Enforcement and Procedure
Aims of EU Competition Law
There exist different views regarding the functions of competition law
- It should be enforced against firms whose behaviour harms consumers (majority view)
- Should not be concerned with an outcome (consumer welfare or efficiency) but with
maintaining competitive process
- Can be enforced to attain a wider set of economic and non-economic ambitions (e.g. to
promote national industries, safeguard employment, protect environment)
Economics of Competition
- Economic Perspective: competition law should prohibit commercial practices that
damage the operation of markets
- There are 3 classes of efficiencies (M. de la Mano):
- Allocative efficiency
- Achieved when existing stock of (final and intermediate) goods are allocated
through the price system to those buyers who value them most, in terms of
willingness to pay or willingness to forego other consumption possibilities
- At an allocatively efficient outcome, market prices are equal to real resource
costs of producing and supplying the products.
- Productive (or technical) efficiency
- The question whether any given level of output produced by firm/industry at least
cost or, alternatively whether any given combination of inputs is producing the
maximum possible output
- Depends on existing technology and resource prices
- Achieved when output is produced in plants of optimal scale (or minimum
efficient scale) given relative prices of production inputs.
- Dynamic (or innovation) efficiency
- Concerned with performance of an economy, industry or firm at a given point in
time, for a given technology and level of existing knowledge
- In antitrust economies connected to whether appropriate incentives and ability
exist to increase productivity and engage in innovative activity over time, which
may yield cheaper or better goods or new products that afford consumers more
satisfaction.
, - For example: Escalators manufacturers agree among each other to raise prices
- Raises prices well above costs (allocative inefficiency)
- Reduces demand so that manufacturers are not using their resources optimally
(productive inefficiency)
- Since firms cooperate in a way that is mutually beneficial, the incentive to
innovate is reduced (dynamic inefficiency)
- Harvard School; Chicago School and Post-Chicago School
- Competition authorities have tended to focus on allocative and productive efficiency
- GlaxoSmithKline (Joined Cases C-501, 513 & 515/06P)
- Court confirmed that dynamic efficiencies may be pleaded under Art. 101(3)
TFEU
The Politics of Competition Law
- The present debate in competition law is between those who consider that antitrust law
should only be enforced when one proves a harmful economic output (or at most the
strong likelihood of a harmful economic outcome) and those who believe that it should
be enforced when certain actions weaken the competitive process.
The aims of EU competition policy.
- The EU competition policy took shape because of 5 factors:
1. The neo-liberal economic policies championed by Reagan in the US and
Thatcher in the UK began to affect governments and industries across Europe
and the economic liberalisation called for by the Single European Act
necessitated a stronger role for competition law to ensure that the transformation
from a mixed economy to a free market occurred smoothly.
2. The CJEU ruled on a number of competition law cases and established strong
precedents that consolidated that Commission’s powers since the ‘60s
3. Staff morale at DG Competition was considerably strengthened by the economic
and legal backing that emerged in the ‘80s.
4. The personalities of the competition Commissioners were instrumental in the
strengthening of DG COMP (Peter Sutherland and Sir Leon Brittan were
instrumental in pursuing and extending free market logic, often leading to clashes
between the views espoused by DG COMP and those of the Commission
President (Jacques Delors)
5. In the ‘90s, the Commission obtained powers to regulate mergers in the Union
- These factors placed EU Competition law at the heart of the Union’s transformation to a
neoliberal market economy.
, - Other Commissioners such as Mario Monti, Neelie Kroes and Joaquim Alumni
continued to follow this policy line.
- Although competition law (and indeed, the economic provisions in the Treaty) are there
also for the development of a strong European industry
- A wide range of policy issues affect competition law decisions, and that competition law
objectives might at times take second place to other Community values.
The Impact of the Economic Crisis
- The rhetoric from the Commission is that competition law enforcement is part
of the solution to the economic crisis → firms cannot be allowed to form
cartels as a means of surviving the crisis: some firms should exit the market
if they are not competitive, to allow the more efficient firms to serve
consumers best. Nor can merger control be made more lenient to support
politically important industries.
- The Justification for this stance is as follows:
- In the aftermath of the Great Depression, the Us Government had supported a
relaxation of antitrust laws but an influential study came to the conclusion that
this made matters worse, not better (Cole and Ohanian: New Deal Policies and
the Persistence of the Great Depression)
- The Commission reflected back on its own management of the oil crisis in the
‘70s and concluded that its lax approach to competition law, which included
allowing the formation of the so-called crisis cartels (i.e. agreements between
manufacturers to reduce output collectively so as to ensure that all firms
survived) was a failure because it did not force industries to adjust.
- Although crisis’ normally lead to policy changes, the present crisis has not made an
impression for 5 reasons
1. The policy approach has been to fix the current economic system rather than
rethink it.
2. The policy approach has the backing of major industrial and financial interest
groups, as well as politicians.
3. There is no concrete alternative to the current economic system that has been
identified.
4. The Commission enjoys significant powers and considerable degree of
operational autonomy from MS governments and has been able to take a
proactive approach in acting as a neo-liberal crisis manager, interfering with
national-level crisis management and prescribing ever more vigorous neo-liberal
policies.
- By being strategically selective, it has privileged the interests of organised
Aims of EU Competition Law
There exist different views regarding the functions of competition law
- It should be enforced against firms whose behaviour harms consumers (majority view)
- Should not be concerned with an outcome (consumer welfare or efficiency) but with
maintaining competitive process
- Can be enforced to attain a wider set of economic and non-economic ambitions (e.g. to
promote national industries, safeguard employment, protect environment)
Economics of Competition
- Economic Perspective: competition law should prohibit commercial practices that
damage the operation of markets
- There are 3 classes of efficiencies (M. de la Mano):
- Allocative efficiency
- Achieved when existing stock of (final and intermediate) goods are allocated
through the price system to those buyers who value them most, in terms of
willingness to pay or willingness to forego other consumption possibilities
- At an allocatively efficient outcome, market prices are equal to real resource
costs of producing and supplying the products.
- Productive (or technical) efficiency
- The question whether any given level of output produced by firm/industry at least
cost or, alternatively whether any given combination of inputs is producing the
maximum possible output
- Depends on existing technology and resource prices
- Achieved when output is produced in plants of optimal scale (or minimum
efficient scale) given relative prices of production inputs.
- Dynamic (or innovation) efficiency
- Concerned with performance of an economy, industry or firm at a given point in
time, for a given technology and level of existing knowledge
- In antitrust economies connected to whether appropriate incentives and ability
exist to increase productivity and engage in innovative activity over time, which
may yield cheaper or better goods or new products that afford consumers more
satisfaction.
, - For example: Escalators manufacturers agree among each other to raise prices
- Raises prices well above costs (allocative inefficiency)
- Reduces demand so that manufacturers are not using their resources optimally
(productive inefficiency)
- Since firms cooperate in a way that is mutually beneficial, the incentive to
innovate is reduced (dynamic inefficiency)
- Harvard School; Chicago School and Post-Chicago School
- Competition authorities have tended to focus on allocative and productive efficiency
- GlaxoSmithKline (Joined Cases C-501, 513 & 515/06P)
- Court confirmed that dynamic efficiencies may be pleaded under Art. 101(3)
TFEU
The Politics of Competition Law
- The present debate in competition law is between those who consider that antitrust law
should only be enforced when one proves a harmful economic output (or at most the
strong likelihood of a harmful economic outcome) and those who believe that it should
be enforced when certain actions weaken the competitive process.
The aims of EU competition policy.
- The EU competition policy took shape because of 5 factors:
1. The neo-liberal economic policies championed by Reagan in the US and
Thatcher in the UK began to affect governments and industries across Europe
and the economic liberalisation called for by the Single European Act
necessitated a stronger role for competition law to ensure that the transformation
from a mixed economy to a free market occurred smoothly.
2. The CJEU ruled on a number of competition law cases and established strong
precedents that consolidated that Commission’s powers since the ‘60s
3. Staff morale at DG Competition was considerably strengthened by the economic
and legal backing that emerged in the ‘80s.
4. The personalities of the competition Commissioners were instrumental in the
strengthening of DG COMP (Peter Sutherland and Sir Leon Brittan were
instrumental in pursuing and extending free market logic, often leading to clashes
between the views espoused by DG COMP and those of the Commission
President (Jacques Delors)
5. In the ‘90s, the Commission obtained powers to regulate mergers in the Union
- These factors placed EU Competition law at the heart of the Union’s transformation to a
neoliberal market economy.
, - Other Commissioners such as Mario Monti, Neelie Kroes and Joaquim Alumni
continued to follow this policy line.
- Although competition law (and indeed, the economic provisions in the Treaty) are there
also for the development of a strong European industry
- A wide range of policy issues affect competition law decisions, and that competition law
objectives might at times take second place to other Community values.
The Impact of the Economic Crisis
- The rhetoric from the Commission is that competition law enforcement is part
of the solution to the economic crisis → firms cannot be allowed to form
cartels as a means of surviving the crisis: some firms should exit the market
if they are not competitive, to allow the more efficient firms to serve
consumers best. Nor can merger control be made more lenient to support
politically important industries.
- The Justification for this stance is as follows:
- In the aftermath of the Great Depression, the Us Government had supported a
relaxation of antitrust laws but an influential study came to the conclusion that
this made matters worse, not better (Cole and Ohanian: New Deal Policies and
the Persistence of the Great Depression)
- The Commission reflected back on its own management of the oil crisis in the
‘70s and concluded that its lax approach to competition law, which included
allowing the formation of the so-called crisis cartels (i.e. agreements between
manufacturers to reduce output collectively so as to ensure that all firms
survived) was a failure because it did not force industries to adjust.
- Although crisis’ normally lead to policy changes, the present crisis has not made an
impression for 5 reasons
1. The policy approach has been to fix the current economic system rather than
rethink it.
2. The policy approach has the backing of major industrial and financial interest
groups, as well as politicians.
3. There is no concrete alternative to the current economic system that has been
identified.
4. The Commission enjoys significant powers and considerable degree of
operational autonomy from MS governments and has been able to take a
proactive approach in acting as a neo-liberal crisis manager, interfering with
national-level crisis management and prescribing ever more vigorous neo-liberal
policies.
- By being strategically selective, it has privileged the interests of organised
