ANNUAL PROCEEDINGS OF THE

FORDHAM COMPETITIONLAW INSTITUTEINTERNATIONAL ANTITRUST

LAW & POLICY

This volume contains articles and panel discussions delivered during theThirty-Sixth Annual Fordham Competition Law Institute Conference on

International Antitrust Law & Policy

Editor

Barry E. Hawk

Fordham Competition Law Institute2010

Juris Publishing, Inc.

TABLE OF CONTENTS

Foreword iiiSummary Table of Contents vTable of Contents xiiiWelcome xxv

Chapter 1

OLIGOPOLISTIC MARKET POWER -AN ISRAELI PERSPECTIVE

by

Ronit Kan and Ilan Steiner

I. Introduction 1II. The Market Power Triangle 1III. Revision of Concentration Group Provisions in

Israel's Restrictive Trade Practices Act (RTPA) 6A. Oligopolies in the Context of a Small Island

Economy 6B. Overview of the Proposed Revision 7C. Comments on the Proposed Revision 14

IV. Conclusion 17

Chapter 2

STRIVING FOR THE OPTIMAL BALANCE IN ANTITRUSTENFORCEMENT: SINGLE-FIRM CONDUCT, ANTITRUST REMEDIES

AND PROCEDURAL FAIRNESS

by

Christine A. Varney

I. Introduction: The Legacy of The International

Competition Policy Advisory Committee 19II. In Search of Greater Convergence in Global

Antitrust Enforcement Standards 20A. Single-Firm Conduct 21B. Antitrust Remedies - Fines 24

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III. Conclusion: Towards Greater Transparency andProcedural Fairness 32

Chapter 3

INTERNATIONAL ANTITRUST:RECENT DEVELOPMENTS AND TRENDS

A. Paul Victor, ModeratorBernhard Heitzer

Ronit KanJon LeibowitzPhilip Lowe

Graeme SamuelPhilip J. Weiser

Panel Discussion 35

Chapter 4

ANTITRUST AND STATE AID CONTROL - THE LESSONS LEARNED

by

Neelie Kroes

I. Antitrust Progress 77

II. The Value of State Aid Control 81III. How Does The System Work? 82IV. The Car Industry 83V. Is The System Working? 83

Chapter 5

STATE AIDS AND EU COMPETITION LAW AND POLICY - Q & A

by

Neelie Kroes

Q&A 85

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Chapter 6

EUROPEAN STATE AID POLICY IN SEARCH OF A STANDARD.WHAT IS THE ROLE OF ECONOMIC ANALYSIS?

by

Alberto Heimler

I. Introduction 92II. The EC Policy on State Aid, The Optimal Institutional

Setting and The New Economic Approach 95A. State aid policy and the quality of regulation 98B. Article 87, paragraph 1, and distortions of

competition 100C. The exemption of incompatible State aid 101D. The new economic approach in State aid policy 103

III. Restructuring Aid and the Alitalia Case 105IV. Locational Aid and the Charleroi Case 110V. The Recovery of Unlawful State Aid and the Italian

Digital Decoder Case 114VI. Conclusion 118

Chapter 7

EU AND UK COMPETITION LAWS AND THE FINANCIAL CRISIS.THE PRICE OF AVOIDING SYSTEMIC FAILURE

by

Simon Polito

I. Introduction 121II. EU State Aid Regime and The Financial Crisis 121

A. An Overview of the EU Regime 121B. Pre-October 2008 125C Post October 2008 133

HI. UK Merger Control and The Financial Crisis 152A. An Overview of the UK Regime 152B. Development of the Crisis in the UK Banking Sector 153C Regulatory Decisions Affecting The UK Banking Sector 154D. Banking Sector Reform 162

IV. Conclusions and Reflections 168A. Commission 169B. UK Authorities 170

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Chapter 8

GOVERNMENT AID, ANTITRUST ENFORCEMENT ANDCOMPETITION IN A DISTRESSED ECONOMY

by

James F. Rill

I. Introduction 175II. Direct Financial Aid and Competition 176III. Indirect Aid Through Relaxing Antitrust 178IV. The Call For Expanded Antitrust Initiatives 181V. Conclusion 183

Chapter 9

EUROPEAN STATE AID LAW IN THE FINANCIAL AND ECONOMICCRISIS - HAS THE COMMISSION RISEN TO THE CHALLENGE?

by

Ulrich Soltesz and Christian von Kockritz

I. Introduction 185II. Overview of the General State Aid Framework 187

A. The Rationale for Effective State Aid Policy 187B. The EC State Aid Law Regime 188

III. The Commission's Response to The Financial Crisis 206A. The Financial Crisis: A Serious Challenge

to EC State Aid Law? 206B. The Commission's Response: Art. 87 (3) b) EC 209C. After The Restructuring Communication —

Has The Commission Found the Right Approachfor Applying Art. 87 (3) (b) EC in the Financial Sector? 232

IV. A Side Note: State Aid Control and the "Real Economy"In Times of Crisis 236A. The "Temporary Framework" — Background 236B. Basic Principles 238C. Instruments under the Temporary Framework 239D. Procedural Issues 247E. The Temporary Framework — the right response

to the crisis in the real economy? 248V. Conclusion 249

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Chapter 10

GOVERNMENT AID AND COMPETITION CONDITIONS

by

Bernard Spitz

I. The Situation of The French Insurance IndustryRegarding State Aids 253

II. The Position of the Insurance Industry Vis-A-VisState Aids Granted within the Current Financial Crisis 256

III. Unlike The Banks, The Insurance Industry ReceivedAlmost No State Aids in the Current Financial Crisis,Due to a Fundamental Difference in Nature 258

IV. The Threats of State Aids on Fair Competition in theInsurance Field 259

V. The Monitoring of State Aids by the EU CommissionIn Response to the Fears of the Non-Aided Companies 261

VI. Monitoring Restructuring Aids as Part of Economic Regulation 265

Chapter 11

STATE AIDS AND EU COMPETITION LAW AND POLICY

Frederic Jenny, PresiderSeth Bloom

Alberto HeimlerPhilip LoweSusan BrightJames F. Rill

Ulrich SolteszBernard Spitz

Panel Discussion 267

Chapter 12

DOES GENERIC ENTRY ALWAYS INCREASE CONSUMER WELFARE?

by

Henry Grabowski, Tracy Lewis, Rahul Guha,Zoya Ivanova, Maria Salgado and Sally Woodhouse

I. Introduction 317II. Benefits and Costs of Branded and Generic Drugs 319

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III. The Effects of Generic Entry on Competitionand Consumer Welfare 325A. The Nature of Competition In Pharmaceutical Markets 326B. The Effect of Generic Entry on Brand Competition 327C. The Effect of Generic Entry on Prices 330D. The Effect of Generic Entry on Consumer Welfare 331

IV. Implications For The Analysis Of Generic CompetitionIn Other Markets 333A. Implications For The European Union (EU) 333B. Implications For Biologies 335

V. Conclusion 337

Chapter 13

PARALLEL TRADE IN PHARMACEUTICALS:FIRM RESPONSES AND COMPETITION POLICY

by

Margaret K. Kyle

I. Introduction 339II. Legal Status of Parallel Trade 340

A. Parallel Trade in the European Union 341B. Parallel Trade in the United States 342C. Parallel Trade in Other Major Markets 344

III. Economic Models of Parallel Trade 345IV. Empirical Evidence on the Impact of Parallel Trade 347

A. The EU Experience in Pharmaceuticals 347B. Empirical Evidence in Other Contexts 351

V. Parallel Trade and Competition Policy 352A. Competition Law in the European Union 352B. Competition Law in the United States 355

IV. Conclusion 357

Chapter 14

PATENT SETTLEMENTS AND AUTHORIZED GENERICS -LEGAL AND PRACTICAL ISSUES

by

Caroline B. Manogue

I. Patent Settlements 359II. Authorized Generics 363

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Chapter 15

PRICING IN THE PHARMACEUTICAL INDUSTRY IN SPAIN:AN OVERVIEW OF REGULATORY DEVELOPMENTS AND ITS

IMPLICATIONS UNDER COMPETITION LAW

by

Edurne Navarro Varona and Luis Moscoso del Prado

I. Introduction 367II. The Facts of the Case and the Commission Decision 367III. The CFI Ruling 369IV. The Advocate General's Opinion 371V. The Ruling of the European Court of Justice 373VI. Some Comments on the Glaxo Saga 374

A. Definition of Restrictions By Object andApplication to the Specific Case 375

B. The Distinction Between Restrictions By Objectand By Effects 376

VII. The Spanish Cases 377VIII. Conclusion 382

Chapter 16

THE INTERSECTION BETWEEN EU COMPETITION LAW,THE FREE MOVEMENT OF GOODS AND THE PHARMACEUTICAL

INDUSTRY: SOME OBSERVATIONS ON THE ROLE OF INTENT

by

Anne Nielsen

I. Parallel Trade and Pharmaceutical Products 384II. The Early Cases Before The ECJ: Deciding Whether

The Competition or Free Movement Rules Applied 385III. Accession of New Member States 387IV. Increased Scrutiny Under The Competition Rules 390V. Allegations of Abuse of a Dominant Position 393VI. Astrazeneca 398VII. From Parallel Trade in the Article 81 and 82 EC Contexts

to the AZ Case to the Sector Inquiry 399VIII. The European Commission Sector Inquiry 400IX. Concluding Remarks 403

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Chapter 17

THE APPLICATION OF EUROPEAN COMPETITION LAWTO THE PHARMACEUTICAL SECTOR

SOME PERSONAL THOUGHTS

by

Dr. Dominik Schnichels

I. Introduction 405A. The Commission Inquiry into the Pharmaceutical

Sector 405B. Main Market Features and Trends 407C. Past Enforcement Practice 409D. Scope and Structure of the Article 410

II. Application of Competition Law in the PharmaceuticalSector 411A. Relationship of Intellectual Property Rights (IPRs)

and Competition Law 411B. Market Definition 416C. Patent Settlements 419D. Parallel Trade 430

III. Conclusions 441

Chapter 18

PHARMACEUTICAL INDUSTRY ANDCOMPETITION LAW

Luc Gyselen, PresiderWilliam E. KovacicMargaret K. KyleTracy R. Lewis

Caroline B. ManogueAnne N. Nielsen

Dominik Schnichels

Panel Discussion 443

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Chapter 19

RESALE PRICE MAINTENANCE: EXPLAINING THE CONTROVERSY,AND SMALL STEPS TOWARDS A MORE NUANCED POLICY

by

Matthew Bennett, Amelia Fletcher,Emanuele Giovannetti and David Stallibrass

I. Introduction and Conclusions 497II. Legal and Economic Background: The Root of

Disagreement 499A. Creating legal certainty around the law

on agreements 500B. Comparison with Article 82 502C. Implications for RPM 503

III. Introduction to the Economics of RPM 504A. Efficiency benefits of RPM 504B. Anticompetitive effects of RPM 505C. The dreaded question: How often is RPM

likely to be on balance harmful? 507IV. Small Steps Towards a More Nuanced Policy? 509

A. Ensuring that the presumption of illegalityis truly rebuttable 509

B. The use of screens for prioritising RPM cases 510C. The use of screens within a legal standard 511

V. Conclusions ....512

Chapter 20

RESALE PRICE MAINTENANCE IN THE EU:IN STATU QUO ANTE BELLUM?

by

Eric Gippini-Fournier

I. Introduction ..515II. Resale Price Maintenance: The Pain And The Gain 516

A. Some Reasons Why RPM is a Cause for Concern 516B. Procompetitive claims with regard to RPM 524

III. RPM In The EU: Plus Ca Change, Plus Cest LaMeme Chose? 531A. The importance of the procedural setup 531

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B. The nature of the rule against RPM in theVerticals BER 535

TV. Concluding Thoughts 547

Chapter 21

THE LEEGIN OPPORTUNITY:A REASONABLE MINIMUM RESALE PRICE

MAINTENANCE ENFORCEMENT POLICY IN THE UNITED STATES

by

Tommy Prud'homme

I. Background 553

A. Dr. Miles 553B. Colgate 553C. Beech Nut and Parke Davis 554D. Sylvania 555E. Monsanto 555F. Business Electronics 556G. Kahn 557H. Leegin 557

II. Defining "Agreement": Leegin Cut the Legs fromunder Colgate, Monsanto and Business Electronics 558

III. The Structured Rule of Reason 562IV. Conclusion 564

Chapter 22

RESALE PRICE MAINTENANCE AND ARTICLE 81 EC: DEVELOPINGA MORE SENSIBLE ANALYTICAL APPROACH

by

Andreas P. Reindl

I. Introduction 567II. The Economics-Based Framework for Article 81

Analysis 569A. A Determination That an Agreement "Restricts

Competition" Must Include an Explanation of Howthe Agreement Increases Market Power, Regardlessof Whether the Analysis Focuses on a "Restrictionby Object" or "Restriction by Effect" Analysis 571

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B. Both the "Object" Analysis and the "Effect" Analysisin Article 81(1) Are Evidence Based, Although theFormer Relies More on Empirical Evidence, JudicialExperience and Consistent Economic Theory on theEffects of a Specific Restraint to Support a GeneralRule That the Restraint "Restricts Competition," the Latteron a Fuller Analysis of the Facts of a Specific Case 573

C. Although "Restriction by Object" and "Restriction byEffect" Indicate Two Different Analytical Routes ImposingDifferent Evidentiary Requirements on Plaintiffs, ThereAre No Radical Differences Between Them That SeparateThe Two Into One "Easy/Clear Cut/Legal Certainty" Routeand Another "Difficult/Messy/Unpredictable" Route 574

D. The Fact That Europe Does Not Do a "Rule of Reason"Analysis Is Not an Argument Against an AnalyticalApproach Focusing on The Concept of Market Power 577

III. Identifying Steps Towards an Improved Framework forRPM Analysis Under Article 81 578A. The Economics of RPM 578B. The Commission's Current & Proposed Rules

Concerning RPM 580C. Principles for an Improved Article 81

Analysis of RPM 584D. Competition Authority Prioritization as Alternative 590

IV. Conclusions 591

Chapter 23

ASSESSING THE REASONABLENESS OF THE RULE OF REASON:THE WORLD AFTER LEEGIN

by

Christine Wilson, Bimal Patel and Katrina Robson

I. Introduction • 593II. How Did We Get Here? .....593

A. Dr. Miles 593B. A Gradual Paradigm Shift 595C. Congress Weighs In - Part One 596D. A New Day Arrives - Leegin 597

III. Where We Are 600A. Trends and Key Issues in Lower Courts and

at the Agencies Post-Leegin 600B. Stepping into the Shoes of Plaintiffs 603

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IV. Where Are We Going? 605A. The Spectrum of Possible Standards 605B. A Rising Tide of State Opposition 606C. Congress Weighs In-TheEncore 607D. Finding a Solution 608

Chapter 24

VERTICAL RESTRAINTS, RPM ANDARTICLE 81 ANALYSIS

Andreas Reindl, PresiderAmeilia Fletcher

Eric Gippini FournierEdurne Navarro Varona

Damien NevenTommy Prud'homme

Nils WahlChristine Wilson

Panel Discussion 609