Volume 2 - Issue 2

Whole Issue

Competition Law Review - Volume 2 Issue 2 (Coming Soon)

Editorial

Editorial

Richard Whish (129 KB)

Articles

Article 82 EC: Where are we coming from and where are we going to?
Liza Lovdahl Gormsen (256 KB)

This paper considers the most appropriate way of modernising the European Commission’s enforcement policy on abuse of a dominant position. It argues that a modernisation of Article 82 EC requires a clarification of the underlying objective of the ‘protection of competition’ as well as a change of the current methodology from ‘form’ to ‘effects’. The first part of the paper examines the Continental Can, Commercial Solvents and Hoffmann-La Roche cases to show that the objective of the ‘protection of competition’ in these cases was understood as meaning economic freedom of other market players, inspired by the ordoliberal school of thought. The first part concludes that an appropriate modernisation of the Commission’s enforcement policy would require a change of the reading of the objective of the ‘protection of competition’ to mean the enhancing of consumer welfare, and ensuring an efficient allocation of resources. A change from economic freedom to consumer welfare would align Article 82 EC with the Commission’s enforcement policy in Article 81 EC and merger control. The second part of the paper considers more recent case law and shows that the methodology adopted is formalistic, in that it relies on assumptions instead of sound economics; this is particularly clear in the recent judgments in Michelin and British Airways. The second part concludes that a more suitable methodology would be one where the unilateral conduct of dominant undertakings is assessed on the basis of its actual or likely effects in the market.

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The Concept of ‘Objective Justification’ of an Abuse of a Dominant Position: Can it help to Modernise the Analysis under Article 82 EC?
Ekaterina Rousseva (611 KB)

This The purpose of the article is to clarify the scope and the operation of the concept of ‘objective justification’ of an abuse of a dominant position and to ascertain whether the concept can be instrumental for modernising the current enforcement policy under Article 82 EC. In particular, the paper examines whether the concept of objective justification can help to narrow down the scope of Article 82 and make its application consistent with the application of the already modernised Article 81EC. For this purpose, the paper critically examines the proposals made in the literature that the concept of objective justification can be employed as a ‘meeting competition justification’ and as an ‘efficiency justification’ for exclusionary conduct of dominant undertakings. A close examination of the case law shows that the Community Courts’ perception of objective justification is very narrow – it relates only to objective factors and public policy considerations which are beyond the control of private firms. The paper shows that meeting competition and efficiency justifications not only do not find support in the case law but their acceptance under Article 82 is obstructed by the way the concept of abuse is interpreted. The paper advocates that the concept of objective justification alone cannot provide a solution to the current problematic application of Article 82 and tentatively suggests alternative ways of thinking about the notion of abuse, and especially of the notion of competition on the merits.

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Article 82 and the New Economy: Need for Modernisation?
Michele Messina (406 KB)

Some consider the application of Article 82 EC too formalistic and incoherent with the lack of any sound economic basis when applied to traditional markets. This view seems to be even more prevalent when it applies to new economy markets as they present a peculiar set of characteristics, such as economies of scale, network effects, consumer lock-in, and high rates of innovation, which distinguish them. It is possible to identify two divergent approaches: those who concentrate particularly on the dangers of network effects as a reason to justify an aggressive antitrust policy; and those who consider antitrust enforcement as largely unnecessary, because the dynamic characteristic of these industries makes any dominant position temporary as those markets are highly contestable. These two different views seem to constitute an extension of two conflicting perspectives of the ‘neo-structuralist’ and the ‘neo-Schumpeterian’. The former favours aggressive antitrust enforcement when an anti-competitive behaviour is carried out, the latter considers dominance in the new economy markets as temporary and short-lived. Both the European Commission and the EU courts, on one side, and the majority of national competition authorities, on the other side, have focused their attention on the neo-structuralist view. The scope this article is to discuss these two approaches in the light of the EU Commission’s Microsoft Decision, trying to conclude that, as long as the application of Article 82 to new economy markets afford market access for all participants without eliminating incentives to innovate or frustrating the dynamism of those markets, there is no reason to modernise it through ‘revolution’, as consumer choice is another important competition policy aim to be achieved.

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Exporting Article 82 EC to Singapore: Prospects and Challenges
Burton Ong (361 KB)

Section 47 of Singapore’s recently enacted Competition Act 2004 prohibits commercial conduct which 'amounts to the abuse of a dominant position in any market in Singapore', effectively transplanting a legal standard which originated from Article 82 EC into the domestic legal landscape. This article identifies and explains the key modifications which have been made by Singapore legislators to the Anglo-European legal framework for Article 82 EC, while exploring the difficulties that are likely to arise from the wholesale importation of established Article 82 EC jurisprudence into this branch of Singapore’s new Competition Law in light of the following domestic economic characteristics: (1) a broad spread of government-linked companies occupying entrenched positions of market leadership in most major economic sectors; (2) the small size of the Singapore’s domestic market and the substantial presence of export-driven industries serving regional and international markets; (3) monopolistic and oligopolistic market conditions in several significant high-value tertiary industries, exacerbated by a recent wave of merger and consolidation activity; (4) the co-existence of separate sectoral regulatory frameworks for the telecommunications, media and energy industries which have been excluded from the scope of the Act, along with a host of other statutorily-prescribed exceptions; and (5) a deeply-entrenched laissez faire business culture which has given market-leading undertakings considerable commercial freedom prior to the introduction of the new Competition Law.

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An Experimental Investigation of Article 82 Rebate Schemes
Martin Beckenkamp & Frank P Maier-Rigaud (183 KB)

We conduct an experiment to test standard theoretical predictions concerning switching behavior in a rebate and a discount scheme. Beyond theoretical expectations we find that rebate and discount schemes exert a significant attraction that enhances the potentially exclusionary effect of the schemes. From a competition policy perspective this is an important result because it emphasizes that it may be crucial to analyze to what extent firms deviate predictably from decision patterns prescribed by standard economic theory. Competition policy cannot accord to neglect the possibility of boundedly rational firms deviating systematically from standard theoretical predictions.