Chillin'Competition

Remedies are now at the forefront of legal and policy discussions. As discussed here, this reality reflects a shift in the centre of gravity of enforcement (in the EU and beyond). The administrative priorities of authorities and the economic features of digital markets demand the administration of obligations that are regulatory in nature (such as the functional or structural unbundling of activities, access obligations and the determination of wholesale and retail prices).

A bare bones cease-and-desist order does the job in oligopolistic markets, but is often unable to deliver in industries (such as digital) that feature monopolies or quasi-monopolies across one or several levels of the value chain.

Authorities and commentators are catching up with this emerging landscape. For a long time, remedies were, at best, an afterthought (and not just in the literature). There is therefore every reason to welcome the structured conversation on the topic that is organically taking place.

The recent Report on the ex post evaluation of EU antitrust remedies, produced for the Commission, exemplifies the new trend. In addition, scholarship addressing remedy design and implementation is growing and taking fascinating new directions every time.

Is there room for restorative remedies in EU antitrust law?

Interestingly, the rise of remedies as a central theme in the EU antitrust arena has revealed that some basic issues are yet to be addressed systematically. Surprising as it may sound, something as fundamental as the very purpose of enforcement is not fully clear. For instance, many of the most recent contributions to the literature assume as self-evident that the point of remedies is (or can be) restorative in nature.

What authors mean by restorative is not always clear (there is a ‘thick’ and a ‘thin’ version of the concept, as I explain in the article cited above). The above said, the concept means, at a minimum, that remedial action should recreate the conditions of competition that existed prior to the infringement. Even in its more modest incarnation, therefore, restorative intervention would go beyond merely bringing the infringement to an end. It would require turning back the clock to where things were in terms of structure and competition dynamics.

If one reads carefully the EU case law, however, there is precious little support for the idea that restorative remedies can be imposed in EU antitrust law. One could take the argument further: the judgments that are typically relied upon to substantiate the claim suggest, if anything, that restorative intervention is, as the law stands, outside the reach of courts and authorities (at least so when they enforce Articles 101 and 102 TFEU).

This conclusion is particularly apparent from AKZO, which, paradoxically, is frequently mentioned in support of the proposition that remedial action can be restorative. As part of the remedy package in the case, the dominant firm was required to refrain from engaging in selective price-cutting.

The purpose of this measure was not to restore the conditions of competition that existed prior to the abuse. The Court (see para 155) is even explicit about the fact the remedy did not seek to re-allocate to ECS the customers it had lost to AKZO (which would have made it restorative in nature). The more modest ambition of the obligation was simply to bring the infringement to an effective end and prevent the abuse from taking place again.

Another common ruling that is mentioned in support of restorative intervention in EU antitrust law is Ufex, where the Court of Justice held that where the ‘anti-competitive effects continue after the practices which caused them have ceased’, the Commission ‘remains competent’ to ‘to act with a view to eliminating or neutralising’ them.

The best way to make sense of this passage is to take a look at the precedent to which it refers, namely Continental Can. This venerable classic of EU competition law concerned the abusive acquisition of a rival. In the specific circumstances of the case, the infringement could only be brought to an effective end by mandating a divestiture. The intervention was a mere adaptation of the nature of the infringement (a one-off) and its effects (which were not a one-off and thus lasted until intervention took place).

We are yet to see a judgment of the Court of Justice addressing the question of whether remedial intervention can go beyond merely bringing the infringement to an end. A good opportunity would have been Lithuanian Railways, as the one of the alternatives identified by the Commission in its decision was the restoration of the railway track. However, the remedy was not challenged by the dominant firm in its appeal (and, when contested before the General Court, the dominant firm did not claim that such a remedy exceeded the scope of the authority’s powers under Regulation 1/2003).

Should remedies be restorative in nature?

The fact that, as the law stands, there is little support for restorative intervention does not mean that such measures are necessarily beyond the reach of antitrust courts and authorities. Similarly, it does not rule out the possibility that the Court will accept them in the future. It simply means that one cannot take for granted that restorative remedies are feature of the system (or that a court or a competition authority are not acting decisively when they choose not to impose such measures).

It also means, more to the point, that it is necessary to have a conversation about their desirability. The arguments in favour of restorative remedies are well-known and definitely have force to them. In markets that change rapidly and that naturally tends towards concentration, merely bringing the infringement to an end may achieve little in some instances. If the role of antitrust law is to be taken seriously, the argument goes, it means that restorative intervention is a necessity, at least in some instances.

Arguments against this form of intervention are no less powerful. The single most persuasive one has to do, as usual, with the sheer complexity that comes with the design and implementation of restorative measures. We have witnessed in the past few years that getting remedies right in the digital arena is a complex task, even for the most sophisticated and well-resourced of authorities.

It is not clear that adding more demands to the already stretched antitrust institutions will be beneficial for the system. In this sense, I have always been of the view that creating the expectation that competition law can achieve more than it realistically is able to deliver is particularly harmful to its credibility (and its status in the EU legal order at large).

There is another factor to consider in this debate, which is equality of treatment. Would restorative remedies be imposed in some cases but not others? If so, on what basis? Could the matter be left to the discretion of the court or authority? One should not forget, in this sense, that the principle of equal treatment in the context of remedial action has featured prominently in the case law (most notably in the old ice cream cases, Langnese-Iglo and Schöller)

What matters, as I say, is to get the conversation started and discuss meaningfully the pros and cons of restorative intervention. Your comments, as ever, would be most welcome.