue that the practices have exclusionary effects. If it appears that they allow for more competition relative to the counterfactual, they fall outside the scope of Article 102 TFEU.

Fascinating as this issue may be, it was avoided by the General Court. Even though it concedes that the Android platform is pro-competitive, in the sense that it opens opportunities for rivals, it fails to consider the counterfactual.

In paras 587-596, the judgment merely points out that the Commission decision only challenged some aspects of Google’s monetisation strategy, not the business model as a whole. Which, if there was any doubt, does not address the question of what the conditions of competition would have been in their absence.

The attributability of anticompetitive effects

It is well-established case law that the effects of a practice must be attributable to the contentious practice for Article 102 TFEU to come into play. In other words, there must be a causal link between the behaviour and the impact on competition. In many respects, Android provides an ideal scenario in which to test the question: are Google’s market shares the result of its conduct or are they the consequence of the fact that its products are superior?

Inevitably, these questions emerge in the case, but, again, there is no definitive answer from the General Court. It is worth reading paras 546-558 and 570-584 in this regard. The judgment describes the evolution of market shares and explains that other competing applications are not downloaded by users. Whether or not the observable consumer behaviour can be attributed to the conduct is not something that is addressed directly.

In fact, the General Court notes at some point (para 574) that the figures outlined in the judgment are in themselves sufficient to establish harm. In this sense, the judgment suggests that attributability may be established by proxy. It remains to be seen whether this is enough to show a causal link between conduct and effects.