Federal Antitrust and EC Competition Law Analysis

Femi Alese

• Publisher: Routledge
• Year: 2016
• ISBN:
  9781351936798
• Edition: 1
• Topic: Law
• Subtopic: Jurisprudence
• Index: Law

This book provides the reader with a comprehensive analysis of US Federal Antitrust and EC Competition Law. It is encyclopaedic in coverage: examining every constituent element of the law and landmark decisions from the perspectives of economics and policy goals, explaining their implications for commercial operations and advocating policy reforms where necessary.

Chapter 1

Introduction

This book is an attempt to give an account of competition law and policy in the United States and the European Union, and to evaluate it in light of economic analysis, where necessary. The systems of competition in these jurisdictions now highly influence each other and those of several other countries in determining competition issues. The regulators in both jurisdictions consistently work together, particularly in rooting out international cartels and in the preliminary assessments of large notified international mergers – where information is shared and discussions can entail deliberations over the appropriate economic theories. Interestingly, both are currently engaging in modernization reviews of their competition provisions.¹ Consequently, a comparative analysis of the current state of the law is a worthy academic expedition. Such a task is, however, laden with a plethora of difficulties not limited to the differences in governmental and institutional structures, but also to the objectives of the law.

The European Union is currently made up of 27 independent states (Member States) governed by their national laws in conjunction with the EC Treaty provisions, while the United States is a federalist system of 50 states (and District of Columbia) largely governed by state laws and the Federal Constitution.² As we shall see later, the interests of the central authorities and those of the states can sometimes diverge, particularly in the European Union where Member States still retain a large degree of autonomy in determining policies relating to defence, education and other public interest issues that might usually fall within the laps of ‘sovereign’ States. Nevertheless, competition law and policy is largely dictated in both jurisdictions by the central authorities. Articles 2 and 3(1)(g) of the EC Treaty (hereafter referred to as the ‘Treaty’, unless specified otherwise) provides the fundamental objectives to be achieved in tandem with the application of the competition provisions of the Treaty (Articles 81 and 82, 86 and 90) and other provisions relating to social policy in order to bring about an integrated market.³ The position here is that in driving forward the need for market integration, there would be instances where competition policy is suppressed or discarded in favour of the need to bring about social cohesion in an integrated market. Such a need would not appear warranted in the policies of a sovereign entity such as the United States, where the Commerce Clause of the US Constitution provides Congress with the ability to directly regulate interstate commerce (this is the constitutional power for enacting the antitrust laws or exemptions).⁴ While the distinction in governmental structure can become emphatic when examining the workings of competition law in the European Union and the United States, social and economic reality within the United States shows that several activities, including those necessary for social cohesion (such as the organization of labour and labour unions and certain activities of the states) are also exempted from the antitrust laws. What these positions appear to reveal is that competition enforcement is just one of many laws that governmental institutions must implement in order to bring about an improved quality of life for their citizens, and that situations would occur in which the need to achieve effective competition on market platforms is tempered to avoid denigrating other spheres of society as a whole.

As such a view points to the existence of competing interests of groups and is to be expected within a societal structure, any balancing measures to displace the interests of one group for another (particularly through enforcement or judicial measures) must ensure or strive towards ensuring that the conditions (or status) of one group are not improved at the expense of another. Consequently, the approaches towards the variables driving competition policy and law must be objectively clear and be practical enough to enforce, and displace when necessary, by the judiciary. Such a position would, however, seem difficult to arrive at without a unified principle of what is entailed in the notion of competition. The debate on such an issue is too vast to be covered here. What is intended here is to argue that laws of competition divorced from market economics or commercial reality would not only seem impracticable and difficult to enforce consistently (or incorrectly, and easily displaced by other competing interests), but might also significantly jeopardize the interests of one group at the expense of another – thereby creating an overall societal imbalance.

Competition, in all essence, signifies the act of engaging in a process in which a reward awaits the winner. Competition, in the sense of the markets, however, appears to be a continuous or a repeated process not necessarily subject to a quantified period – with the implication that the competition process and the reward entailed are factors that can be spread over a long or short period. The idea of reward in this sense would seem to revolve around the capture of the custom of market participants at the expense of rivals. The means necessary to achieve such a position would particularly include the provision of innovative products developed after incurred costs on research and development, efficient management acquired after several trials and errors, and market ‘know-how’ engineered after numerous dealings with clients or provisions of goods and services. Employing such attributes at some cost in order to gain higher market shares at the expense of rivals would appear to sum up what is entailed in the idea of competition. Thus, where the idea of competition is strongly that of forbidding the elimination of rivalries or that of maintaining atomistic rivalries, such an approach might lead not only to prohibiting internal growth generated from a long standing in the market, but also to proscribing monopolies generated through the production of superior products or efficient management. It would also appear to be an objective that would not only discard competition as a process of constant refinement of market positions through innovation,⁵ but one that would appear to define the competition process solely from the producers’ perspectives.

However, if the idea of competition is to improve the quality of life of consumers, then it would appear that idea of competition must be approached from their perspectives. It can be confidently presumed that competition from this angle would mainly entail the production and supply of quality products to consumers at the lowest possible prices, and that this should be the exclusive focus of the law. This position might, however, leave policy view in a state not different from the laws of the jungle, given that economic reality indicates that while lower prices are desired, offering goods at prices lower than the costs of production and distribution could also effectively be applied to eliminate efficient providers and in the long term create insurmountable obstacles on the market. Nevertheless, the latter position provides the avenue for indicating that the idea of competition could be deduced as entailing separating instances where the production and distribution of quality goods and services are provided to the market without any ulterior motive to eliminate competition.

The test here would appear to be one of intent, and would appear implausible for determining the concept of competition, given that intent to triumph over rivals is usually at the forefront of every competitor’s thoughts. Moreover, to approach enforcement of the law solely in this way might restrict the scope of challenges to those in which documentary evidence displays the intent of the parties under review – regardless of their conduct on the market or economic evidence showing otherwise. Furthermore, the objectives of competition policy and law would appear to be placed in danger by such an approach, because many activities that generate efficiencies are sometimes indistinguishable from conduct indicating the intent to eliminate rivals – below-cost prices, for example, might not be put in place to eliminate a competitor, but might be necessary to introduce a product to the market (loss leaders) or entice consumers to buy more of another higher-priced product, with the implication that this serves as an avenue for price discrimination.

Consequently, while evidence of intent might be valuable, and in some instances could relegate consideration of content to the back-burner, more appears to be required given the weight of the objectives pursued by competition policy and law. The latter in particular would appear to indicate that as producers and consumers usually form the entities within whose societal positions competition policy and law must seek not to unfairly denigrate, the idea of what competition entails should take into consideration their total well-being; such a position, however, even if qualified, might prove impracticable to apply given that several factors, such as income distribution and the immeasurable notions such as market ‘know-how’ built from years of production/distribution and consumer utility or desire, would always have to be analysed.

A common thread that can be discerned from all these positions is that the notion of competition, particularly in view of competition law as an enforcement mechanism, should describe situations in which quality goods and services are produced and distributed through methods restricted to market attributes. ‘Market attributes’ in this sense simply denotes attributes that could be achieved by other firms (such as supplying improved or better products or achieving economies of scale – particularly in situations outside a natural monopoly), with the implication that enforcement action should be directed only at the creation of ‘artificial’ barriers (welfare-detrimental or blatant anticompetitive conduct) that seek to limit output or maintain price above certain competitive levels. The positions also indicate, conversely, that policy view should be appreciative of barriers created through efficient production/distribution mechanisms (production and allocative efficiency). This being the deduction, and given that the theory of commerce (the art of buying and selling) is encapsulated in micro-economic theory of the firm, an economic approach to determining competition issues would appear to be an inescapable factor not only in devising competition policy, but also in identifying when measures from other competing interests are designated to relegate the effects of competition.

The enforcement of the law in both jurisdictions has moved significantly towards underpinning decisions with an economic approach; this position is strengthened by the fact that enforcement agencies now participate regularly in similar working groups, such as the International Competition Network and related seminars on competition policy run by the OECD. Furthermore, economists in these agencies, unlike lawyers in these jurisdictions, largely draw their knowledge from the same literature on industrial economics. As a result of these and many other factors, the competition-enforcement process now increasingly frowns on the creation of cartels, the abuse of dominant positions on the market through adverse conduct on the market, the creation of monopoly positions via mergers that might subsequently threaten future competition, and the activities of state governments, public authorities and similar entities, in their attempts to suppress competition on the markets for regulation – particularly in instances where their activities are not only like those of private firms, but actually in competition with such firms.

Subsequent chapters of this book are structured in this manner: the next six address issues relating to cartels, permissible collusions and factors which might facilitate collusion. The following set of six chapters focuses on issues concerning the assessments of market definition and various forms of abuse of dominant or monopoly positions, then the next two assess merger laws (horizontal, vertical and conglomerates), and the last chapter provides a conclusion and also assesses the limitations on the scope of competition law mainly through state measures, antitrust standing and issues pertaining to the notion of extraterritoriality.

Finally, competition policy and law in both the European Union and the United States are greatly shaped by the enforcement agencies. The United States Department of Justice (Antitrust Division), popularly referred to as the DOJ,⁶ and the Federal Trade Commission (through the Federal Trade Commission Act of 1913) are the main federal enforcement agencies with obligations to enforce the antitrust laws of the United States. The DOJ possesses powers to enforce the Sherman Act of 1890 and the Clayton Act of 1914, to exclusively pursue criminal sanctions and obtain civil injunctions, and can obtain civil damages when acting for the federal government as a purchaser. The Federal Trade Commission (FTC) enforces the Clayton Act and the FTC Act (particularly s. 5 of this statute) and the Robinson-Patman Act of 1936. It can also obtain equitable remedies, including restitution.⁷ The DOJ and the FTC avoid duplication of investigative and prosecution efforts through a ‘clearance’ procedure in which they inform each other of prospective enforcement challenges and decide which agency is in the best position to take them up. The states of the United States can also enforce the Sherman and Clayton Acts as well as their own antitrust laws,⁸ obtain injunctions and treble damages under federal and state laws, and enforce criminal provisions of state laws. State enforcements usually proceed through the use of their laws or through the filing of suits in federal courts.⁹ Private parties can also enforce the Sherman, Clayton and Robinson-Patman Acts,¹⁰ and obtain treble damages and injunctions and attorney fees and costs. There are also actions that can be taken by federal sectoral agencies through powers conferred by specific statutes such as the Federal Communications Act.¹¹

Enforcement of the competition provisions of the EC Treaty is carried out in the European Union by the EC Commission, a body also empowered to initiate legislation to be adopted by the European Council of Ministers and national competition authorities.¹² The process is largely quasi-judicial, with an appeals route to the Court of First Instance¹³ and Court of Justice,¹⁴ or in the case of national authorities, higher national courts.¹⁵ Sanctions for infringements are mainly the imposition of fines and interim measures, in order to prevent any subsequent final award from being otiose. As the competition provisions of the Treaty (particularly Articles 81 and 82) are directly enforceable in the courts of Member States,¹⁶ private citizens can commence action for damages, and various schemes to encourage such actions are currently being considered.¹⁷

Notes

1 The Antitrust Modernization Committee began a process of reviewing antitrust law in 2004: see generally <http://www.amc.gov/>. Within the EU, the review of the competition provisions, as we shall see in subsequent chapters, resulted in Regulation 1/2003, which devolved powers in several areas of the application of the law to national regimes. Discussions are also ongoing in several other areas involving the Article 82 provisions which cater for dominant firms. See generally <http://europa.eu.int/comm/competition/general_inf...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Dedication
• Table of Contents
• List of Figures
• Foreword
• Preface
• Acknowledgements
• 1 Introduction
• 2 Restrictive Agreements: Legal Requirements
• 3 Agreements and Concerted Practices
• 4 Permissible Horizontal Restraints
• 5 Group Boycotts
• 6 Information Exchange Agreements
• 7 Vertical Resale Restrictions
• 8 Market Definition and Dominance
• 9 Abuse and Monopolization: Legal Requirements
• 10 Leverage Theory and Tying
• 11 Refusal to Supply
• 12 Exclusive Dealing Arrangements
• 13 Predatory Pricing
• 14 Price Discrimination
• 15 Horizontal Mergers and Acquisitions
• 16 Conglomerate and Vertical Mergers
• 17 Limitations and Conclusions
• Index