The More Economic Approach to EU Antitrust Law

Anne C Witt

• Editore: Hart Publishing
• Anno: 2016
• ISBN:
  9781509909223
• Edizione: 1
• Argomento: Jura
• Categoria: Wettbewerbsrecht

In the late 1990s, the European Commission embarked on a long process of introducing a 'more economic approach' to EU Antitrust law. One by one, it reviewed its approach to all three pillars of EU Antitrust Law, starting with Article 101 TFEU, moving on to EU merger control and concluding the process with Article 102 TFEU. Its aim was to make EU antitrust law more compatible with contemporary economic thinking.
On the basis of an extensive empirical analysis of the Commission's main enforcement tools, this book establishes the changes that the more economic approach has made to the Commission's enforcement practice over the past fifteen years. It demonstrates that the more economic approach not only introduced modern economic assessment tools to the Commission's analyses, but fundamentally changed the Commission's interpretation of the law. Emulating one of the key credos of the US Antitrust Revolution thirty years earlier, the Commission reinterpreted the EU antitrust rules as aiming at the enhancement of economic consumer welfare only, and amended its understanding of key legal concepts accordingly.
This book argues that the Commission's new understanding of the law has many benefits. Its key principles are logical, translate well into workable legal concepts and promise a great degree of accuracy. However, it also has a number of serious drawbacks as it stands. Most worryingly, its revised interpretation of the law is to large extents incompatible with the case law of the European Court of Justice, which has not been swayed by the exclusive consumer welfare aim. This situation is undesirable from the point of view of legal certainty and the rule of law.

Part I

1

Triggers and Catalysts

I. Introduction

The more economic approach to EU antitrust law did not appear out of the blue. A number of factors contributed to its advent. In the mid-1990s, the European Union had realised its key aim of creating a single market to a great extent, which allowed the institutions to turn their attention to new tasks and objectives. Around the same times, the European Commission’s antitrust policy came under increasing criticism from academics and practitioners for its lack of economic analysis. The 1990s and early 2000s saw the Commission clash repeatedly with the US antitrust authorities over cases with international dimensions, in which it was accused of being guided by the wrong values and applying outdated economic theories. In particular, the emotionally charged dispute over the Commission’s decision to prohibit the merger between the two US companies General Electric and Honeywell triggered an extensive debate about the role of economics in antitrust analyses both at the academic level and within the European Commission’s Directorate General for Competition Policy (DG Competition). The Court of Justice of the European Union is likely to have fuelled the Commission’s review process further when, in an unprecedented move, it annulled three merger decisions in 2001 because of manifest errors of assessment. Another important factor was the appointment of an economist to the position of Commissioner for Competition in 1999. His professional background and personal convictions no doubt played a major part in driving forward the reform and shaping the Commission’s more economic approach to EU antitrust law. Finally, the Commission’s review process is likely to have been influenced by the exchange of ideas between antitrust authorities in the International Competition Network and other international forums of cooperation.

II. The Completion of the Internal Market

The creation of a common market between the six original Member States had been the cornerstone of the European project that dominated much of the Union’s early activities. In order to understand the importance accorded to this aim, one must bear in mind that market integration not only served the purpose of creating economic welfare. In the 1950s, it was considered a key tool for preventing further military conflict in Europe. The European Communities were created in response to World Wars I and II, which ravaged the European continent in quick succession. Attempts at international peace-building following World War I had not been successful. 20 years after the Treaty of Versailles officially ended the state of war between Germany and the allied powers, World War II began, only to surpass the previous conflict in human loss, destruction and suffering. In 1946, the League of Nations, which had proved ineffective in preventing World War II, was therefore dissolved. The United Nations took its place as the key international body to promote international cooperation and peace. Given how powerless the League of Nations had been against the rise of war, however, there were serious doubts as to whether this successor organisation would be any more successful.

Against this background, the French Foreign Minister Robert Schuman proposed a novel and highly experimental method of securing a sustainable peace in Europe. Instead of focusing on the promotion and respect of certain ideological values in the image of the United Nations and the Council of Europe, the Schuman Declaration of May 1950¹ outlined a much more pragmatic plan. It was based on the key premise that in order to achieve a lasting peace in Europe it was necessary to eliminate the age-old opposition between France and Germany. This was not to be achieved through unilateral supervision of Germany, but through practical cooperation. The hope was that such cooperation, which was to start in small, well-defined areas, would result in mutual trust and could then be expanded to other spheres.

Today’s European Union is the outcome of this plan. In 1951, France, Germany, Italy and the three Benelux countries agreed to create a common market for coal and steel. With this aim, they created a European Coal and Steel Community (ECSC) with independent institutions that would not only ensure the application of the Treaty’s provisions but also had the power to make rules and take decisions with regard to this common market that were binding on the signatory States.² This system allowed the Member States and the independent Community institutions to monitor the trade of coal and steel within the Community’s territory. The reasons for starting cooperation and trust-building in this specific area were obvious. Coal and steel were indispensable to the production of arms and military machinery, so that placing the trade in coal and steel under common supervision would have allowed the participating States to detect if one of them were rearming.

In 1957, the same six States agreed to create two further areas of cooperation. The Treaty establishing the European Atomic Energy Community (Euratom) related to the other area relevant to modern warfare, ie nuclear energy. The Treaty establishing the European Economic Community, the legal predecessor of today’s Union, was not concerned with detecting and preventing rearmament, but pursued another method of conflict prevention: economic integration. In the ultimate aim of establishing an ‘ever-closer union amongst the peoples of Europe’ and the ‘elimination of barriers which divide Europe’,³ the same six States decided to begin this process by abolishing the economic barriers that divided Europe. The key purpose of the European Economic Community was to create a common market between its members, within which goods, services, capital and the people engaged in economic activities could move around freely irrespective of national borders. The hypothesis was that national economies would become so intertwined that engaging in military conflict with one another would have disastrous economic consequences for the individual Member States. This was deemed a powerful deterrent not only for the Member States’ governments but also for their citizens, who were dependent on good relations with neighbouring States either because they were engaged in trade with them or because they benefited from this trade as consumers. In addition to this effect, the signatory States also assumed that free trade would create economic prosperity and improve the ‘living and working conditions of their peoples’.⁴

The key legal tools for creating the common market were the free movement rules that were aimed at abolishing state-imposed barriers to the free movement of goods, workers, the self-employed, services and capital.⁵ As a complement to these rules, the signatory States also included ‘rules on competition’ that were addressed to undertakings. The main reason for including these competition rules was that they were deemed necessary to ensure that private parties did not replace the state-imposed barriers with private barriers to trade.

The creation of the three Communities was a remarkable victory of reason over emotion. France, Germany, Belgium and The Netherlands had geographically been at the centre of both world wars and many other previous European military conflicts. France and Germany in particular had repeatedly clashed over border territories and in the 1950s, there was a deeply embedded distrust between the citizens of these States stemming from centuries of conflict and suffering.

While the aim of peace-building may no longer be what most people nowadays associate with the internal market goal, it must have been prominent in the minds of the first generations of Community officials, who had experienced the traumas of World Wars I and II first-hand. This experience, and the desire to prevent another conflict between the original Member States, undoubtedly explains the importance, urgency and almost mythical status accorded to the common market goal in the early days of the Communities. Not surprisingly, therefore, the creation of the common market was the focus of the institutions’ policy during the first 35 years of the Union’s existence,⁶ including its antitrust policy. While the process faltered in the 1970s and early 1980s when the oil crises, recession and empty chair crisis almost paralysed the Union’s political institutions, it was revived in the mid-1980s, when the Commission published a White Paper outlining a plan for completing the common market by 1992 under the guidance of its new president Jacques Delors. The functional rather than institutional approach of Delors’ plan appealed to most Member States, prompting them to convene an intergovernmental conference, which resulted in the adoption of the Single European Act in 1986.⁷ This Treaty amended the Treaty of Rome in apparently modest ways.⁸ At its heart lay the proposal and goal to complete the common market, redubbed ‘single market’, by 31 December 1992. Between 1986 and 1992, the European Union adopted nearly 280 pieces of legislation to achieve this aim.⁹ The single market was formally considered in place on 1 January 1993.

While the aim of protecting the single market, renamed ‘internal market’ by the Treaty of Lisbon, remains a valid and important objective of the Union, it lost some of its immediate urgency after 1 January 1993. This is also reflected in the growing number of objectives not related to the internal market in the Union Treaties after 1993. Consequently, the institutions, including the Commission, were able to turn their attention to other projects and causes, more in line with that of a modern nation state than an experimental supranational organisation focused on eliminating barriers to trade.

III. Academic Criticism

In the late 1980s and early 1990s, EU antitrust law came under attack from a number of academics. Barry Hawk famously published a particularly critical analysis of the treatment of vertical restraints under EU antitrust law, which he deemed too legalistic and lacking in economic analysis.¹⁰ The European Commission explicitly engaged with his views in a Green Paper on Vertical Restraints from 1997, which opened a public consultation on ways of modernising the Commission’s approach to assessing vertical restraints.¹¹ Hawk was by no means the only person to criticise the lack of economic analysis in the Commission’s antitrust policy. A number of other eminent academics, practitioners and even Commission officials expressed similar views.¹² Most of these critiques drew on a comparison of EU antitrust law with US antitrust law, which had been guided by the objectives and tools of economic theory since the late 1970s, and the Commission’s approach usually came off very much worse in these comparisons.

IV. Transatlantic Conflict

What a number of academics had detected in the 1980s already became more or les...