max-planck-institute for research on collective goods doctrinal sources of legal uncertainty in both...

Max-Planck-Institutefor Research on Collective Goods

Doctrinal sources of legal uncertainty in both Art. 82 EC and Sec. 2 ShA

Alexander Morell

MPI Bonn

The deep roots of legal uncertainty

Max Planck Institute for Research on Collective Goods

Intro

The Stereotypes: – Application of Antitrust law: US economics based, EU

conduct based

– More economic approach => legal uncertainty I would like to suggest (very much work in progress) :

– It‘s not only the application

– More economic approach => exchanges source of persisting legal uncertainty


Outline

Fundamental Texts Definitions Implementation of Definitions Things to be astonished about Conclusions


I. The fundamental texts

Sec 2 ShAEvery person who shall monopolize,

or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony, and, on conviction thereof, shall be punished by fine not exceeding $10,000,000 if a corporation, or, if any other person, $350,000, or by imprisonment not exceeding three years, or by both said punishments, in the discretion of the court.

Art. 82 ECAny abuse by one or more undertakings of a

dominant position within the common market or in a substantial part of it shall be prohibited as incompatible with the common market in so far as it may affect trade between Member States.

Such abuse may, in particular, consist in:(a) directly or indirectly imposing unfair purchase or

selling prices or other unfair trading conditions;(b) limiting production, markets or technical

development to the prejudice of consumers;(c) applying dissimilar conditions to equivalent

transactions with other trading parties, thereby placing them at a competitive disadvantage;

(d) making the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts.


II. Definitions: monopolization and abuse

US: Definition of monopolization

Monopolization– ShA protect competition – Stifle competition and harm social

welfare– Spur competition as reward for

success Tradeoff when prohibiting

achievement of monopoly

Definition competition by goal of comp.

– Make consumers better off

– Monopolization = market power increases => consumers worse off.

EU: Definition of abuse Monopolization

– Reward for competition– Can’t be forbidden regulate monopolies: abuse

Definition of abuse:– By goal of competition?

Abundance of goals (Freedom of action, prevent exploitation, distribution of income in accordance to performance, optimal allocation of resources, technical progress, adaptive flexibility)

– By structure or process?Nobody can define competition

– De facto ad hoc definitions



Social goals in the USWe have been speaking only of the economic reasons

which forbid monopoly; but, as we have already implied, there are others, based upon the belief that great industrial consolidations are inherently undesirable, regardless of their economic results. In the debates in Congress Senator Sherman himself in the passage quoted in the margin showed that among the purposes of Congress in 1890 was a desire to put an end to great aggregations of capital because of the helplessness of the individual before them… Throughout the history of these statutes it has been constantly assumed that one of their purposes was to perpetuate and preserve, for its own sake and in spite of possible cost, an organization of industry in small units which can effectively compete with each other. We hold that "Alcoa's“ monopoly of ingot was of the kind covered by § 2 (Learned Hand, UNITED STATES V. ALUMINUM CO. OF AMERICA 148 F.2d 416 (2d Cir. 1945).)

What goals in EU? (About regulation 17) : That is because the

Commission’s power (…) to impose fines on undertakings which have, intentionally or negligently, infringed Article 81(1) EC or Article 82 EC, not only includes the duty to investigate and punish individual infringements, but also encompasses the duty to pursue a general policy designed to apply, in competition matters, the principles laid down by the Treaty and to guide the conduct of undertakings in the light of those principles. Opinion AG Verika, (2008) C-510/06

so we don‘t know what principles are guiding the interpretation, we only know there are many.



Early importance of Economic goals in US

A single producer may be the survivor out of a group of active competitors, merely by virtue of his superior skill, foresight and industry. In such cases a strong argument can be made that, although the result may expose the public to the evils of monopoly, the Act does not mean to condemn the resultant of those very forces which it is its prime object to foster: finis opus coronat. The successful competitor, having been urged to compete, must not be turned upon when he wins. (Learned Hand, UNITED STATES V. ALUMINUM CO. OF AMERICA 148 F.2d 416 (2d Cir. 1945).)

The only „clear“ goal in EU is Art. 3 I g) EC „undistorted competition“.

EuGH “British Airways“, Rs, C- 95/04 P, Rn. 62;

Opinion GA Verica, 15 May 2008, C‑510/06 P, Rn. 229;

Bechtold Bosch et al. Art. 82 Rn. 27

Lenz/Grill Art. 81-86 no. 2 Wish, Competition Law, 28



Conceptual effects of US-definition

The (partial) efficiency goal delivers systematic that can structure the law

Clear definition of competition: Competition is what makes consumers better off.

Increases predictability Builds solid ground to built

arguments upon

Conceptual effects of EU-definition

Open definition => incorporate many policies (EU market integration, distributive, fairness,

protectionist, …) Amplification by systematic

interpretation of treaty (Art 2 EG: create common market, ECJ “Metro I” 26/76 no. 20, and other social and economic goals)

Shifts power from legislator to ECJ (and Commission);

Ad hoc approach makes ECJ less predictable



Examples for legal uncertainty in EU: loyalty rebates • Michelin test (totally over-inclusive)

Roll back rebate Market share considerably larger than those of competitors Reference period relatively long

• British Airways Rebate illegal with reference period of ONE month!!! (relatively long !?) Add to test: rebate threshold close to total demand or (!) individually negotiated

• “Excuse”: “It is necessary to consider all the circumstances…and to investigate whether …the discount tends to (1) restrict the buyers’ freedom to choose his sources of supply, to (2) bar competitors from access to the market, (3) to apply dissimilar conditions to equivalent transactions with other parties or (4) to strengthen the dominant position by distorting competition.” (Michelin I. No. 73)

pretends effects based approach either test is inadequate for finding effects or effects are inadequate for being found. legal certainty?

• Reason: Don’t know what to protect => no systematic framework


III. Implementation/application of the definitions

Effects based US-law central topos “making

consumers better off” care for effects care about false negatives as

much as about false positives

Although you look for effects they are hard to see Difficult factual questions Decrease predictability

Conduct based EU-law integrate various policy goals

into one article major difficulty: constructing

the rule loads of per se rules

Guidance in deciding cases? You will always find at least

one helpful principle No need to look into the

details/facts Increases predictability Detachment from reality


III. Implementation/application of the definitions

US: Standards of proof become decisive Good example: Concord

Boat model was insufficiently rooted in data of the case

illegality of single product rebates rejected

Usually plaintiff bears burden of proof less enforcement

EU: Rules tend to seem economically odd

Importance of length of rebate reference periods (Michelin); (Maybe that’s why it was abandoned in BA)

Per se illegality of targeted rebates (Michelin + BA)


IV. Weird: Why wasn’t it the other way around?

US legal system actually tuned to per se rules and simple fact finding? The more general statute Often a circuit judge takes the

decision– DoJ cannot bindingly deem illegal

a monopolization– (FTC can, though)

Jury trials possible in antitrust issues (LePage vs. 3M)

Can lead to problematic rules too: AVC-test in single product rebate

cases (concord boat) Separation of tied rebates and

single product rebates (3M)

EU enforcement system actually tuned to combining legal and economic knowledge?

The more precisely framed statute

Commission has expertise on both legal and economic side and can bindingly decide

No jury trails economic advice easily

available to courts (Discussion paper could initiate

some sensitivity to false positives)


V. Conclusion

The differences are deeply rooted in legal thinking and principles

It‘s not just a matter of how to apply very similar norms, it is a matter of deeply rooted doctrinal thought.

Both system have a predictability problem: The EU triggered by conceptual issues, the US by factual issues. You can only trade the one against the other.


Thank you!

Most important sources that are not case law:Bechtold/ Bosch/ Brinker/ Hirsbrunner, EG Kartellrecht – Kommentar, 2005

Lenz, EG-Vertrag – Kommentar, 2003

Eilmansberger, CMLR 2005, 129-177

Fox, Antitrust Law Journal 70, (2002-03), 371-411.

Kolasky, Antitrust Bulletin 49 (2004), 29-53.

Wesseling, The Modernization of EC Antitrust Law, 2000

Whish, Competition Law, 2003

max-planck-institute for research on collective goods doctrinal sources of legal uncertainty in both...

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legal uncertainty n

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abuse us

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