Whose Regulation, Which Competition?
Edited by Hanns Ullrich
Edited by Josef Drexl, Warren S. Grimes, Clifford A. Jones, Rudolph J.R. Peritz and Edward T. Swaine
This chapter explores the impact of ordoliberal thinking on the drafting of the prohibition of ‘abuse’ of a dominant position in the market that was included in the competition rules of the Rome Treaty establishing the European Economic Community as well as on its interpretation by the Commission and the Court of Justice of the European Union (CJEU). It is shown that the ordoliberal school must not be regarded as a set of ideas frozen in its formative period of 1933 to 1950 or 1957 when the ‘Freiburg School’ was established but rather as an approach that has been dynamically developed and refined over the last 75 years (ie over four generations of ordoliberals) up to the present day by integrating important new insights without, however, giving up its core tenets and convictions. It is explained how ordoliberal thinking about the ‘system of undistorted competition’ and the protection of ‘residual competition against exclusionary practices’ has influenced the application of the ‘abuse’ concept in the jurisprudence of the Commission and the CJEU. This approach has come under attack from welfare-economic approaches which emphasize efficiency instead of competition and which have accused the ordoliberal approach of formalism, lack of sufficient economic analysis, preoccupation with fairness, protection of competitors instead of competition, obsession with interventionist regulation, and so on. This chapter demonstrates that all of these characterizations are based on fundamental misunderstandings of what ordoliberal thinking originally meant and what it stands for today.
Over the last years, European competition procedure has seen a shift towards more consensual dispute resolution methods. The most striking example is the so-called commitment procedure. It allows the European Commission to declare binding commitments offered voluntarily by the parties. Its main goal is to significantly shorten the duration of proceedings. As a consequence, the classical target parameters of European competition procedure are complemented by efficiency considerations. This is only justified if the anticipated efficiency gains outweigh the apparent disadvantages a consensual procedure entails. This contribution presents the key findings of a statistical inquiry into the European Commission’s competition law enforcement between 1 May 2004 and 30 April 2014, with a specific focus on the commitment procedure. The analysis provides valuable insight into the European Commission’s enforcement priorities and success. It specifically reveals that the utilization of the commitment procedure has not met the objectives pursued with its introduction.
Pieter Van Cleynenbreugel
The EU and US legal orders rely on presumptions and other rules of evidence permitting to establish, to the requisite legal standard, the presence of anticompetitive abusive behaviour. This chapter seeks to highlight how and when both legal orders rely on such presumptions and other rules of evidence and what impact such differentiated reliance has on the potential for both legal orders to converge on substantive abuse regulation questions. To that extent, it distinguishes and analyses two different categories of rules of evidence (short-cut rules and evidentiary presumptions) present in both legal orders. General policy and case law evolutions allow to infer that both legal systems seemingly attest to a move away from short-cut rules in favour of evidentiary presumptions. In the US, the latter kind of presumptions are also even more limited in scope and scale. Building on that analysis, the chapter subsequently questions to what extent short-cut rules and evidentiary presumptions serve as analytical benchmarks in the quest for a more globally streamlined abuse regulation framework.
Market definition and the calculation of market shares for dominance are two features of competition law that are at the core of many abuse cases. Yet, the concepts – market definition, dominance – have significant weaknesses. Instead of turning away from market definition completely, as is advocated by some scholars, the better way seems to have a more open and evolutionary concept of market definition. Market definition is to be understood as the starting point for setting the scene, gathering economic information. This requires qualitative assessments and awareness for path dependencies and bounded rationality. Such an understanding may solve problems currently associated with market definition in multi-sided markets.
Antonio Robles Martín-Laborda
In European competition law it has been considered that ‘unfair prices’, as it is used in Article 102(a) TFEU, should not only include exclusionary high prices, but also prices which, without reinforcing it, represent a mere exercise of the market power legitimately acquired by the dominant firm. This chapter analyses the case law of the European Court of Justice on these ‘exploitative prices’ and suggests that, given the legal uncertainty of the prohibition, its economic and institutional flaws and the conceptual contradictions that it entails, regulating the prices of monopolists should be done ex ante and left to government or sector-specific regulators. The prohibition of ‘unfair prices’ should be interpreted by competition authorities as referring merely to exclusionary prices.
Luís Silva Morais and Lúcio Tomé Feteira
Together with its undisputed economic relevance, complexity is undoubtedly one of the most salient features of the financial sector. Complexity bequeaths the adoption of a specific regulatory setting, as was the case with the creation of the Banking Union. In fact, deficient and inadequate regulation and supervision of the financial sector – largely due to an insufficient outside perception of risks incurred by financial institutions – coupled with a selective application of competition rules ranked highly amidst the reasons for the 2007–09 financial crisis. Consequently, it would seem that the rethinking of the overall regulatory framework should be complemented by a reflection on the role of antitrust enforcement in the financial sector. This chapter builds upon the latter premise and focuses on a specific type of antitrust intervention – the prohibition of abuse of dominance – and its interaction with the regulation and supervision of the financial (banking) sector. This reflection takes into account the recent evolution of competition rules in the financial sector in order to tentatively sketch a reappraisal of abuse regulation in the financial sector resorting to a notorious example: that of inter-change fees for card-based payment transactions.