Structure and Effects in EU Competition Law, Studies on Exclusionary Conduct and State Aid

Citation

Taylor, C. (2012), "Structure and Effects in EU Competition Law, Studies on Exclusionary Conduct and State Aid", International Journal of Law and Management, Vol. 54 No. 1, pp. 87-89. https://doi.org/10.1108/17542431211189623

The recent publication by Wolters Kluwer Structure and Effects in EU Competition Law, Studies on Exclusionary Conduct and State Aid contains a collection of essays presented in an international conference organised by the Max Planck Institute for Comparative and International Private Law at Hamburg on 13 and 24 January 2009. The focus of the conference was on the so‐called “more economic approach” adopted since the mid‐1990s by the European Commission in the context of the modernization of European competition law.

The more economic approach does not constitute a radical departure of the commission's traditional practice with regard to competition law enforcement but an effort to bring the goals and application of competition law in line with more modern economic thinking which emphasises economic efficiency and consumer welfare. By adopting this new approach, which elevates consumer welfare to the sole goal of competition policy, the commission shifts its focus away from the maintenance of market structures and the protection of competitors, which were linked to ordoliberalism. Also, the commission's analysis under the new approach is more facts‐based focusing on the actual effects of the business practices on the market and not on the form of these practices which was the focus of the old more formalistic approach. This type of analysis requires extensive use of economic models and methods to assess and predict the impact on competition of the business practices under investigation. The quantitative results produced are hoped to add more precision and reliability to the competitive assessments of the European Commission. The adoption, though, of the more economic approach has not been uncontroversial and there are views in the legal community arguing that the adoption of consumer welfare standard as the sole goal of EU competition law would require amendment of the current Treaty law. There are also conceptual issues with regard to the exact meaning of “consumer welfare” and other key economic terms and some criticism of the use of economic models to predict the competitive impact, based on the limitations facing these models.

The Hamburg conference brought together prominent European lawyers, economists, academics, policymakers and competition enforcers to discuss the new reality of EU competition law and policy under the more economic approach. The conference placed special emphasis on two “especially controversial” areas of competition law: exclusionary conduct and state aid.

The book has four Parts. Part I deals with conceptual and methodological issues related to the more economic approach of the European Commission. In this part, Professor Jürgen Basedow introduces the topic followed by three essays by Carles Esteva Mosso, Daniel Zimmer and Svend Albæk, which explain issues related to the application of the new approach. Carles Esteva Mosso of the European Commission points out (p. 19) between others, certain important implications for competition law and policy from the more economic approach: first, the new focus is on detrimental effects on consumer welfare; second, the commission under the new approach must explain using factual evidence how an individual practice will end up harming consumers; third, there is a new balancing test which seeks to balance efficiencies against possible anticompetitive effects; fourth, the new approach deals with different types of conduct in the same way, which focuses on effects and not on the form.

Professor Zimmer's submission points to some limitations and ambiguities in the more economic approach (i.e. the lack of clear definition of “consumer benefit”) as well as to certain legal complications from the use of a one‐dimensional approach to competition law which would be relying on consumer welfare. The wording of the treaties and the jurisprudence of the court may not allow for adopting consumer welfare as the sole goal of competition policy. This view was shared by other participants in the discussion in the last section of Part I where it was also made the case for more coherent EU enforcement policy.

Part II presents some studies on Article 102 TFEU which include a study of Professor Giorgio Monti on the dominance threshold of Article 102 TFEU commented by economist Christian Wald and a study by Professor Wolfgang Wurmnest on predatory pricing commented by Professor Philippe Choné. Both studies address the impact that the more economic approach has had on the commission's enforcement in these areas. Professor Wurmnest has been very positive on the impact of the more economic approach on predatory pricing enforcement by pointing out that the commission's approach “brings the assessment of predation cases closer to contemporary economic thinking without causing a radical shift in enforcement” (p. 140).

Part III contains two studies on state aid, one on European state aid control by Professor Ulrich Schwalbe and one on the general block exemption for state aid by Professor Piet Jan Slot. The more economic approach was introduced with delay in state aid control due to the existence of certain idiosyncratic factors in the area that render the application of economic analysis more complex and difficult. Professor Schwalbe refers to normative and social objectives, internal political and economic issues within the Member States and the economic relationships between Member States amongst these factors. The study then discusses the economic foundations and the most important points of the State Aid Action Plan of the European Commission, which places more emphasis on the economic approach by adopting a three‐stage test, the so‐called balancing test. The new test along with the adoption of a series of block exemption regulations, guidelines and communications have simplified the process and have offered useful assistance to decision making with regard to the approval or rejection of an aid. The general block exemption regulation for state aid was considered in more detail in Professor Jan Clot's study.

Part IV focuses on a round table on state aid where the utility of the more economic approach in state aid is discussed in more detail. From Part IV submissions, the views of Professor Josef Azizi, who is a judge of the General Court merit particular attention even if the views presented in Hamburg were personal. Though the European Commission enjoys broad discretion with regard to economic assessments, the court in recent years has demonstrated more willingness to exercise closer control to the ways the commission exercises such discretion. The more economic approach, according to Professor Azizi, offers certain advantages, such as precision which adds to the clarity of EU law in the area. Also, the new approach increases the foreseeability of the commission's state aid proceedings which eases the tasks of the judicial control.

Other interesting issues raised in the conference, which are presented in the book, include the discussions on the appointment of economists as judges to handle more effectively complex economic issues, on the role of political and social factors in state aid control and on the impact of the more economic approach on the relationship between lawyers and economists involved in competition cases. Also, in the annex of the book there is the text of a 2008 Report of the German Monopolies Commission on the more economic approach in European State aid control which offers a useful insight into the relevant European debate in the area.

Overall, the book contains a very interesting set of analyses and proposals on the more economic approach to EU competition law by a group of prominent European specialists who possess both theoretical and practical knowledge of this area of law. Though the law in the area is under constant review and updating, this does not reduce the significance of the submissions made in the book, which concern issues in the core of the more economic approach which remain largely unchanged.