More on AG Ruiz-Jarabo Colomer
“1. Dans les premiers temps de l’État-providence, certains domaines économiques ont été soustraits à la logique du marché afin de réduire l’écart entre «espace vital dominé» et «espace vital effectif».(2) Au nom de valeurs qui n’étaient pas strictement économiques et qui sont consacrées dans la notion juridique continentale classique de service public, l’intervention de l’État a été intensifiée dans certains domaines, des monopoles ont été créés et la réglementation a été renforcée.
2. À partir de l’Acte unique européen, qui a érigé «sur l’autel des idées politiques» une nouvelle idole, la concurrence, le service public est devenu un obstacle à surmonter en vue d’une libéralisation devenue source de toutes les espérances.(3)
3. L’ouverture du marché est la première étape de cette politique, mais l’élimination des barrières laisse subsister des besoins que le marché ne peut satisfaire à lui seul, d’où l’intervention publique, sous forme de «services d’intérêt général» et d’«obligations de service public», que les autorités imposent aux entreprises des secteurs libéralisés pour sauvegarder des intérêts publics dont la satisfaction est impérative et ne peut donc être laissée au libre jeu des forces du marché.
4. Le grand défi du droit économique actuel réside dans la délimitation de ces interventions publiques. À ce jour, la question ne s’est posée que par rapport à l’existence de droits exclusifs ou au financement des services en question, mais rarement à propos des obligations de service public, qui font précisément l’objet des questions préjudicielles posées en l’espèce“.
“Born 1949; Judge; Member of the Consejo General del Poder Judicial (General Council of the Judiciary); Professor; Head of the Private Office of the President of the Consejo General del Poder Judicial; ad hoc Judge at the European Court of Human Rights; Judge at the Tribunal Supremo (Supreme Court) from 1996; Advocate General at the Court of Justice since 19 January 1995“.
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10,000 Visits
We officially launched this blog on 9 September 2009. In a little more than 2 months, we got 10,000 visits.
Thanks to all of you for reading us.
Nicolas and Alfonso
Why Law Matters – Evidence from PepsiCo’s Secretarial Failures
Law has become a truly important aspect of firms’ business strategies (apologies for stating the obvious but similarly to poor good antitrust papers, an attractive post must start with a sweeping strong statement).
Yet, in the view of a significant share of firm’s personal, legal matters remain often perceived as secondarily important, “support”, matters as compared to finance, marketing, etc. A recent story shows that it is crucial to raise personal awareness to the fact that legal matters/risks are almost equally as important as other “core business” issues. As reported by Reuters recently:
A Wisconsin judge has ordered PepsiCo Inc to pay $1.26 billion to two men who said it stole their idea to sell purified water after a secretary mislaid a document alerting the world’s No. 2 soft drink maker the lawsuit existed.
It is reported that the sum of $1.26 billion represents 20% (!) of PepsiCo’s average yearly profit (BTW: an amount which is in the range of the fines now imposed by the EC antitrust authorities). It is also reported that the secretary was too busy preparing a board meeting, of a supposedly higher importance…
For more on the fact that firms’ legal performance (in terms of compliance processes, litigation strategy, etc.) may influence their market competitiveness, see the innovative research carried out by Christophe Roquilly and Christophe Collard from LegalEDHEC as well as a book published under the direction of Antoine Masson earlier in the year.
42nd Lunch Talk of the GCLC – 26 November 2009
The 42nd Lunch Talk on Recent trends in the Commission’s Review of Airline Mergers will take place on 26 November 2009. The speakers: Daniel Boeshertz from DG COMP and Sven Voelcker from WilmerHale. Please see here for registration form.
Rarities – Collective Dominance – EMC/European Cement Producers Decision
Not unlike excessive or discriminatory pricing claims, complainants purporting to lodge allegations of abuse of collective dominance face a tough job to convince the Commission to start proceedings.
In a 2005 case that went largely unnoticed (the EMC/European Cement Producers Decision), the Commission held that mere allegations that some firms belong to an association of undertaking and participate to meetings do not, in and of themselves, establish the existence of “links” within the meaning of the traditional collective dominance case-law (CMB, TACA, and other cases).
“§120: EMC failed to provide substantiated evidence relating to the circumstances in which the Portland cement producers collectively hold a dominant position. Indeed, EMC has not given any indication of the existence of any link or factors which give raise to a connection between the European cement producers. The mere fact that Portland cement producers are members of Cembureau and that their representatives take part in meetings of the Technical Committee of CEN is not sufficient in order to prove the existence of a collective dominant position”
Ҥ44: In the case of collective dominance the undertakings concerned must, from an economic point of view, present themselves or act together on a particular market as a collective entity.
§45: In order to establish the existence of such a collective entity on the market, it is necessary to examine the factors that give rise to a connection between the undertakings concerned. Such factors may flow from the nature and terms of an agreement between the undertakings in question or from the way in which it is implemented, provided that the agreement leads the undertakings in question to present themselves or act together as a collective entity. This may, for instance, be the case if undertakings have concluded cooperation agreements that lead them to coordinate their conduct on the market. It may also be the case if ownership interests and other links in law lead the undertakings concerned to co-ordinate.
The key explanatory factor for this is arguably that the Commission does not want to uphold Article 82 EC allegations as a surrogate for unproven cartel behaviour. In this case, the parties were primarily seeking to establish an Article 81 EC violation and, only ancillarily, had invoked Article 82 EC.
This decision should thus be interpreted as another illustration of the Commission’s reluctance to act upon abuse of collective dominance complaints (to be read also in conjunction with the Laurent Piau case and the Commission’s Guidance Communication on Article 82 EC which leaves collective dominance outside of its enforcement priorities).
(Wikipedia Image. Possibly subject to copyrights. Source here)
Predictably Irrational – Behavioral Economics and Competition Law
I’m currently reading Predictably Irrational, an extremely interesting and thought provoking book on behavioral economics. It challenges traditional assumptions regarding, amongst others, price theory and rational profit maximizing behavior, precisely the tenets of economic thinking that underpin competition law’s design and application.
The subject of the possible uses of behavioral economics for competition law purposes remains largely unexplored, even if now seems to be on the rise. Nevertheless, the controversy over the validity of rational choice theories is by no means new. Challenges to such theories have been rebutted in the past, sometimes brilliantly and even humoristically, by some of the most prominent antitrust scholars:
Skimming through ‘The Antitrust Paradox‘ I came across Bork’s dismissal of the objection that business are not purely, or even primarly, rational profit seekers. Bork argues -quoting Friedman- that price theory does not require the assumption of effective profit maximizing behavior, but rather that firms ‘generally behave as if they were engaged in maximization. But, in addition, he has a somehow more interesting argument when he states that:
‘[i]f required I should not hesitate to impute conscious profit maximizing to businessmen -experience with businessmen, and even more, with antitrust lawyers and consulting economists should convince anyone that profit is a goal not only consciously but constantly borne in mind‘.
(There we are, us, poor innocent antitrust professionals, turned into the quintaessential rent seekers….)
This notwithstanding, this book on behavioral econ. certainly has a valid point. Whilst behavioral econ. is ill-suited to replace rational choice theory as the theoretical framework for competition law, this rising discipline can surely contribute to raise our awareness about the existence of unavoidable flaws in traditional analysis.
Moreover, there are surely some direct applications of behavioral economics which could be useful for competition law purposes. Let’s illustrate this through a few examples.
First, behavioral econ. may help identify systematic biases or deviations from rational prescriptions which would aid in determining whether in some instances firms are more or less likely to engage in non-profit maximizing strategies than we generally tend to believe (e.g. predatory pricing when recoupment is unlikely).
Also, some studies aim at explaining why ‘overconfident entrants’ may decide to enter into a given market ignoring unfavorable conditions and high barriers and therefore tipically fail in their attempt (if that were so, then reliance on entry rates to qualify market power should be replaced by the sole study of successful penetration).
Another possible use of behavioral econ. relates to ex post assessment of predictions on the effect of mergers. Competition authorities could increase their efforts to empirically evaluate ex post how accurately economic models used in merger control predict the effects of mergers in order to explore whether systematic deviations might also take place. I understand that US authorities are starting to follow this path (after all, the laxity of the Bush administration in the area of merger control provides for a favorable environment for such exercise), but I am not aware of such developments in other jurisdictions.
Finally, the possible uses of this disciple in the area of competition law must not necessarily be confined to analyzing why businessmen and firms engage in irrational behavior; it would surely be interesting to study when and why competition authorities behave irrationally.
(Image possibly subject to copyrights: see here)
Slides of Today’s GCLC Lunch Talk, and Some Remarks
I attach below the slides presented at today’s lunch talk on State Aid and the Financial Crisis.
Thanks to C. Caffarra, C. Ahlborn, D. Piccinin for their stimulating presentations.
According to a speaker at this event, one of the remedies imposed in the Fortis decision implies something close to a Commission-sponsored retail cartel. On the facts, the point may be valid, but is not that straightforward. The remedy is as follows: “Predatory pricing on the retail deposit market is… prohibited“. This, in essence, seeks to preclude the risk that the otherwise failing bank initiates a price war thanks to tax-payers money, and ends up forcing out healthier firms from the market. On face value, this makes a lot of sense, even though this leads to prohibit under Article 87 EC something that would not be as such prohibited under Article 82 EC, absent dominance.
Now, if I understand correctly, the cartel problem likely originates from the fact that the Commission has also imposed this remedy on other Belgian banks that have benefited from public subsidies (e.g., KBC), as a result of what the remedies might, altogether, have the cumulative effect of chilling competition.
Workshop on Competition Policy and Sector Specific Regulation in the Electricity Sector
The GREDEG-CNRS, OFCE and Gis LARSEN organize this Friday in Nice (France) a high level workshop on competition policy and regulation in the electricity sector. See programme below. Frederic Marty (GREDEG and CNRS) has invited me to talk about collective dominance.
I seize this opportunity to indicate that one my three research projects this year will consist in trying to apply the findings of my Phd on Oligopolies, Joint Dominance and Tacit Collusion in a sector-specific, empirical, fashion. My first target is the energy sector (electricity and gas). My assistant, Norman Neyrinck, and I, are currently drafting a paper on this. I have one or two ideas re. next targets, but it is too early to tell. Stay tuned.
Journée OFCE LARSEN elec market definition
(Image possibly subject to copyrights. Source here)
Lapsus
The Commission’s prosecutorial bias in official writing… I did not immediately notice, but this is undeniably a big, important, mistake.
At § 12 of its Guidance Communication on its enforcement priorities in applying Article 82 to abusive exclusionary conduct by dominant undertakings, the Commission explains the objective methodology that it will follow to assess dominance.
Read carefully:
The assessment of dominance will take into account the competitive structure of the market, and in particular the following factors: • constraints imposed by the existing supplies from, and the position on the market of, actual competitors (the market position of the dominant undertaking and its competitors);
Read again:
The assessment of dominance will take into account the competitive structure of themarket, and in particular the following factors:• constraints imposed by the existing supplies from, and the position on the market of, actual competitors (the market position of the dominant undertaking and its competitors);
In other words, the Commission pretends it will systematically review whether there is dominance, but meanwhile implies that this three stages approach is entirely redundant, because it has already reached this finding. A strong candidate for the 2009 worst antitrust law prize?
Resolution
![MCj03230910000[1]](https://chillingcompetition.com/wp-content/uploads/2009/10/mcj032309100001.gif "MCj03230910000[1]")
Another post related to what happened last week in Vienna. Had no time to report on this before.
As some of you may know, each year, the LIDC adopts resolutions on a competition-related issue. In so doing, the LIDC seeks to call the attention of the decision makers to certain issues of importance for the competition law community.
This year, the LIDC had chosen to deal with the issue of the competition authorities’ discretion in the context of the investigation of competition law proceedings.
Importantly, the LIDC’s resolutions are adopted pursuant to a lenghty, representative, process, which starts very early in the year at the national level: in each member state, groups of competition experts representing not only private practice, but also academics, in-house counsels and national competition officials, appoint a national reporter who is entrusted with the duty to draft a comprehensive national report. Once the national report is approved by the national group, it is sent to an international reporter who attempts to synthetise the data and to identify points of convergence/divergence amongst national jurisdictions. Where there is too much divergence or no common position, the international reporter can make spontaneous proposals on selected issues. The international report is presented at the LIDC annual conference. A large debate takes place between national groups, the international reporter and the General LIDC reporter (the person in charge of all scientific activities in the organization: this year Jean Louis Fourgoux). Eventually, this leads to the adoption of resolutions that are subsequently sent to competition enforcers.
A primer: this year’s resolutions can be found below.
Please note that next year, the conference will take place in September in Bordeaux (France). The topic is resale price maintenance and the exchange of price information through vertical relationships. The International reporter is Elisabeth Legnerfält, from the law firm DELPHI (Sweden). Nice region, nice topic and bright international reporter. A promising event.
