The Objectives of EU The Objectives of EU Competition LawCompetition Law

Some ThoughtsSome Thoughtsby Marc van der Woudeby Marc van der WoudeKing’s College, LondonKing’s College, London

13 February 201413 February 2014

Some recent events

Speech Almunia, Competition policy for the post-crisis world, 17 Speech Almunia, Competition policy for the post-crisis world, 17 January 2014:January 2014:

• Defence of policy in context of crisis and de-industrialisationDefence of policy in context of crisis and de-industrialisation

Slovak Banks C/68/12, 7 February 2013:Slovak Banks C/68/12, 7 February 2013:• not for private market operators to enforce public rulesnot for private market operators to enforce public rules

1. garantovaná T-392/09, 12 December 2012:1. garantovaná T-392/09, 12 December 2012:• fines leading to market exitfines leading to market exit

Guidelines on horizontal cooperation 2011:Guidelines on horizontal cooperation 2011:• No examples on environmentNo examples on environment

Objectives of competition lawObjectives of competition law

1. Do objectives matter? 1. Do objectives matter?

2. What does the Treaty say about 2. What does the Treaty say about objectives?objectives?

3. Who determines the objectives?3. Who determines the objectives?

4. Which objectives? 4. Which objectives?

5. Some personal reflections 5. Some personal reflections

Part IPart I

Do objectives matter?Do objectives matter?

Guiding PrincipleGuiding Principle

Guiding principle of interpretation in Guiding principle of interpretation in Toshiba C-17/10, 14.02.2012, para 73: Toshiba C-17/10, 14.02.2012, para 73: ““In interpreting a provision of EU law, it is In interpreting a provision of EU law, it is necessary to consider not only its wording, but necessary to consider not only its wording, but also the context in which it occurs and also the context in which it occurs and the the objectives pursued by the rules of which it is objectives pursued by the rules of which it is partpart ...” ...”

GlaxoSmithKline C-501/06 P, 6.10.2009GlaxoSmithKline C-501/06 P, 6.10.2009

Certain examples of the rulesCertain examples of the rules

Debate on restriction of contractual freedom and impact Debate on restriction of contractual freedom and impact on competition:on competition: Delimits C-231/89Delimits C-231/89 Remia C-42/84Remia C-42/84 Issue of joint ventures Issue of joint ventures

Debate on predatory pricing: France Télécom C-202/07Debate on predatory pricing: France Télécom C-202/07

Efficiency defence in merger control (Section VII, Efficiency defence in merger control (Section VII, Horizontal Guidelines) Horizontal Guidelines)

Public policy issues: Albany C-67/96, Wouters C‑309/99Public policy issues: Albany C-67/96, Wouters C‑309/99

Origin, evolution and projectionOrigin, evolution and projection

Giuliano Amato, Antitrust and the bounds of power, Giuliano Amato, Antitrust and the bounds of power, 1997, page 2: 1997, page 2:

““But I am also writing them [the candid pages] to remind the experts But I am also writing them [the candid pages] to remind the experts of the genetic origins of antitrust law; and especially to bring them of the genetic origins of antitrust law; and especially to bring them to a recognition of the traces of that DNA in the complex technical to a recognition of the traces of that DNA in the complex technical arguments they make choices among in order to resolve dilemmas arguments they make choices among in order to resolve dilemmas facing them. facing them. For the choices they make do not involve those For the choices they make do not involve those arguments alone, but continue to find their roots in the great arguments alone, but continue to find their roots in the great political and philosophical options with which antitrust law still political and philosophical options with which antitrust law still remains bound upremains bound up”.”.

Part IIPart II

What does the Treaty say What does the Treaty say about objectives?about objectives?

From objective to protocolFrom objective to protocol

From priority to addendum?From priority to addendum?

Rome: main aim of Art. 2 and ensuing policies listed in Art. 3Rome: main aim of Art. 2 and ensuing policies listed in Art. 3

Lisbon: Lisbon: two treaties, with principles listed at the beginning of TFEUtwo treaties, with principles listed at the beginning of TFEU competition policy not listed amongst general EU values, unlike competition policy not listed amongst general EU values, unlike

prohibition of discrimination, environmental protection and prohibition of discrimination, environmental protection and animal wellbeinganimal wellbeing

Protocol n° 27: “Protocol n° 27: “Considering that the internal market as set out in Considering that the internal market as set out in Article 3 of the Treaty on the European Union includes a system Article 3 of the Treaty on the European Union includes a system ensuring that competition is not distorted…”ensuring that competition is not distorted…”

Concept of undistorted competition Concept of undistorted competition present in other Treaty provisionspresent in other Treaty provisions

Part III, Title VII: Common Rules on Competition Part III, Title VII: Common Rules on Competition Taxation and Approximation of Laws, Chapter 1, Rules Taxation and Approximation of Laws, Chapter 1, Rules on Competition, two sections. on Competition, two sections.

Part VII, Chapter 2: Art. 113 harmonisation of indirect Part VII, Chapter 2: Art. 113 harmonisation of indirect taxation “taxation “to ensure the establishment and the functioning to ensure the establishment and the functioning of the internal market and to avoid distortion of of the internal market and to avoid distortion of competitioncompetition.”.”

Part VII, Chapter 3 approximation measures within Part VII, Chapter 3 approximation measures within meaning of Chapter 3 (see Art. 116 and 117): “meaning of Chapter 3 (see Art. 116 and 117): “distorting distorting the conditions of competitionthe conditions of competition”.”.

Title VII on economic and Title VII on economic and monetary policymonetary policy

Art. 119 sets out basic principles of the economic and Art. 119 sets out basic principles of the economic and monetary policy of Member States and Union: monetary policy of Member States and Union: coordination, internal market, definition of common coordination, internal market, definition of common objectives “objectives “conducted in accordance with the principle of conducted in accordance with the principle of an open market economy with free competitionan open market economy with free competition” ”

Art. 120 on Art. 120 on nationalnational economic principles: “ economic principles: “the Member the Member States and the Union shall act in accordance with the States and the Union shall act in accordance with the principle of an open principle of an open market economy with free market economy with free competition, favouring an efficient allocation of competition, favouring an efficient allocation of resourcesresources, and in compliance with the principles set out , and in compliance with the principles set out in Article 119in Article 119”.”.

Art. 127 idem as regards monetary policy. Art. 127 idem as regards monetary policy.

Objectives in the Treaty: Objectives in the Treaty: SummarySummary

Competition law is listed as an integral Competition law is listed as an integral part of the internal market project. part of the internal market project.

But what does a system of undistorted But what does a system of undistorted competition mean? competition mean?

Efficient allocation of resources specifically Efficient allocation of resources specifically referred to re referred to re national economic policies national economic policies but not re but not re EU competition rulesEU competition rules..

Part IIIPart III

Who determines the Who determines the objectives?objectives?

Who decides what?Who decides what?

Competition law Competition law competition policy competition policy

Competition policy Competition policy other public policies other public policies

Court (Art. 19 TEU) Court (Art. 19 TEU) Commission (Art. Commission (Art. 101-109 TFEU)101-109 TFEU)

Judicial enforcement Judicial enforcement administrative administrative enforcement enforcement

Abuse Abuse Prohibition system Prohibition system

Court GuidanceCourt Guidance

Commission/Italy C-496/09 (ground 60) protocol does Commission/Italy C-496/09 (ground 60) protocol does not affect fundamental nature of competition rules: not affect fundamental nature of competition rules:

““As to the seriousness of the infringement, the vital nature of the As to the seriousness of the infringement, the vital nature of the Treaty rules on competition must be recalled, in particular those Treaty rules on competition must be recalled, in particular those on State aid, which are the expression of one of the essential on State aid, which are the expression of one of the essential tasks with which the European Union is entrusted. At the time of tasks with which the European Union is entrusted. At the time of the Court’s assessment of the appropriateness and the amount the Court’s assessment of the appropriateness and the amount of the present penalty payment, that vital nature is apparent from of the present penalty payment, that vital nature is apparent from Article 3(3) TEU, namely the establishment of an internal market, Article 3(3) TEU, namely the establishment of an internal market, and from Protocol No 27 on the internal market and competition, and from Protocol No 27 on the internal market and competition, which forms an integral part of the Treaties in accordance with which forms an integral part of the Treaties in accordance with Article 51 TEU, and states that the internal market includes a Article 51 TEU, and states that the internal market includes a system ensuring that competition is not distorted”system ensuring that competition is not distorted”

See also Telia C-52/09See also Telia C-52/09

Academic EnvironmentAcademic Environment

Freiburg: price taking and market entryFreiburg: price taking and market entry

Harvard: structural approach Harvard: structural approach

Austria: the time factor Austria: the time factor

Chicago: price theory and efficiency Chicago: price theory and efficiency

What next? Toulouse, Israel?What next? Toulouse, Israel?

Economic environmentEconomic environment

Economic CyclesEconomic Cycles EU IntegrationEU Integration

1955-19701955-1970 The miracle still at workThe miracle still at work Customs union and Customs union and empty chairempty chair

1970-19901970-1990 Stagflation and restructuringStagflation and restructuring First enlargements and First enlargements and money issuemoney issue

1990-20081990-2008 Opening up marketsOpening up markets The internal market and The internal market and € at work€ at work

2008-20152008-2015 Crisis and recessionCrisis and recession Unwanted cooperationUnwanted cooperation

A number of factorsA number of factors

Plurality of actorsPlurality of actors

Role of law and economicsRole of law and economics

Evolving economic insight and thinkingEvolving economic insight and thinking

Changing market conditions Changing market conditions

Part IVPart IV

Which objectives?Which objectives?

The CouncilThe Council

From Reg. 17 to Reg 1/2003: from exemptions From Reg. 17 to Reg 1/2003: from exemptions to hard core restrictionsto hard core restrictions

Reg. 4064/89: “Reg. 4064/89: “..reorganisations are to be ..reorganisations are to be welcomed to the extent that they are in line with welcomed to the extent that they are in line with the requirements of dynamic competition and the requirements of dynamic competition and capable of increasing the competitiveness of capable of increasing the competitiveness of European industry, improving the conditions of European industry, improving the conditions of growth and raising the standard of living in the growth and raising the standard of living in the Community.”Community.”

The Commission (I)The Commission (I)

Aspirin approach in the Comp. reports: Aspirin approach in the Comp. reports: 70s: the internal market and (global) 70s: the internal market and (global)

competitivenesscompetitiveness 80s: competitiveness and the competitive 80s: competitiveness and the competitive

processprocess 90s: internal market and appearance of 90s: internal market and appearance of

consumer welfareconsumer welfare >2000: maintenance of competitive market >2000: maintenance of competitive market

and single marketand single market

The Commission (II)The Commission (II)

De Minimis notice: market share thresholds & De Minimis notice: market share thresholds & favourable view on SMEfavourable view on SME

Vertical restraints guidelines (2000): consumer Vertical restraints guidelines (2000): consumer welfare primary objective and market integration welfare primary objective and market integration as additional goal (para 7)as additional goal (para 7)

Technology transfer guidelines (2004): “Technology transfer guidelines (2004): “tthe aim he aim of Article 81 as a whole is to protect competition of Article 81 as a whole is to protect competition on the market with a view on the market with a view to promoting to promoting consumer welfare and an efficient allocation of consumer welfare and an efficient allocation of resourcesresources..” ” (para 5)(para 5)

The Commission: MergersThe Commission: Mergers

Horizontal mergers guidelines (2004): Horizontal mergers guidelines (2004):

““Effective competition brings benefits to consumers, such as low Effective competition brings benefits to consumers, such as low prices, high quality products, a wide selection of goods and prices, high quality products, a wide selection of goods and services, and innovation. Through its control of mergers, the services, and innovation. Through its control of mergers, the Commission prevents mergers that would be likely to deprive Commission prevents mergers that would be likely to deprive customers of these benefits by significantly increasing the market customers of these benefits by significantly increasing the market power of firmspower of firms.” (para 8).” (para 8)

Non horizontal merger guidelines (2008): Non horizontal merger guidelines (2008):

““Consequently, the fact that a merger affects competitors is not in Consequently, the fact that a merger affects competitors is not in itself a problem. It is the impact on effective competition that itself a problem. It is the impact on effective competition that matters, not the mere impact on competitors at some level of the matters, not the mere impact on competitors at some level of the supply chain. In particular, the fact that rivals may be harmed supply chain. In particular, the fact that rivals may be harmed because a merger creates efficiencies cannot in itself give rise to because a merger creates efficiencies cannot in itself give rise to competition concernscompetition concerns.” (para 16).” (para 16)

The Commission: Art. 102The Commission: Art. 102

Article 102 guidelines on exclusionary practicesArticle 102 guidelines on exclusionary practices::

““Article 82 is the legal basis for a crucial component of competition Article 82 is the legal basis for a crucial component of competition policy and its effective enforcement helps markets to work better policy and its effective enforcement helps markets to work better for the benefit of businesses and consumers. This is particularly for the benefit of businesses and consumers. This is particularly important in the context of the wider objective of achieving an important in the context of the wider objective of achieving an integrated internal marketintegrated internal market.” (para 1).” (para 1)

““In doing so the Commission is mindful that In doing so the Commission is mindful that what really matters is what really matters is protecting an effective competitive process and not simply protecting an effective competitive process and not simply protecting competitorsprotecting competitors. This may well mean that competitors who . This may well mean that competitors who deliver less to consumers in terms of price, choice, quality and deliver less to consumers in terms of price, choice, quality and innovation will leave the marketinnovation will leave the market.” (para 6).” (para 6)

Findings on Commission policyFindings on Commission policy

Aspirin view of competition policy in reports and public Aspirin view of competition policy in reports and public speechesspeeches

Difference between public statements and technical Difference between public statements and technical documents; in the latter clear choice for consumer documents; in the latter clear choice for consumer welfare as prime objectivewelfare as prime objective

101(3) gradually reduced to efficiencies 101(3) gradually reduced to efficiencies

Favourable view on SMEs Favourable view on SMEs

Two recurring themes: global competitiveness and the Two recurring themes: global competitiveness and the internal market as a means to ensure that positioninternal market as a means to ensure that position

The Court: Founding YearsThe Court: Founding Years

Grundig & Consten 56 & 58/64: market integrationGrundig & Consten 56 & 58/64: market integration

Contintental Can 6/72 (and Zoja 6 & 7/73): structure of Contintental Can 6/72 (and Zoja 6 & 7/73): structure of competition competition “…not only aimed at practices which may “…not only aimed at practices which may cause damage to consumers directly, but also those cause damage to consumers directly, but also those which are detrimental to them through their impact on which are detrimental to them through their impact on effective competition…”effective competition…”

Metro 27/76, workable competitionMetro 27/76, workable competition

Turning competition into a constitutional norm: 3f, 5 and Turning competition into a constitutional norm: 3f, 5 and 85/86, GVL, 7/8285/86, GVL, 7/82

The Court: Market YearsThe Court: Market Years

Opening up specific sectors to competition

Limits of formalism and the notification system: Nungesser 258/78, Coditel 262/81, Pronuptia 161/84, Delimitis C-234/89

Impact on merger control (Airtours, T-342/99)

Controlling a revived Commission (cartels, 102 TFEU)

Balancing competition with other interests (Wouters C-309/99)

The Court: stare decisis The Court: stare decisis GSK C-501/06 GSK C-501/06

““With respect to the [CFI’s] statement that, while it is accepted that With respect to the [CFI’s] statement that, while it is accepted that an agreement intended to limit parallel trade must in principle be an agreement intended to limit parallel trade must in principle be considered to have as its object the restriction of competition, that considered to have as its object the restriction of competition, that applies in so far as it may be presumed to deprive final consumers applies in so far as it may be presumed to deprive final consumers of the advantages of effective competition in terms of supply or of the advantages of effective competition in terms of supply or price, the Court notes that neither the wording of Article 81(1) EC price, the Court notes that neither the wording of Article 81(1) EC nor the case-law lend support to such a position.nor the case-law lend support to such a position.” (para 62)” (para 62)

“…“…Article 81 EC aims to protect Article 81 EC aims to protect not only the interests of not only the interests of competitors or of consumers, but also the structure of the competitors or of consumers, but also the structure of the market and, in so doing, competition as such.market and, in so doing, competition as such. Consequently, for Consequently, for a finding that an agreement has an anti-competitive object, a finding that an agreement has an anti-competitive object, it is not it is not necessary that final consumers be deprived of the advantages necessary that final consumers be deprived of the advantages of effective competition in terms of supply or priceof effective competition in terms of supply or price …” …” (para 63)(para 63)

The Court: Stare decisisT-Mobile, C-8/08

“With regard to the assessment as to whether a concerted practice is anti‑competitive, close regard must be paid in particular to the objectives which it is intended to attain and to its economic and legal context.” (para 27) “...in order for a concerted practice to be regarded as having an anti‑competitive object, it is sufficient that it has the potential to have a negative impact on competition.” (para 31)“... Article 81 EC, like the other competition rules of the Treaty, is designed to protect not only the immediate interests of individual competitors or consumers but also to protect the structure of the market and thus competition as such.” (para 38)

The Court: The Court: Post Danmark C‑209/10Post Danmark C‑209/10

““Thus, not every exclusionary effect is necessarily detrimental to Thus, not every exclusionary effect is necessarily detrimental to competition (…). competition (…). Competition on the merits Competition on the merits may, by definition, may, by definition, lead to the departure from the market or the marginalisation of lead to the departure from the market or the marginalisation of competitors that are less efficient and so less attractive to competitors that are less efficient and so less attractive to consumers from the point of view of, among other things, price, consumers from the point of view of, among other things, price, choice, quality or innovation.choice, quality or innovation.” (para 22)” (para 22)

“…“…Article 82 EC applies, in particular, to the conduct of a dominant Article 82 EC applies, in particular, to the conduct of a dominant undertaking that, undertaking that, through recourse to methods different from through recourse to methods different from those governing normal competition on the basis of the those governing normal competition on the basis of the performance of commercial operatorsperformance of commercial operators, has the effect, to the , has the effect, to the detriment of consumers, of hindering the maintenance of the degree detriment of consumers, of hindering the maintenance of the degree of competition existing in the market or the growth of that of competition existing in the market or the growth of that competition.competition.” (para 24)” (para 24)

Findings on Court’s positionFindings on Court’s position

Plurality of objectives: Plurality of objectives: market integration market integration protecting the structure of competitionprotecting the structure of competition

Structure of competition: Structure of competition: primary consideration rather than consumer welfare primary consideration rather than consumer welfare competition as a process with an intrinsic normative value competition as a process with an intrinsic normative value constitutional componentconstitutional component

Part VPart V

Some personal reflectionsSome personal reflections

Defining and redefining the Defining and redefining the objectivesobjectives

Competition rules embedded in Treaty system: Competition rules embedded in Treaty system: obligation to ensure consistency and role of obligation to ensure consistency and role of

CommissionCommission not surprising that system pursues multiple not surprising that system pursues multiple

objectives objectives

Internal market is main objective, especially Internal market is main objective, especially when related to the concern of ensuring global when related to the concern of ensuring global competitiveness:competitiveness: Commission’s attempt to focus on consumer Commission’s attempt to focus on consumer

welfare in last decade welfare in last decade GSK case reminds GC of the foundationsGSK case reminds GC of the foundations

Defining and redefining the Defining and redefining the objectivesobjectives

Within internal market, rules must protect the Within internal market, rules must protect the structure of competition:structure of competition: Effective or workable competitionEffective or workable competition Protecting competition can sometimes imply the Protecting competition can sometimes imply the

protection of competitors protection of competitors Role of SMEs Role of SMEs

Constitutional and normative dimension of the rules Constitutional and normative dimension of the rules ((OrdnungspolitikOrdnungspolitik?):?): Applicable to States Applicable to States Competition on the merits Competition on the merits Unfair trading conditionsUnfair trading conditions No discrimination by nationality No discrimination by nationality

Defining and redefining the Defining and redefining the objectivesobjectives

What about more economic approach? Economics provide analytical tools (Airtours,

Post Denmark) Economic thinking influences the process

(from Eucken to Kahneman) Economic theory not value-free

Welfare analysis: what welfare? Chicago School and Ayn Rand

Micro and macro-economics e.g. implicit state guarantees (RJB Mining)

Defining and redefining the Defining and redefining the objectivesobjectives

What about effects-based approach? Discussion on objectives of rules is related to,

but does not correspond to object/effect debate

Always need to take into account economic and legal context which differs from one sector to another

Changing geopolitical conditions Jurisdiction and imperium

Concluding remarksConcluding remarks

Objectives are important: they determine the orientation Objectives are important: they determine the orientation of the law of the law

Plurality of objectives: Plurality of objectives: a system of undistorted competition is one of them a system of undistorted competition is one of them internal market objectives internal market objectives reconciled with other objectives reconciled with other objectives

Evolution in time and influenced by numerous factorsEvolution in time and influenced by numerous factors

NEVER BE TOO DOCTRINAL !