Chillin'Competition

Advocate General Rantos rendered his Opinion in Teva last week. The factual background is not new: it involves pay-for-delay arrangements, with which the Court of Justice has dealt regularly in recent years (including the Servier saga, discussed here and here). The action against the original Commission decision in Teva was dismissed by the General Court (see here). and the appellants – Teva and Cephalon – request that the first-instance judgment be set aside.

The case law on pay-for-delay has made important contributions to the assessment of the object of agreements under Article 101(1) TFEU. Above all, this steady stream of judgments has led to the adoption of a legal test that has been systematically applied since Generics. The test captures the substantive approach followed by the Court in the preceding the years.

As the Opinion of Advocate General Rantos shows, some questions keep coming back, even though – one might reasonably argue – they were already implicitly (if not explicitly) addressed in the previous case law. In this sense, the appeal provides the Court with an opportunity to clarify some issues at the margins.

The Court’s contextual approach to restrictions by object

The case law of the past decade makes it clear that the Court’s approach to the analysis of restrictions by object is contextual. Restrictions by object, in other words, are not abstract categories that can be mechanically applied to agreements. Whether or not a practice is, by its very nature, contrary to Article 101(1) TFEU must take into account the economic and legal context surrounding it. Only in such a way is it possible to establish whether the behaviour can be explained other than as a means to restrict competition.

The Court’s contextual approach is not an analysis of effects

In spite of the consistency of the Court’s position, it is not infrequent to read that the contextual approach to restrictions by object amounts, in essence, to evaluating the effects of the practice. According to this view, the current case law would conflate the object and effect stages of the analysis.

As explained elsewhere, there is a fundamental difference between ascertaining the object of an agreement in light of the relevant economic and legal context and assessing its effects on competition. The Teva case itself shows that the object stage is about making sense of the rationale behind the practice, that is, what explains the agreement between the parties. This assessment cannot be undertaken in the abstract. By necessity, it must consider the circumstances surrounding it. Doing so does not mean, however, that it must venture into effects territory.

An indispensable step of the analysis in pay-for-delay cases, which the Court explained at length in Servier, involves asking whether the parties to the agreement are actual or potential competitors (if there is no actual or potential competition to restrict in the first place, the agreement cannot be inherently anticompetitive). Semantic issues aside (see para 52 of the Opinion), this step does not entail an evaluation of the restrictive effects of agreements in light of the relevant counterfactual (as already clarified in Lundbeck).

The appellants in Teva, the Opinion suggests, sought to argue that the General Court engaged in an analysis of effects (thereby erring in law).

Advocate General Rantos relies on the existing body of law to explain that the General Court did not seek to ascertain the impact of the practice, but rather make sense of the ‘interests and incentives of the parties concerned, in order to ascertain whether the commercial transactions contained in the settlement agreement could have any explanation other than the commercial interest of the appellants not to engage in competition on the merits’ (para 56, emphasis in the original).

In other words, the General Court did nothing other than ascertain whether the Commission had correctly identified the object of the agreement in the relevant economic and legal context, as required by the case law.

The Court’s contextual approach does not entail a reversal of the burden of proof

Pursuant to the Court’s contextual approach, the authority or claimant have the burden of showing that the practice has no explanation other than a restrictive one. If there is no other plausible way to make sense of the behaviour, it will be deemed to restrict competition by object.

This test does not entail in any way a reversal of the burden of proof. It is not for the parties to the agreement to provide a plausible non-restrictive explanation for their conduct, but for the claimant or authority to show that such a plausible explanation does not exist.

While the above point seemed clear, one of the arguments in the appeal in Teva appears to be that the General Court’s assessment amounted to a reversal of the burden of proof. Advocate General Rantos explains (paras 59-64) why this argument does not reflect the reality of the case law (and, indeed, the analysis actually undertaken at first instance).

More than anything, the appellants’ argument is a valuable reminder that there is a difference between the legal burden of proof (what the authority or claimant needs to show to establish an infringement) and the evidential burden of proof (the evidence that the parties need to provide to challenge the arguments made by the authority or claimant).

It is uncontroversial to state that the parties to an agreement have the evidential burden of putting forward a plausible non-restrictive explanation for their conduct. It does not follow from this fact, however, that the legal burden of proof is reversed in any way.

In a similar vein, Advocate General Rantos rejected claims that the General Court had set a test that was impossible for the parties to meet. The parties need not show that an alternative explanation for the agreements is ‘certain’ (para 64). It is sufficient to show that it is plausible. The plausibility of the alternative explanation, however, cannot be merely pretextual (in the sense that it must be properly substantiated) and must be informed by the specificities of the case.

The first two instalments of the series focused, respectively, on the institutional and substantive contributions of the Court of Justice judgment in Android Auto. This third (and final) entry moves to the consequences of the ruling. There are three areas where the ruling may have a significant impact.

Product design and business models after Android Auto

As explained a while ago here, dominant firms’ choices in terms of product design and business models were, for decades (before Android Auto, that is), largely insulated from competition law scrutiny. This is true, for instance, of the degree of openness of an infrastructure. Absent evidence of indispensability, the decision by the operator about which features to open to third parties and which to keep for itself would be generally compatible with Article 102 TFEU.

Similarly, business models (that is, the strategies followed by firms to monetise the value they generate) was typically (if no presumptively) in line with EU competition law. As a rule, a dominant firm could keep for itself a feature of a partially open model as an aspect of its monetisation strategy. Again, this choice would have come under scrutiny only if the conditions set in Magill or Bronner had been shown to be met.

Following Android Auto, however, indispensability is no longer an obstacle to intervention where infrastructure operators (or input providers) decide to open their assets to third parties only partially. As soon as access is given in relation to one potential use of the input or infrastructure, indispensability ceases to be relevant across the board.

This shift in the case law is particularly consequential in the current economic and technological landscape. It expands authorities’ policy space significantly. One implication is that the design of products and the choice of business models may have to be reconsidered more often than in the past.

The analysis of effects becomes particularly relevant in the new legal landscape

The retreat of the indispensability condition strikes a new balance between short-term and long-term competition. It may well be the case that, in dynamic industries, indispensability sets too high a bar for intervention. This, in fact, was the point made by Advocate General Kokott and Mariya Serafimova in a recent piece addressing this very issue.

Whenever a new balance is struck, however, there is always a risk that the pendulum swings too far in the opposite direction. There is a risk, in other words, that the design of products and the choice of business models move from being (almost) presumptively lawful to being (almost) presumptively unlawful. A radical shift may not be the optimal one, whether from a substantive or an institutional standpoint.

In this new legal landscape, the analysis of effects emerges as a particularly relevant step in the assessment of potentially abusive conduct. The effects test will, in practice, act as the primary legal filter to strike the right balance between the static and dynamic dimensions of competition. It is not a surprise, against this background, that the Court stresses its importance in Android Auto.

In line with the preceding case law, the judgment emphasises that the analysis of the actual or potential impact of a practice cannot be a mere formality. As the Court put it, the assessment cannot be grounded in a ‘mere hypothesis’ (para 57). Instead, it must be based on ‘tangible evidence’ informed by the specificities of the case. Similarly, the ‘existence of doubt’ about the capability of a practice to produce actual or potential effects must ‘benefit the undertaking’.

Testing the meaning and limits of Android Auto

It seems likely, if not inevitable, that the meaning and limits of Android Auto will be explored in the coming years at the national and EU levels. With private enforcement on the rise (in particular in the context of Article 102 TFEU), national courts may be confronted with the sort of issues (imposing access obligations, determining the price of access, monitoring compliance) that only arose sparingly before them prior to the ruling.

This, it seems to me, is a third major consequence of the substantive innovations introduced in the judgment. There are many issues that are likely to be tested before national courts. One question relates to whether this judgment is confined to digital platforms. I do not believe it is (the key substantive innovation applies to all sectors, as I understand it), but I am aware that there is no consensus on this point.

A second obvious question relates to what ‘open to third-party undertakings’ actually means. The limits of this concept are not immediately apparent. If an operating system is open to third-party application providers but is not licensed to third-party device manufacturers, does Bronner apply where the latter seek access? Again, there is room for interpretation. For the same reason, this issue (and similar ones) may come back before the Court in the next few years.

The Annual Conference of the Mannheim Centre for Competition and Innovation took place last week. I am very much grateful to the organisers for honouring the legacy and achievements of Professor Heike Schweitzer.

The script of the keynote I delivered can be found here. It focused on the Ordoliberal tradition, which Professor Schweitzer continued, and which I came to appreciate and study thanks to her. Its core insights come across as particularly relevant at this juncture. Ordoliberals’ concern with unchecked (private and public) power and its impact on democracy resonates more than it has in decades.

Paradoxically, the zeitgeist appears to be moving away from what I call the Ordoliberal compact, that is, an approach to policy-making that revolves around an independent authority that is constrained by law and is subject to judicial review (and which is behind the unlikely and resounding success of European competition policy since the 1950s).

This technocratic approach to competition policy is increasingly questioned. An emerging body of literature deems it excessively narrow and (unduly) insulated from the broader political landscape. Similarly, legal constraints on administrative action have come under critical scrutiny.

Counterintuitive as it may sound, moving away from the Ordoliberal compact may weaken competition authorities vis-a-vis powerful private (and public) actors. In addition, it may affect the effectiveness and credibility of enforcement.

I have just uploaded on ssrn (see here) a new paper on judicial review in EU merger control. I am delighted that the paper is forthcoming in European Law Open, a new, fully open access journal run by a group of leading EU law scholars.

In light of recent case law, the paper addresses an eternal debate in EU merger control: whether, and if so how, one can disentangle issues of law (which are subject to full review in the EU legal order) from complex economic assessments (controlled for manifest errors).

The question (which has both a constitutional and a competition law dimension) is whether the two standards of review can co-exist or whether, in practice, one will inevitably exercise its gravitational pull over the other.

It seems to me that this debate is particulaly relevant at a time of technological and economic change. It has been suggested that, in this new reality, the administrative authority would benefit from greater leeway to experiment and take risks to tackle unprecedented substantive issues. The paper discusses the impact that such rebalancing of powers could have on the merger control regime.

I look forward to your comments on it (as usual, nothing to disclose).

The first instalment of this series on the judgment in Android Auto discussed the metamorphosis of the case before the Court: a preliminary reference concerning the interpretation of the indispensability condition was turned into an analysis of whether the Bronner criteria were applicable in the relevant circumstances.

Beyond institutional issues, the judgment is notable in that it introduces a number of substantive innovations that represent a move away from Magill (which was the first providing a structured framework to refusals to deal), Bronner (which extended this framework to tangible property) and IMS Health. One may add to this list Slovak Telekom and Google Shopping, which did not depart from (in fact, they embraced) the same approach.

One can identify three main areas where Android Auto carves its own path and reframes the case law. To begin with, the judgment departs from the logic underpinning the legal framework introduced in Magill. Second, it changes the interpretation of a crucial point of law, which has the effect of significantly reducing the scope of Magill and Bronner. Third, it allows for more far-reaching intervention.

Android Auto and the logic underpinning the refusal to deal case law

The rationale underlying the refusal to deal case law and, specifically, the indispensability condition had been clear from the outset, and were effectively summarised by Advocate General Jacobs in his Opinion in Bronner. If anything, the Court has been more explicit about this logic in recent years.

There are two main reasons why Magill, and then Bronner, set the bar so high. The first relates to the fact that imposing a duty to deal on firms amounts to a major interference with their right to property and their freedom of contract. It should therefore only happen, the Court has consistently explained, in genuinely ‘exceptional circumstances’.

The second reason has to do with the consequences that such interference has on firms’ incentives to invest and innovate (that is, on dynamic competition). The fundamental premise behind Magill and Bronner is that dynamic competition is more beneficial for citizens and society than its short-term counterpart. Against this background, requiring evidence of indispensability was deemed to be a reasonable means to ensure that the latter does not impact negatively the former.

The Court moves away from this logic in Android Auto. Indispensability is not an element of the legal test even though intervention in the case amounts not just to compelling a firm to deal with a third party, but even to changing the operation of its platform.

The indispensability condition, therefore, is no longer universally applied as a filter to ensure that intervention does not affect dynamic competition. By the same token, the judgment strikes a new, different balance between static rivalry and firms’ incentives to invest and innovate.

How Magill and Bronner are reinterpreted in Android Auto

The Court, in Android Auto, attaches a great deal of importance to the fact that the platform had not been solely developed for the ‘needs of [Google’s] own business but with a view to enabling third-party undertakings to use that infrastructure’ (paras 44 and 49). Where the platform is a partially open one, the ECJ concludes, the indispensability condition is not an element of the legal test. This is so, the judgment suggests, even when access to ‘third-party undertakings’ has been given for purposes other than the one for which access is requested.

It is sufficient to take a cursory look at Magill to realise how this position departs from the preceding three decades of case law, including Bronner. The TV operators in Magill had enabled ‘third-party undertakings’ to use the programming listings at issue in the case. As explained by the Commission in its decision, RTE, BBC and ITV had not kept their inputs for their ‘own use’. They were already licensing their intellectual property to newspapers, free of charge, when the Commission started its investigation. What TV operators kept for the ‘needs of [their] own business’ was not the input generally speaking but a particular application of the input (the publication of weekly listings, as opposed to daily ones).

In spite of the above, indispensability was found to be an element of the legal test in Magill. What mattered was not whether the TV operators had licensed the listings to ‘third-party undertakings’ in a market unrelated to the one at issue in the case (daily listings), but whether the dominant firm had kept for the ‘needs of its own business’ the activity for which access was requested (weekly listings).

Android Auto introduces a new interpretation of Article 102 TFEU. It suggests that if access is requested for application A, indispensability will not be an element of the legal test when access is requested for application B. Once the platform is partially open to ‘third-party undertakings’, Magill and Bronner will no longer be the relevant framework to assess the abusive nature of a refusal, irrespective of the adjacent market concerned.

The implications of this rereading of the case law are significant. It necessarily reduces the scope of the Magill and Bronner doctrines, which are now confined to instances where the integrated dominant firm has not dealt with rivals in any market or in relation to any actual or potential use of the input or infrastructure to which access is requested.

Crucially, it is not obvious that this new interpretation is limited to digital platforms. It is easy to think of instances where an input or platform can be used for a variety of purposes, and nothing suggests that the new reading of Bronner will vary based on the relevant sector.

This interpretation was not expressly acknowledged or contrasted with the facts at stake in Magill, whether by the Court of by Advocate General Medina in her Opinion. It was treated as a novel point of law in the judgment. This technique reminded me of some recent refinements of the case law in the context of Article 101 TFEU (and discussed here).

How Android Auto goes beyond Magill and Bronner

It is worth mentioning, finally, that the judgment in Android Auto goes beyond Magill and Bronner, in the sense that it allows for a deeper and more significant interference with a dominant firm’s right to property.

In both Magill and Bronner, the Court ruled that there may be circumstances where a firm can be compelled to deal with rivals. Android Auto suggests that a firm may be forced not just to deal with third parties, but to change the operation of its infrastructure to accommodate rivals (and this, without the need to establish that the said infrastructure is indispensable).

The Commission had already suggested expanding the scope of Article 102 TFEU to require firms to invest to adjust their property and accommodate rivals (in particular in energy markets, as in ENI). Its approach is now vindicated. In a sense, in fact, the shift heralded in Android Auto has been decades in the making. I will elaborate on this issue in the next instalment. In the meantime, your comments would be very much welcome.

The “revolution”, “counterrevolution” and most debates around Article 102 TFEU over the past couple of decades have revolved around the notion of an “effects-based approach”. Yet, there remains considerable uncertainty as to the meaning of “effects” in abuse of dominance cases. This is remarkable given the Court’s clarification that a finding of abuse presupposes that the conduct at issue “at the very least, is capable of producing exclusionary effects” (Superleague, para. 130). Indeed, establishing exclusionary effects/foreclosure is the bottom line in every case. If the notion of effects is too narrow or demanding, effective enforcement may be compromised. If, on the contrary, there are no discernible limitations to the notion of effects, then this paves the way to discretionary enforcement and legal uncertainty. We should arguably avoid either extreme.

In the Policy Brief launching the process for the future adoption of Guidelines on Article 102 TFEU (titled “A dynamic and workable effects-based approach to abuse of dominance”) the Commission acknowledged that “[t]he effects-based approach promoted by the Commission is clearly reflected in [case law developments]” (p.2), but also raised “the question of whether the heightened substantive legal standard that the Union Courts have accorded to it may inadvertently lead to undesired outcomes”, expressing concern that “the bar for intervention [could be set] at a level that would render enforcement against practices that restrict competition unduly burdensome or impossible” (p.4).

The desire to “consolidate the case law” in such a way as to make the effects-based approach more “workable” also inspired the March 2023 amendments to the Guidance Paper on exclusionary abuses. With those amendments, the Commission replaced the notion of “anticompetitive foreclosure” that the Commission had publicly committed to follow since the original 2008 version of the Guidance Paper, and which was consistent with that used under merger control (see e.g. the Commission’s non-horizontal merger guidelines, para. 18). This significant amendment, which implied not only signposting for the future, but arguably also an element of goalpost-moving, received scarce attention at the time.

The draft Guidelines now take several additional steps to alleviate the Commission’s burden of having to establish exclusionary effects:

First of all, it is noteworthy that under the approach set out the Commission would not need to establish anticompetitive effects in cases involving “naked restrictions” (Draft Guidelines, para. 60.c) or conduct otherwise “presumed to lead to exclusionary effects” (including exclusivity agreements, conditional rebates, predatory pricing, margin squeeze and certain forms of tying; Draft Guidelines, para. 60.b)). This reliance on presumptions has already been the subject of much commentary (see, e.g., here, here, here, or here).

But for the purposes of this post I will focus on the analytical framework that the Draft Guidelines propose to follow in relation to the only category of practices that the Commission itself describes as “conduct for which it is necessary to demonstrate a capability to produce anticompetitive effects” (Draft Guidelines, para. 60.a):

If one connects what the Draft Guidelines say regarding capability, causality and appreciability together with their definition of exclusionary effects, my reading is that even in the subset of cases where the Commission would be required to establish effects, the Commission would only need to show that conduct by a dominant firm is capable, considered together with other factors, of potentially increasing the likelihood that rivals (including in some cases less efficient rivals) may find it somewhat more difficult to compete against a dominant undertaking (e.g. by increasing barriers to entry), even if the added difficulty is minimal or not appreciable.

Query: Can anyone think of any conduct outside the scope of competition on the merits that would not meet this test?

I can’t. And if every conduct deviating from competition on the merits (itself a controversial and vaporous filter, as discussed here or here) would meet this test then, arguably, the requirement that conduct must be capable of having exclusionary effects to fall within the scope of Article 102 TFEU would constitute an empty filter.

There are, I suppose, three possible counterarguments to my observation, namely (a) that my reading of the Draft Guidelines is an oversimplification; (b) that the Draft Guidelines are simply and objectively based on established case law; and/or (c) that, in practice, the Commission would in any case exercise self-restraint. So let’s address those:

The Court of Justice delivered yesterday its much awaited judgment in Android Auto, which I followed from the early stages (see here for a comment of the AGCM’s decision from four years ago). It exemplifies, better than any other, the uncertain future of the Magill/IMS Health and Bronner doctrines in the current economic and technological landscape.

Android Auto could have a very substantial impact on the relevance and scope of these two doctrines (far more substantial than Google Shopping, for instance). I write ‘could’ for the simple reason that the meaning of the judgment is only likely to be fully teased out following subsequent references to the Court.

Before addressing substantive matters strictly speaking, it makes sense to start by focusing on an issue that is potentially of interest to EU lawyers at large (and arguably the most intriguing in this particular case).

Yesterday’s judgment deals extensively with the conditions under which the Bronner doctrine is applicable. However, Bronner is not even cited in the original AGCM decision. The authority’s analysis was based on Magill and IMS Health instead (which is a similar, but not identical, doctrine).

More importantly (and unlike Google Shopping), the dispute at the national level was never about whether the Magill/IMS Health (or indeed Bronner) conditions were applicable in the circumstances of the case.

It revolved, instead, around the interpretation, by the AGCM, of the Magill/IMS Health doctrine, which was deemed to provide the appropriate analytical framework to evaluate the abusive nature of the practice. The AGCM’s choice of legal test was unsurprising. It was, after all, an outright, plain-vanilla refusal to deal.

One could argue, on the other hand, that the AGCM’s interpretation of Magill/IMS Health was somewhat unorthodox. It was therefore reasonable (and to be expected) for the Consiglio di Stato to refer a number of questions to the Court of Justice.

To begin with, it was unclear, in light of the available facts, whether access to Android Auto was indispensable within the meaning of IMS Health (this ruling provides, in paragraph 28, the canonical definition of the condition). Enel’s app had in fact been launched and was offered to end consumers even though it did not have access to the said platform (see paras 8 and 9 of the Court’s judgment in Android Auto).

The first and the second questions referred by the Consiglio di Stato addressed this issue. One of the questions related to the very meaning of the condition (does indispensability mean indispensability or does it mean convenience instead?). The other focused on the fact that Enel’s app and, indeed, rival apps had been offered to end users even though they were not accessible via Android Auto, thereby suggesting that the demanding threshold set in Magill and IMS Health had not been met.

The judgment in Android Auto does not interpret the indispensability condition. The Court, instead, reformulated the questions asked by the Consiglio di Stato (see para 33) and examined, following this exercise, whether the Bronner doctrine was applicable in the context of the case.

The reformulated question (para 36) was whether Article 102 TFEU can apply to a refusal to deal in the circumstances of the case (that is, one involving access to a digital platform) and this even though the platform in question is not indispensable but can make a product more attractive to consumers.

It is on the basis of this new question that the Court provided its interpretation of Article 102 TFEU. I will discuss the substantive aspects of the ruling (and how it potentially entails a shift in some points of law that had remained unaltered since Magill) in the next instalments.

For the time being, the fact that the dispute in Android Auto was transformed (from a case about the interpretation of Magill/IMS Health to one about the applicability of Bronner) raises a number of issues that are worth discussing.

Android Auto shows, first, the extent to which the substantive and institutional aspects of a legal discipline are intertwined. This is one of the overarching themes of my research. I have come to realise, over and over, that institutions often influence (if not shape) substance. This judgment is one on which I will rely in the future to illustrate this interaction.

A second point relates to EU law: it is fascinating that disputes coexist at various levels and that the EU incarnation of a case sometimes acquires a life of its own. As soon as new actors become involved in the dispute and provide their perspective, the discussion before the Court can drift apart from the national one and end up in a different place.

As a result, third, the judgment may be more consequential for disputes other than the one at stake in Android Auto. By focusing on the applicability of Bronner instead of the interpretation of Magill/IMS Health, the judgment may not necessarily shed much light on the specifics of the case. On the other hand, it is very likely to pave the way for intervention in other disputes relating to digital platforms.

The first instalment of this series (see here) – and the paper on which it is based (see here) – identify a mismatch between the reality of contemporary enforcement – where the adequate design and implementation of remedies is crucial to its success – and the ‘law in the books’, which assume a world in which the difficulty lies with detecting and establishing an infringement.

The obvious follow-up question is how the ‘law in the books’ (which is another way of saying Regulation 1/2003) can be changed to ensure that remedial intervention is effective.

The first step towards effectiveness is to acknowledge that ‘principles-based remedies’ hinder, rather than facilitate, enforcement. This point was already discussed at some length last time. The new iteration of Regulation 1/2003 should require the European Commission to provide the details of how the infringement is to be brought to an end.

The above point could draw inspiration from the framework that is already followed in relation to commitment decisions. The context is obviously different, but the fact that the obligations are specified in detail under Article 9 provide a clear template on what remedies should look like, in particular in cases that demand regulatory-like action. A quick look at recent decisions (such as this one) shows how granular the specification of commitments can get (as they should, given the concerns they address).

A second step towards effective enforcement would be to introduce a specific framework for the design of the remedies. This aspect is so central to the meaningful application of Articles 101 and 102 TFEU that is cannot be an afterthought in a procedure primarily conceived to establishing an infringement.

Again, this dedicated framework could draw inspiration from the one already applying when a firm proposes commitments to the European Commission.

Another source of inspiration is the Digital Markets Act, if only because this instruments acknowledges that a regulatory obligation is not always the end of the road, and that effective enforcement occasionally requires specification (as well as a formal apparatus allowing for it, such as the various avenues enshrined in Article 8 of the DMA).

The introduction of a formal framework for the specification of remedies would improve the current landscape in two ways (in addition to improving the effectiveness of remedies, that is). Third parties, who are not currently involved in the design of the remedy in any meaningful way, would be allowed to participate in the process.

The move would also provide greater clarity to firms subject to the remedies. By specifying, ex ante and in detail, how an undertaking is to meet its obligations, the state of perpetual uncertainty around compliance (which has become apparent in some recent cases) would be avoided.

The proposed framework is designed to balance these concerns with the requirements of the case law (pursuant to which the Commission cannot require the firm to bring the infringement to an end in a particular way if there are less intrusive means to achieve the same result)

The framework is summarised in the figure below.

The Commission would specify in detail the (structural or behavioural) obligations it plans to impose to bring the infringement effectively to an end, which would then be subject to a market test (along the lines of what is already done under Article 9 of Regulation 1/2003).

Following the market test, the Commission would give the chance to the undertaking subject to the proceedings to present a counterproposal to the (potentially revised) remedies. Only following this step (intended to bring the framework in line with the case law) would the Commission make the final version of the remedies binding upon the undertaking.

The Vodafone/Three merger, cleared last month by the UK Competition and Markets Authority, has been widely discussed, and for good reasons. For a long time, competition agencies insisted on structural remedies as a non-negotiable first-best. Any concerns would need to be addressed from the outset and without the need of subsequent monitoring.

The authorities’ traditional approach reflect the very logic of merger control, which is after all to prevent the harmful effects of lasting changes to market structures. It was therefore inevitable that the sort of behavioural remedies imposed in Vodafone/Three would spark discussions within the community.

Are the remedies in Vodafone/Three even legally consistent with the essence and objectives of the merger control regime? Can effective compliance with a commitment to invest and to cap prices be guaranteed in the first place? What are the consequences for the system if such remedies become the bread-and-butter of merger control and authorities’ resources are increasingly dedicated to monitoring activities?

These are all fascinating questions that should be, and will be, discussed at length. My immediate reaction focused on a different aspect, which is the relationship between competition law and regulation. The outcome of this investigation reflects particularly well the trends towards the ‘blending’ of competition law and regulation, which I addressed in The New EU Competition Law.

A great deal of scholarly energy has been devoted to identifying differences between competition law and regulation and/or to determining whether discrete instruments, such as the Digital Markets Act, are best characterised as the former or the latter.

My impression has long been that these discussions are ultimately immaterial. Formal regulatory instruments often replicate the logic and operation of competition law. It is not infrequent, moreover, that their objectives are aligned with those of antitrust.

Conversely, competition law, precisely because it is so malleable, often mimics regulatory regimes. It can intervene both ex ante and ex post and can be both prescriptive and proscriptive. Remedies, moreover, have become increasingly regulatory-like across both antitrust and merger control.

As a result of these parallel trends, where competition law becomes more like regulation and vice versa, the lines between one and the other become blurred, and agencies are likely to have recourse indistinctly to one or the other (just think of action by the European Commission against Big Tech).

Vodafone/Three is but an example of this trend. From now on, mobile telephony activities in the UK will be regulated in the country not just by means of formal regulatory instruments, but also via the administration of remedies imposed in the context of a merger investigation.

When the EU Regulatory Framework for electronic communications was adopted, it was hoped that, over time, regulation would roll back as markets become effectively competitive and the need for ex ante intervention decreases. Effective competition, it was hoped, would keep prices down and investments up.

The regime did not foresee that markets might become less competitive after reaching ‘peak effective competition’ and that re-regulation might be necessary as a result. If the trend towards consolidation is followed on the other side of the Channel, regulation through merger control might become the new normal across Europe.

What would keep investments up and prices down in such a landscape would not be effective competition, but explicit obligations imposed upon operators. And competition law and regulation would turn into an indistinct blend where it is not easy to tell where one starts and the other finishes.

The edited ‘version of record’ of the paper on Remedies in EU Antitrust Law has now been published and is available for download in Open Access here.

As explained in a previous post, the paper addresses the mismatch between the centrality of remedies in the current landscape, on the one hand; and the ‘law in the books’, on the other. More than ever before, effective enforcement depends on the adequate design and implementation of remedies. However, they remain relatively misunderstood.

One of the main ideas developed at length in the paper is that ‘principles-based’ remedies, which have featured so prominently in some recent landmark cases, are unlikely to deliver on their promises and could sometimes even undermine effective enforcement.

The first, and arguably most important point I make is that a ‘principles-based’ approach to remedies is not in any way mandated by law, as sometimes suggested or implied. It is true that an authority cannot require firms to cease the infringement in a particular way if there is more than one route to achieve compliance. It does not follow from this doctrine, however, that the said authority must refrain from specifying a remedy.

The second idea that the paper advances in this regard is that the alleged advantages of a ‘principles-based approach’ are a mirage. It is often claimed that it makes sense to follow this approach insofar as it dispenses competition authorities with the need to engage in the complex technical assessments that the adequate design and implementation of remedies demands.

The experience of the past decades suggests that, sooner or later, competition authorities are likely to end up dealing with the complex issues this approach was meant to spare. Consider the Microsoft saga, where the Commission, by means of a series non-compliance decisions, had to eventually engage with thorny questions, such as what amounts to a reasonable and non-discriminatory price.

This saga is also useful in that it is a valuable reminder that a ‘principles-based’ approach can affect the effectiveness of remedies and might significantly delay compliance. This fact, alone, would negate any of its supposed advantages.

More recent developments have exposed other drawbacks of ‘principles-based’ remedies. Since they do not specify the way in which the firm is to bring the infringement to an end, the issue of compliance is left permanently in limbo (at least for as long as the authority does not issue a non-compliance decision).

As a result of the built-in uncertanty that the approach creates, the compliance question may linger long after the adoption of the decision. It is submitted that such a reality does not benefit any of the actors in the system.

‘Principles-based’ remedies may not work for third parties benefitting from the decision, as they might find themselves unable to meaningfully evaluate compliance. It may not work for firms subject to the obligation either, as the may never be fully certain that their efforts bring the infringement effectively to an end

In fact, this approach may not be in the interest of competition authorities, which (understandably) may be willing to turn the page on the case and devote their resources to new questions but may find themselves caught in limbo.

The paper submits that ‘principles-based’ remedies may not provide the optimal approach to ensure compliance. It submits, in addition, that the current reality may require some tweaks to Regulation 1/2003 (which is not surprising, given that the sort of complex, regulatory-like remedies that are all the rage today are mostly a novelty and had never played an important role under Regulation 17).

What these tweaks are is something I will address in a future instalment of this series. In the meantime, it would be wonderful to get your comments (on the above or the paper at large).