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Antitrust Enforcement in Europe in the Last 25 Years: Developments and Challenges

Abstract

We review all of the main developments that have influenced the way in which antitrust has been enforced in Europe in the last 25 years. We also provide a detailed quantitative description and assessment of the evolution of enforcement in Europe with the use of a unique dataset that is utilized for the first time: all DGCOMP antitrust decisions in the period 1992–2016. Further, we examine and offer explanations as to why there is still significant divergence in the approach to antitrust enforcement between the EU and other mature jurisdictions—particularly in the enforcement of Article 102.

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Notes

  1. In order to identify the annulment rates of DGCOMP’s decisions by appellate courts, we had to trace each decision that was appealed through the judicial appeal process up to the highest court to which appeals can be made—the European Court of Justice (ECJ). This is an aspect of the dataset—as well as its comprehensiveness and period covered—that makes it unique.

  2. This is an area to which the authors have been contributing in recent years; see in particular Katsoulacos (2017), Katsoulacos et al. (2016b) and Katsoulacos and Ulph (2009, 2011, 2015, 2016).

  3. By legal standards we mean the decision rules that are utilized when assessing anti-competitive practices, or the rules about how assessment should be made. Effects-based is the European term for rule-of-reason. For a detailed review of the concepts of legal standards and substantive standards in CL enforcement and their relation, see Katsoulacos (2018a, b) and Katsoulacos et al. (2016a). Below we will follow the convention of describing as “lower” legal standards those that are closer to Per Se and as “higher” standards those that are closer to effects-based. For the tendency of enforcement on Europe to rely on Per Se type standards, see the discussion and references below. See also Kovacic and Shapiro (2000) for a review of the application of economics in a century of antitrust enforcement in the US; see also Gavil et al. (2008), Gual and Mas (2011), and for an early skeptical view Fisher (1989).

  4. The substantive standard is the criterion on the basis of which the competition authority or a court will decide whether or not there is liability or a CL violation. While this is usually assumed to be welfarist (consumer surplus or total welfare), in practice this is often not the case. For example, the substantive standard may be just to “protect the economic freedom of market participants”, or the pursuit of a “system of undistorted competition” (Wils 2014), without obligation to show adverse effects on consumer welfare or efficiency (Rey and Venit 2015).

  5. The authorities seemed to consider that several inefficient firms were always more competitive than fewer more efficient firms and they were more interested in static than dynamic competition; see Korah (2010). The socio-economic and political theory that emanated from Austria and Germany (the Freiburg School)—known as Ordoliberalism—is much richer, though here we associate it just with one of its tenets: the importance of protecting the “competitive process” and preventing the rise of dominant firms/monopolies in market economies.

  6. See Gifford and Kudrle (2015) and Sokol (2017).

  7. A famous recent example is that concerning RPM in the Leegin Creative Leather Products v. PSKS (No. 06-480) case in which the US Supreme Court decided that a Per Se assessment cannot be accepted and a more effects-based approach should be applied.

  8. See the recent decision in Tervita Corp. v. Commissioner of Competition, 2015, Case Number 35314.

  9. Council Regulation (EC) 4064/89—Control of Concentrations, OJ 1990, L257/14 [1990], 4 CMLR 859, CMR 2893, amended by Council Regulation (EC) 1301/97, OJ 1997, L180/1 and replaced by Council Regulation (EC) 139/2004.

  10. OJ 1997, C372/5, [1998] 4 CMLR 177.

  11. Com (96) 721 final 4 CMLR 519. The changing direction in competitive assessment and refocusing on effects on the market and consumer welfare taking into account of efficiency justifications is evident in the writings of one of the leading economists in DGCOMP at the time; see Deacon (1999).

  12. Articles 85 and 86 at that time.

  13. Communication on the application of EC Comp. rules to vertical restraints—follow up to the Green paper on vertical restraints, OJ 1998, C365/3, comments by Economic and Social Committee, OJ 1999, C116/22.

  14. Article 81 at that time.

  15. OJ 1999, L336/21, [2000] 4 CMLR 398.

  16. See Korah (2010) referring to the cases Pronuptia de Paris GmbH v. Pronuptia de Paris Irmgard Schillgalis (161/84), Delimitis (Stergios) v. Henninger Bräu (C-234/89) and European Night Services (ENS) and Other v. Commission (t-374, 375, 384 and 388/94).

  17. OJ 2010, L 102/1.

  18. The application of Regulation 2790/1999 depended only on the supplier’s market share not exceeding 30% (except that in cases of vertical agreements that contain exclusive supply obligations it was the market share of the buyer that had to be calculated). According to the latest Regulation 330/2010, the 30% safe harbor is based on the market shares of both the supplier and the buyer.

  19. Guidelines on Vertical Restraints OJ 2010, C 130/1.

  20. In 2001 the Commission had found that GlaxosmithKline, a major global pharmaceutical company had infringed Art. 101 by requiring Spanish wholesalers to pay a higher price for products that they exported to other Member States than for products that they resold in Spain. However, the GC stated that the mere limitation of trade between Member States does not suffice to make the agreement restrictive by object. In 2009, the judgment of the GC was annulled by the ECJ. According to the ECJ, Art. 101 aims at protecting not only the interests of competitors and consumers but also the structure of the market and the competition as such. The ECJ reasserted the traditional view that agreements that are intended to limit parallel trade have as their object a restriction of competition—regardless of the harm that is suffered by consumers. See Faella (2013) and Witt (2016).

  21. OJ 2000, L304/3, [2001] 4 CMLR 800.

  22. OJ 2000, L304/7, [2001] 4 CMLR 808.

  23. OJ 2010, L335/43.

  24. OJ 2010, L335/36.

  25. OJ 2004, L123/11.

  26. OJ 2014 L 93/17.

  27. These are listed in paragraph 4 of the Regulation 330/2010: They include restrictions on the buyer’s ability to determine its downstream selling price and restrictions on the territory into which it may sell.

  28. OJ 2003, L 1/1.

  29. Articles 81 and 82 at that time.

  30. The rationale was to allow the Commission to focus its resources on enforcing the most serious competition infringements with a cross-border dimension. Another important innovation of regulation 1/2003 was to remove the obligation of notification of agreements that firms implement by considering them justified under Art. 101 (3): the article that sets out the conditions for agreements not to be anticompetitive.

  31. Idem, note 11.

  32. OJ 1996, C207/4.

  33. OJ 2002, C45/3.

  34. OJ2006, C298/11, amended by Notice OJ 2015, C256/1.

  35. Only one application for immunity was granted in the period 1996–2000, which reflects the time lag between applications for immunity and final decisions.

  36. For this case, and on a ‘conservative count’ he finds a total of 33 cases for the period 2001–2015.

  37. http://ec.europa.eu/competition/cartels/statistics/statistics.pdf. Last accessed January 22nd 2018.

  38. Though it is not clear whether this increase in detection is associated with an increase in the rate of cartel formation (i.e., a reduction in deterrence).

  39. Gual et al. (2005).

  40. Speech given at the Fordham international antitrust conference. Commissioner Kroes declared that she was “Convinced that the exercise of market power must be assessed essentially on the basis of its effects in the market …. Art. (102) enforcement should focus on real competition problems: in other words, behavior that has actual or likely restrictive effects on the market, which harm consumers”.

  41. European Commission (2005).

  42. One reason for this delay is probably the fact that these Guidelines may have interfered with prominent judgments, such as those that involved Microsoft and Intel.

  43. At that time the ECJ and the General Court (GC) continued to hand down judgments with a strong ordo-liberal flavor (see Geradin (2010)), such as the British Airways.

  44. Para. 23.

  45. Para. 24.

  46. Para 30.

  47. Geradin (2010).

  48. In British Airways and Michelin II cases the Commission notes that “for the purposes of establishing an infringement of Art. 82 EC, it is not necessary to demonstrate that the abuse in question had a concrete effect on the markets concerned”. The Commission thus appears to say that it does not need to show any evidence of foreclosure, let alone evidence of consumer harm.

  49. Marsden (2010).

  50. Para 19.

  51. When the substantive standard is welfarist, then, as Rey and Venit (2015) note, under an effects-based legal standard the assessment starts with a showing of a distortion of the competitive process; but, in order to assess this distortion and find liability, one “should (also) look at the actual or likely effects of the conduct”, on consumer welfare or efficiency—something that was not done in the Intel case. Though the recent decision on Intel by the ECJ seems to provide some basis for rejuvenating the effects-based approach in Europe, a closer reading does not leave much ground for optimism: Rather than proposing an effects-based approach, the ECJ just objects that the General Court did not apply properly (even) a lower than effects-based legal standard (the truncated effects-based) that relies on a showing of “disadvantaging rivals” (see also below). ECJ EU Press Release No 90/17, 6th September 2017 “Judgment in Case C-4 13/14 P Intel Corporation Inc. v. Commission.

  52. OJ 1998, C9/3.

  53. Ortiz Blanco (2013)

  54. OJ C 2006, 210/2.

  55. Depending on the seriousness of the infringement. For cartels the relevant percentage tends to be in the range of 15–20%.

  56. In deciding whether a company is a repeat offender the Commission takes also into account the antitrust decisions by National CAs.

  57. Forrester (2011).

  58. http://ec.europa.eu/competition/cartels/statistics/statistics.pdf. Last accessed January 22, 2018.

  59. The introduction of the leniency programme and settlement procedures did not reduce the fines that were imposed in cartel cases. This happened because these measures were accompanied by a compensating increase in the level of fines through Fining Guidelines 1998 and 2006; see Wils (2016).

  60. The procedure for commitments is described in the Commission Notice on Best Practices for the conduct of proceedings with respect to Articles 101 and 102 TFEU 2011/C 308/06.

  61. Under Art. 7 of 1/2003.

  62. Regulation 622/2008 OJ L 171/3 amended regulation 773/2004 OJ L123/18 by introducing settlement procedures in cartel cases. Regulation 622/2008 was further amended in 2015 by Regulation 2015/1348 OJ L208/3.

  63. “Other” decisions include reasoned opinions, closure of proceedings, sector enquiries, procedural fines decisions, and decisions that were based on various Commission and Council Regulations.

  64. As was explained in Sect. 2.2 this is the result of the implementation of Block Exemption Regulation for vertical agreements (in 1999) as well as the fact that Regulation 1/2003 decentralised enforcement with respect to vertical agreements to National CAs.

  65. That is, taking into account all appeals to the CFI or GC and the ECJ.

  66. We should clarify that as annulments we count here all of the decisions that were reversed by the CFI (GC) or the ECJ for substantive—rather than for procedural—reasons.

  67. Of the 24 (= 21 + 3) abuse-of-dominance decisions, only six were annulled. We have included Intel (2011) in annulled decisions following ECJ’s 2017 verdict, though case is still pending.

  68. Gifford and Kudrle (2015). See also the review of their book by Sokol (2017).

  69. Mentioned at the beginning of this article.

  70. See also the discussion in Jones and Kovacic (2017, p. 28) and the reference there to Peeperkorn (2015); see also Blair and Sokol (2013), Coniglio (2017), and Sokol (2017) for the multi-objective character of EU CL.

  71. And, therefore, of those countries that have chosen to follow this approach.

  72. Katsoulacos and Ulph (2009, 2011, 2015, 2016). Extensive references and reviews of the literature related to these issues are contained in these papers.

  73. But which up to the 1990s were widely considered as strongly presumptively illegal. See for more details Katsoulacos et al. (2016a).

  74. That is, the ability of the assessment to discriminate accurately between harmful and benign conduct.

  75. These are likely to more-than-compensate for any detrimental effects due to higher administrative costs and legal uncertainty. As Jones and Kovacic (2017, p. 7) note «many jurisdictions apply a rule of per se illegality, or virtual per se illegality, against some horizontal agreements such a price fixing. The extent to which such a rule should be expanded beyond this… is much more controversial and contested». As they indicate (p. 16) nowadays in the US, vertical restraints, mergers and single-firm exclusionary behavior are not assessed by a rule of Per Se. See also Blair and Sokol (2012).

  76. And, in many other countries. There are exemptions to this, such as the US or Canada (see Hovenkamp, 2018, especially from p. 43); but the statement does reflect accurately the reality in the vast majority of other jurisdictions (Katsoulacos 2018a). The statement concerns conduct other than hard-core horizontal collusion. Thus, the type of practices that we have in mind are those for which there is no universally accepted choice of legal standards: e.g., unilateral conduct by dominant firms, vertical restraints, and concerted practices.

  77. Generally, the CA will recognize from case law and will adopt the substantive standard that is used by the courts. See Katsoulacos (2018a, b).

  78. See Geradin and Petit (2010, pp. 6, 35).

  79. In Table 6 the Intel decision is included as annulled in the 2007–2011 period (strictly speaking the case is pending).

  80. 1 out of 12 appeals (exclusionary and exploitative conduct).

  81. Which can be characterized as Modified Per Se or Truncated Effects-based (Katsoulacos 2018a, b).

  82. Katsoulacos (2018b).

  83. This interpretation is consistent with that of Wils’ (2014) position with respect to the decision by DGCOMP and the GC in the Intel case. He commends this decision for adopting an effects-based standard. But, while he uses the term “effects-based” to characterize the legal standard that is used, by “effects” he refers to the effects of Intel’s conduct on its rivals—i.e. on what he terms ‘the preservation of undistorted competition’—rather than to its effects on welfare. He thus accepts that the substantive standard that was used by the GC is non-welfarist.

  84. The higher annulment rates of Art.101 decisions are consistent with the courts’ adopting higher legal standards in these cases than the DGCOMP: higher than Per Se type legal standards that involve an often significant increase in the extent to which economic analysis and evidence is utilised and in its complexity; this increases the disputability of decisions and hence it is expected to increase the rate of annulment: See Proposition 2 of Katsoulacos (2018a), which shows that under such circumstances, a reputation-maximizing authority that faces increased costs for adopting higher standards may well choose to adopt lower legal standards than do the courts.

  85. Such as those that have been adopted by the UK’s CMA, which has to show on an annual basis that the consumer benefits that are generated by its activities exceed by a ratio of 10:1 the cost of these activities (CMA 2018).

  86. The Competition Appeals Tribunals of the UK or of South Africa provide good examples of such tribunals.

  87. See also Baye and Wright (2011) and Avdasheva et al. (2015).

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Acknowledgements

We are grateful for the comments and suggestions from two referees and by the participants and discussant at the Conference “Celebrating 25 Years of the EU Single Market”, Cambridge, 20th April, 2018, at which this paper was presented. Y. Katsoulacos and E. Metsiou acknowledge financial support from research program DRASI II of the Athens University of Economics and Business. All inaccuracies, mistakes, and omissions are our responsibility.

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Katsoulacos, Y., Makri, G. & Metsiou, E. Antitrust Enforcement in Europe in the Last 25 Years: Developments and Challenges. Rev Ind Organ 55, 5–26 (2019). https://doi.org/10.1007/s11151-019-09698-2

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Keywords

  • Antitrust
  • Enforcement
  • European competition policy

JEL Classification

  • L4
  • K21