The Shaping of EU Competition Law

The Shaping of EU Competition Law Pablo Ibáñez ColomoLondon School of Economics http://chillingcompetition.com London, 14 September 2018

The idea behind the book • A question: • In the US, it is taken for granted that institutions have influenced substance • The question remains pretty much unexplored in the EU • An opportunity: • How can the relationship between institutions and substance be examined? • How can a legal scholar contribute to shedding light on the question? • A concern: • Legal scholars tend to rely on fragmentary and/or anecdotal evidence • A comprehensive database providing a full picture is indispensable

An opportunity • The relationship between institutions and substance is not an easy one to grasp for legal scholars: • Questions in these sense often relate to whether authorities display prosecutorial bias and review courts (undue) deference • The analysis of these questions raise major methodological issues; moreover, popular proxies are very imperfect: • It is popular to use the ratio of annulled decisions as a proxy for deference • However, this is a phenomenon that can be explained in more than one way • Prosecutorial bias and deference are valuable in that they hint at valuable questions that can be addressed systematically (by a lawyer)

An opportunity Prosecutorial bias as a one-shot game Decision Erroneous?

An opportunity Prosecutorial bias as a repeated game Decision Decision Decision How can the law be expected to evolve?

An opportunity Decision-making as a repeated game Decision Decision Decision How does the law evolve?

An opportunity • A static perspective on the competition law system • Is the system coherent, in the sense that it is guided by a common set of principles across the board? • Is the system consistent, in the sense that like practices are treated alike within and across provisions? • A dynamic perspective on the competition law system • Is the legal treatment of practices consistent over time, or does it fluctuate? • Is the case law resilient to attempts by an authority to depart from it?

Approach • Tractable • Notions of (i) restriction, (ii) abuse and (iii) substantive test in merger control • The book focuses on ‘law-intensive’ issues • Meaningful • How does the European Commission interpret competition law provisions? • How do the EU courts react to these interpretations? • Robust: • Methodology to assess systematically the interpretation of the provisions • Exhaustive database covering all ‘law-intensive’ cases

Approach • How does the Commission engage with the law? • In one-shot interactions: • Does it have a preference for rules (by-object) or standards (by-effect)? • Does it have a preference for formal or informal (commitments) instruments? • In repeated interactions: is it risk-prone or a risk-averse when engaging with the case law? • How does the Commission engage with economic analysis?

Approach • How do the EU courts deal with the administrative practice? • In one-shot interactions: do they accept or reframe the interpretation given by the Commission? • In repeated interactions: how do they react to instances when the Commission departs from the logic of prior case law? • Are there factors that influence the way EU courts deal with administrative practice? • Economic analysis and, in particular, consensus positions? • The procedural path through which the law is interpreted?

Approach: the line between object and effect certainty likelihood Effects capability [N/A] Direct evidence Formal analysis [N/A] Informal analysis Purpose

Approach: the analysis of effects certainty Probability likelihood capability Freedomof action Marketstructure ‘As efficient’ Consumers Effects considered

Findings: about the Commission • There are some consistent patterns, across time and provisions in the way the Commission behaves in one-shot interactions: • Preference for rules (by-object) over standards (by-effect) • Tendency to blur the line between rules and standards (relatively low threshold of effects) • Preference for relatively unstructured legal tests • To determine the scope of the rule (the trigger) • To establish effects (the outcome)

Findings: about the Commission • There are also patterns in the way it deals with constraints • Exogenous constraints (economics) appear to be more powerful than endogenous constraints (case law) • Change comes from the desire to bring enforcement in line with mainstream economics • Its impact is felt more on the prioritisation of cases than on legal interpretation • In repeated interactions, the Commission does not appear to be risk averse (precedents are interpreted expansively or restrictively)

Findings: Article 101 TFEU certainty Delimitis Judgment Probability likelihood Langnese Iglo Traditional approach capability Freedomof action Marketstructure ‘As efficient’ Consumers Effects considered

Findings: Article 102 TFEU certainty likelihood Effects AKZO Judgment capability AKZO Decision [N/A] Direct evidence Formal analysis [N/A] Informal analysis Purpose

Findings: Article 102 TFEU Irish SugarGeneral Court Irish SugarCommission AKZOCourt of Justice AKZOCommission CMBCourt of Justice CMBCommission Costs not decisive Cost-based test

Findings: merger control certainty GE/H’well Judgment Probability likelihood GE/H’well Decision capability Freedomof action Marketstructure ‘As efficient’ Consumers Effects considered

Findings: about the EU courts • There is variation in the behaviour of the EU courts both in one-shot and repeated interactions • In one-shot interactions: the EU courts sometimes depart from the legal test articulated (or implied) by the Commission in its decision • In repeated interactions, there is great variation in the degree of fluctuation of the case law • Article 101 TFEU case law has proved to be resilient • Much greater variation can be observed in the context of Article 102 TFEU

Findings: Article 101 TFEU E.OnR’gas(2009) O2(2006) Nungesser (1982) ENS (1997) STM(1966) The eternal return of the counterfactual in Article 101 TFEU case law

The standard in Magill and IMS Health MagillJudgment certainty Probability likelihood MicrosoftDecision capability Freedomof action Marketstructure ‘As efficient’ Consumers Effects considered

Findings: about the EU courts • Several factors may explain the observed variation across cases and across provisions: • In one-shot interactions: ignoring mainstream economics is perceived as arbitrary and capricious by the EU courts (e.g. Airtours, Tetra Laval) • In repeated interactions, several factors may be at play: • Path dependence: one path is resilience, another path is fluctuation • The ratio of preliminary references to direct actions • The nature of the provision (‘every Article 102 TFEU case is exceptional’)

Findings: about the EU courts • Variation has resulted in the emergence of frictions in the case law: • Inconsistencies can be detected within and across provisions • It looks like the EU courts react prudently and incrementally to frictions in the case law, eppursimuove • Judicial review is not always performed in a uniform way: • Sometimes the EU courts articulate explicitly the legal test, sometimes they do not • Is it possible to think of some hallmarks of effective judicial review?

The Shaping of EU Competition Law