Pieter Van Cleynenbreugel
This chapter identifies and distinguishes four different types of scholarship and policymaking on the relationship between competition law and innovation. Scholarship varies to the extent that it considers innovation to be an exogenous or external value to the competition law protection framework and conversely an endogenous or internal value. In addition, different scholars frame innovation either as a positive or a negative value that needs to be addressed by (competition) law. Distinguishing those different kinds of scholarship, the chapter offers a framework in which the different chapters throughout the volume can be understood better.
Many mergers that now come before competition agencies raise questions about their effects on innovation instead of, or in addition to, standard antitrust concerns about prices and quantities of existing products. However, economic analysis of questions about innovation, and analysis of the effectiveness of competition policy directed at innovation, are less well informed and developed. This chapter analyzes new sources of data and other information about mergers and merger control in innovation-based sectors of the economy. The intent is to assist in developing good policy toward mergers in such industries by exploiting existing evidence about the effects of innovation-driven mergers and any trade-offs against standard concerns. The chapter first reports on a comprehensive analysis of known effects of actual mergers on innovation. This information would be derived from the growing number of so-called merger retrospectives – carefully controlled economic studies of the outcomes of mergers (mostly in the US). Next, the chapter develops and analyzes information about the policy responses of the antitrust agencies toward these same innovation-based mergers. This will cast light on the further questions of whether the agencies are successful in identifying mergers that adversely affect innovation, what kind of actions and remedies they employ in these cases, and whether the remedies prevent harms with respect to innovation. Finally, the chapter examines the US pharmaceutical sector, which is an important innovation-based industry that is being transformed by numerous recent mergers. Drawing on new information on approximately 25 mergers in the US industry since 2000, the chapter addresses in greater detail questions about the effects of mergers and the nature and effectiveness of policy responses in this key industry, before concluding with some observations about the trade-offs between innovation objectives and standard considerations in merger policy.
Innovation is key for dynamic efficiency and one of the best recipes to increase long-term businesses’ profits and, at the same time, enhance consumer welfare. Modern high-technology markets offer a perfect account of the importance of innovation for business success: either firms keep apace innovating, or rivals will overcome them and they will be left aside by consumers. History shows many examples of firms that have failed to sustain the innovation game and have faded away. At the same time it also demonstrates how many successful businesses have gained a powerful position in the market in a very short period of time by offering good innovative products or services to consumers at competitive prices. Nevertheless, by being successful, firms have attained a dominant position in the market and that may have meaningful implications from the perspective of antitrust or competition law. In that situation, the experience in many countries shows that innovation decisions by dominant market players can be second-guessed by competition authorities in search of anticompetitive behavior. This chapter assesses the limits and dangers competition law enforcers face in their investigations and sanctioning antitrust proceedings in the assessment of anticompetitive unilateral conduct by innovating firms.
A considerable share of the unilateral practices that have attracted antitrust enforcer attention in the EU and US has only minor exclusionary aspects. Instead, concerns about innovation and consumer welfare being harmed appear to arise significantly under other theories of harm, such as distortion of rewards for innovation. When concerns based on exclusion from the market are absent or do not meet the general standards for exclusionary conduct (e.g. exclusionary abuses or monopolization), practices need to be addressed using other methods (e.g. as forms of exploitative abuses or unfair methods of competition). Examples of reliance on unfairness powers to address innovation concerns include investigations into alleged abuses of standards-essential patents and grant-backs, or cross-licensing imposed on licensees. Some investigations into internet platforms (e.g. Google investigations in the EU and US), essentially appear to concern alleged unfairness of conditions imposed on other firms or consumer deception, rather than pure theories of exclusion. While allowing certain potentially problematic practices beyond exclusionary conduct to be remedied, the exercise of such unfairness powers raises questions about the identity, limits and general standards of antitrust. This chapter examines the theories exploring which innovation and ultimately consumer welfare may be harmed absent exclusion, and the antitrust standards under which such concerns could be addressed in a way amenable to innovation and consumer welfare.
As the advancement of digital technologies dramatically reduced the costs for processing data, a variety of companies seized the opportunity to provide personalized products or services, by identifying relevant consumer characteristics that enable a better matching to the actual or likely needs of their users. The business models generated by the acceptance of this premise tend to reward actors with greater capacity to collect, retain and analyze those data, thereby affecting the structure and the dynamics of competition in the market. In this context, where user data constitute valuable inputs for the attainment of efficiencies, EU competition and data protection law are important tools to ensure that undertakings with exclusive access to strategic data sets do not abuse their privileged position to the detriment of consumers. However, the difference in the operation of these instruments is significant when it comes to the evaluation of the efficiencies claimed by the undertakings processing those data sets. In particular, competition law identifies specific types of (economic) efficiencies that can be used to outweigh anticompetitive effects, while imposing stringent conditions for such trade-offs to occur. In contrast, data protection law relies on the notion of “legitimate interest”, which implies no judgment on the type of interest pursued by the controller, so long as that interest is acceptable (i.e. legal) under applicable law. Likewise, while in both cases the legality depends on a balancing test, the inquiry has a substantially different focus: in competition law, the balancing test is based on a counterfactual of the competitive process, which refers to the general market conditions in the absence of the conduct. In data protection law, the balancing revolves around the fulfillment of the reasonable expectations of the data subject, which depend on the individualistic benchmark of his/her relationship with the data controller. An in-depth explanation of these differences exposes two contrasting approaches to the incorporation of innovation into legal analysis, with important consequences for competition enforcement. This chapter opposes those approaches and substantiates the problematic effects that it could have on innovation. At the same time, recognizing that the fundamental right to data protection should be taken into account by competition enforcers in their action, it proposes to confine those considerations within the notion of “objective justification” (both in the context of articles 101 and 102 TFEU).
It is undisputed that the principle of competition is applicable in the healthcare sector. This sector, however, comprises some of the most highly regulated areas: besides the pharmaceutical sector, which is characterised by strict market authorisation procedures for pharmaceutical products and cost control, health insurance companies, hospitals and care facilities, medical professions, medical practioners’ associations and pharmacies are highly regulated by national laws. In all Member States of the European Union (EU) national healthcare systems are an important economic sector, which is characterised by constantly increasing costs due to demographic change and longer life spans, increasing demand and technological progress due to new treatment options and pharmaceutical products that are generally protected by patents and data exclusivity. This chapter discusses the question when and to what extent competition rules apply to the healthcare system. It leaves the pharmaceutical sector aside and focuses on health insurances, hospitals and other care facilities as well as medical professions and medical practitioners´ associations as examples of regulated areas of healthcare that are influenced by public policy objectives such as the principle of solidarity and other social principles. The chapter addresses the following questions: Why is the importance of competition law increasing for healthcare markets? To what extent does competition law apply in the healthcare sector? Can public policy goals justify restrictions or distortion of competition? What characterises the relationship between competition law that is mainly driven by EU law and is substantially harmonised in the EU and the national healthcare laws of the Member States, which are not harmonised? Based on these questions the chapter begins with an overview of the health protection and the healthcare sector in the EU legal system and discusses the question why healthcare systems are under an increasing exposure to competition law. It then addresses the applicability of competition law in the healthcare sector by analysing the question whether entities in that sector are considered as undertakings in the sense of competition law. If competition law applies, the next question is whether there are restrictions of competition in the healthcare sector. Subsequently the relationship between competition law as harmonised EU law and the healthcare laws that are not harmonised national laws and embedded in the national legal system of the Member States are analysed. Finally, conclusions are drawn.
Shuya Hayashi, Kunlin Wu and Benjawan Tangsatapornpan
Information distributed and processed on information and communication technology (ICT) networks continues to expand and diversify as a result of the evolution and widespread use of mobile devices and the progress of Internet of Things (IoT) technologies – a robust network of devices embedded with electronics, software and sensors that enable them to exchange and analyse data. In light of the quantitative and qualitative expansion of information use, many advanced research projects have been undertaken for the purpose of understanding how to extract the value of data with big data analytics and artificial intelligence (AI)-based technologies. The advancement of AI networks however creates new problems from a competition law point of view relating directly to the large data concentration and retention possibilities that AI networks generate. The purpose of this chapter is to address how AI network developments and innovations are likely to run into competition law concerns including the nature of the pressure created by the data collection potential of AI networks, the manner in which the AI network and competition ecosystem interact with each other in their development process and whether this interaction leads to competition law concerns. The chapter concludes with proposals for possible strategies.