NEW FRONTIERS OF ANTITRUST 2016

Interview with Nicolas Petit

Concurrences Review will organise the seventh edition of the New Frontiers of Antitrust Conference in Paris on 13 June 2016. Nicolas Petit (Professor, Law School of the University of Liege) was interviewed by Hans W. Friederiszick (Managing Director, E.CA Economics). They will participate in the panel "Rebates: to Hell with Consumers!".

To see the full programm, please visit the event website.

Hans W. Friederiszick: What are, in your view, the broader, lasting consequences of the Intel and Post Danmark II judgments of the General Court and the Court of Justice of the EU, respective, on the EU Commission’s assessment of rebates under Article 102 TFEU?

Nicolas Petit: None, unless the Commission decides to withdraw the Guidance Paper. Intel and Post Danmark II do not prevent the Commission from setting for itself stricter standards than those found in the Article 102 TFEU case-law, as it did in the Guidance Paper. The Commission is a policy organ, not a court. As such, the case-law leaves it free to decide to channel resources to dealing with a subset of abuse cases which meet demanding evidentiary thresholds. If the Commission affirms such a policy choice publicly, as it did in the Guidance Paper, it is then bound to observe it until it revokes it. Additionally, the case-law of the CJEU makes clear that a document such as the Guidance Paper, regardless of its formal labelling, creates "self-binding effects" on the Commission. The Commission is thus bound to comply with the substantive content of the Guidance Paper.

Hans W. Friederiszick: Do you consider the application of the AEC (“As Efficient Competitor”) test post Intel/ Danmark II as still required (or even an obligation)? In which type of cases?

Nicolas Petit: Post Danmark II’s recognition of the AEC test as a tool amongst others to establish antitrust liability under Article 102 TFEU effectively confirms that the Commission is able to bind itself to using it as the only legal standard, just as the Commission did in the Guidance Paper for certain types of alleged exclusionary behaviour.

The Commission is thus required to apply the AEC test under the circumstances expressed in the Guidance Paper. The situation is different for NCAs and Courts, who are not bound by the positions vindicated in the Guidance Paper. For them, the AEC test is just a possible option.

Last, Post Danmark II is relevant where it explains that the AEC test is excluded in legacy markets where the dominant firm has a “very large market share” and “structural advantages” conferred, inter alia, by a “statutory monopoly”. That said, this statement is not a revolution. The judgment in TeliaSonera already conveyed this approach.

Hans W. Friederiszick: Do you see a need for a more general reform regarding the application of Article 102 TFEU by the Commission, specifically with respect to economic analyses?

Nicolas Petit: I doubt that an overhaul of economic analysis is needed. Back in 2009, the Commission had done a good job at formulating structured tests of antitrust liability in the Guidance Paper. Those structured tests marked an equilibrium point between the ambition to align article 102 TFEU law with basic economic axioms and the legitimate need for legal certainty in the administration of the EU antitrust rules. Put differently, what the Guidance Paper had achieved in Article 102 TFEU can be compared to what the Airtours judgment had achieved in the area of merger control.

Unlike what the anti-Guidance Paper crowd argues, the structured tests set in the Guidance Paper are not a black box designed to drag antitrust proceedings for years, and to make lawyers and economics consultants wealthier. The Deutsche Bahn decision of 2013 shows that even at the preliminary stage, the Commission can perform a conclusive AEC analysis. With this background, the Intel case is certainly an (early) outlier in terms of the administrability of the AEC test.

If reform is needed, it is primarily institutional and procedural. Institutional, because the Commission no longer speaks in unison in relation to substantive antitrust law. It is a secret of Polichinelle - and a euphemism - that DG COMP and the Legal Service are not aligned in relation to the goals and principles that should govern the law of Article 102 TFEU. The conflict may even cut deeper within DG COMP, where case-teams may not be particularly sympathetic to the more economic approach set out in the Guidance paper. In this context, my hunch is that the EU competition house needs to have one boss only, and to speak with one voice. From a legal certainty standpoint, it is unacceptable that the legal arguments made in ex post appeals before the EU Courts turn a blind eye on the ex ante normative choices made by the Commission in official policy instruments. Similarly, the emerging practice of prosecuting cases under the easiest test available bespeaks the diminished influence of the CET in competition cases, and invites a reassessment as to whether DG COMP can really claim intellectual leadership in the world’s competition arena. In contrast, several NCAs have successfully managed to improve analytical sophistication in antitrust proceedings and have at the same time ramped up their enforcement record.

Procedural reform is needed because economics discussions in antitrust cases often boil down to endless quarrels between the parties' experts, who throw opposing submissions at each other disagreeing on virtually anything to everything (from the calibration of economic models to the veracity of empirical data). The same is true of the Commission’s economists who have progressively abandoned their role as sounding-boards and impartial advisors on the merits of cases, and have increasingly positioned themselves as DG COMP’s in-house consultants, beholden to case teams committed to a prosecution. With all this, it is not surprising that lawyers and judges have not been impressed, and have considered that the introduction of economics in antitrust proceedings had just added another layer of complexity to decision making. Those shortcomings could be cured easily, for instance with increased reliance on Court-appointed, neutral economic experts (see Article 70 of the rules of procedure of the General Court). The CJEU availed itself of this opportunity in the Woodpulp II case in the 1990s. I wonder why such measures of inquiry have completely disappeared from modern antitrust litigation.

Hans W. Friederiszick: To date, attempts to incorporate competition law into the multilateral trade system have not been successful. That said, the EU has described TTIP as “a model for global policies to promote free and fair competition.” Can we expect the EU to promote a similar approach on competition at a multilateral level?

Nicolas Petit: I hope so. As G. Stigler wrote in a paper titled "The Economists and the problem of monopoly": "Free trade is a sort of international antimonopoly program in itself". In my view, free trade across nations and undistorted market competition are just two sides of the same coin.

The devil is in the detail. It is a convenient fallacy to accept that antitrust agencies across the globe enforce antitrust laws based on sound economic principle and under fair procedures. The reality is – perhaps with an exception for cartels – that many agencies outside the EU and the U.S. treat antitrust law as an extension of trade policy and enforce it against non-domestic companies either with protectionist aims in mind or as a revenue-generating activity.

Trade partnerships like TTIP are certainly a good idea when concluded between trade blocks that equally and effectively comply with the rule of law and free market economics. Those instruments may, however, distort the level playing field when concluded with mixed economy countries, creating opportunities for Trojan horse strategies by non-domestic firms. The concerns expressed that western companies do not compete in Europe on equal footing which Chinese SOEs is certainly valid. This should not prompt the EU to lock its market to foreign investments, but instead calls for stronger dispute resolution and enforcement mechanisms in the world trade system.