CENTRAL QUESTIONS
1/ TO WHAT EXTENT ARE RMs AVAILABLE FOR UA-WPI-GENERATING, BUT THAT COULD VIOLATE A CL PROHIBITION?
2/ IF WPIS TAKE PRECEDENCE, WHY ARE RMS CURRENTLY MISAPPLIED?. HOW SHOULD THEY BE APPLIED, TO GET THE BEST FOR SOCIETY?
consumers = individuals, end users, or intermediate sellers
OUR OPINION IS THAT THE ABOVE 2 CENTRAL QUESTIONS, AND ALL RMS, SHOULD BE GOVERNED BY THIS PRINCIPLE:
if 2 wpicp, conflict, but both have the same overarching goal, the winning (implemented) wpicp is the one that furthers the overarching goal. because legal norms must not prohibit actions that further that norm’s goal., we can apply an alternative interpretation (to the standard interpretation) of conflictig legal norms….[specially so , of ‘open legal norms (those who do not specify in detail what is allowed or not..].
eg of a conflict between 2 wpicps:
in banking regulation, an overarching main ewpiua goal, is to increase the efficiency of markets, by remeding market failures. this is an overarching cl’s ewpiau goal… thus, is possible to rm cl and banking regulation, to achieve this single overarching goal.
thus, our opinion is that the cartel prohibition should be interpreted, and applied, in a different way, so that such single overarching goal is best achieved. to do this, cl should block some of its own restrictions to competition [cl should back off in some situations].
eucl ewpiua goals:
a. furthering (the theory of) EW [economic [prosperity=welfare=utility]]
b. protecting market rivalry
c. contributing to the creation of the single eu market.
a. furthering [(the theory of) EW] = economic theory
predicts that markets with perfect competition, maximise society’s overall EW and NEW(non economic) welfare.
the cs test:
but, how can we know, beforehand, what is the max price consumers would have paid?
we can only use indirect methods [eg surveys]. eg a group of producers planning an anticompetitive cooperation to improve the quality of their products, could survey potential consumers on the max price they would pay for the current product, and for the improved product. now, they can be compared (in monetary terms) to get the cs.
but the cs test will not give the correct cs, if either:
a. there is information asymmetry (cos/consumers) = information market failure
b. consumers’ preferences do not add to their ew…[eg due to consumers’ bounded rationality]. to remedy this market failure, paternalistic regulation restricts consumers’ freedom of choice.
the ps (producer (surplus=profit)) test:
total ew = ps + cs, current and future
diff:
a. societal welfare = welfare not only in a given market. [ewpiuas + newpiuas]
b. welfare in a given market only = total ew
…. [the maximisation of ew] = [efficiency], is a cl goal.
eg: if the total ew of producers and consumers ignore the costs [of their ewpiuas] to 3ps and society at large, then: societal welfare < total welfare.
ew = is the (given market’s) consumers’ level of satisfaction (eg meeting his buying preferences). to be able to compute EW, it must be first translated into monetary terms. this is done by measuring:
[consumer surplus(profit) = CS = [price paid by consumers – consumers preference ]maximum price consumers would have paid]]
an ua that increases cs , it also, indirectly, increases ew, because the consumer is now able to consumer more of other products/services. This violates cl
A limitation of competition, results in:
a. higher prices (due to map , which causes loss of ew)
map (market power) is a type of market failure (which cl tries to remedy)
in a perfectly competitive market, prices drop until [ selling price = seller costs]
in imperfect competitive markets, sellers can raise prices above costs. this harms ew [deadweight loss], because the consumer’s loss is larger than the seller’s gain.
b. Less innovation (RD), causes less gain of both ew, and societal welfare (because innovation improves the quality of life of society at large, and not only in a given market)…..but too much competition also reduces innovation, because of less profits to invest in RD….thus, for innovation, the optimum is in the middle: ‘significant competition produces optimal innovation’.
THE GOALS OF EU ANTITRUST [ = CARTEL PROHIBITION] LAW
eu antitrust rules, unlike eu merger control rules, are in the eu treaties (constitution)
EC
EC’S overarching goal is CP for ‘consumer welfare’ … but, what does ec mean by ‘consumer welfare’?: does it mean Societal welfare, or only CS ?….my opinion is that it refers only to CS (ie, welfare only on a given market). this is why the call it the ‘ec’s more economic approach’.
ec (unlike ecj) has set a hierarchy of goals:
1-protecting consumers = ew’s overarching goal.
2- 2 goals to safeguard market rivalry: …..ec on 101 tfeu: (competition restricting) uas, are not allowed to completely stop market rivalry (even if such ua would bring great benefits to society). ecj: not all market rivalry restrictions violate the cartel prohibition.
a.protecting competitors;
b. protecting competition by protecting the structure of the market;
3- protecting the creation of a single eu market): 101.1 tfeu: uas that hinder the single market are prohibited. ecj in spanish gsk, held: if a dominant ua partitions the single market, is an abuse under 102 tfe.
2 and 3, are newpiuas, thus subordinate goals (to protecting consumers – ewpiaua).
ECJ
ECJ is the only body authorised to interpret the eu Treaties (constitution), and this is how they do:
-spanish gsk case: ecj held: art 101 tfeu’s goal is to protect, not just competitors or consumers, but also the structure of the market……uas whose goal is to partition national markets by national borders, or aimed at difficulting the interpenetration of national markets, restrict competition under art 101 and 102 tfeu.
The Tinbergen principle:
2 goal-types that are not fully complementary (may conflict), cannot be fully achieved by 1 single policy-type or law……2 goals cannot be balanced, unless we have a democratically (law) set ‘exchange rate’.
my opinion is that ew goals, and market rivalry goals, may conflict*, thus, CP (1 single policy-type), should not aim to achieve ew goals, and market rivalry goals, simultaneously. thus, the eu parliament should make a clear, express, choice in favour of ew goals, as the only goal that CP should aim to achieve.
*eg:
101.3 tfeu: ‘uas that restrict competition but deliver consumer benefits, are allowed’.
102 tfeu: ‘uas non dominant and non abusive, are allowed.’
Both articles are are based on the concept that restricting market rivalry may deliver economic benefits. also, that competition may reduce innovation and therefore ew….. thus, 101.3 (a single law and policy-type)conflicts ew goals, and market rivalry goals. thus, the rm solution is that only ew should be applied to this law.
eg: 102 tfeu, is a single law, aiming to simultaneously serve 2 different goal-types
- ew goals
- furthering the internal market goals
Because these 2 goal-types may conflict (and have confliced in caselaw), only ew goal-types should be applied to this single law/policy-type. [uas that favour ew but hinder the single market should be allowed]
ok…but how do we rm conflicts when neither of the goal types are ew?:
ua conflicts between competition goal-types (n.2 above), and the protection of a single market goal-types (n.3 above), are reconciled (RM) this way: competition harm, and noncompetition benefits, are first translated into ew terms, and then balanced, to find if cl is violated.
other eu cps:
-3, teu: promoting peace is one of the ultimate goals of eu. other goals: dignity, freedom, etc.
= newpiuas
-11 tfeu: environment protection rules, must be integrated into eu’s policies and activities.
-12 tfeu: consumer protection rules, must be integrated into eu’s policies and activities.
because eucl’s only overarching goal is the maximisation of ew, the rest of the goals cannot be pursued via eucl.
THE CARTEL PROHIBITION TEST:
ua fails this test, if it
1- limits market rivalry, AND
2- reduces any ew component: ae (allocative efficiency) ; pe (productive efficiency); de (dynamic efficiency)
3- is another ew component increased?. if so, is the overall (considering all ew components) reduced?
THE GOALS OF THE EU MERGER CONTROL REGIME
Unlike eu antitrust rules, eu merger control rules are not in the eu treaties…but is regulation from the eu council, called the EUMR (its ultimate goal is ew) : uas for mergers that significantly impede effective competition, are prohibited…this means that mergers that lead to dominant positions, even if this dominance is not created, nor enhanced by the merger, are also prohibited.
ED’s goal is ew: 2.1.b eumr: non exhaustive criteria. eg: efficiencies can be technical and economic progress, to consumers’ advantage, which is not an obstacle to competition……….the merging uas have the onus to prove the ED (efficiency defence): where efficiencies offset the anticompetitive effects, the merger will be cleared. ec: if consumers are worse off, it will be blocked….ec: the mere creation of map [=the capacity to evade market rivalry], is not decisive… but if the map causes harm (to consumers), the merger is blocked.
horizontal mergers are between (actual or potential) competitors. Horizontal mergers (unlike vertical or conglomerate mergers) are the most likely to be prohibited.
the siec test is applied: is the same as THE CARTEL PROHIBITION TEST (above)….but a couple of variations.
Recitals 2 and 6 of eumr: the eu merger control regime’s goal (subordinate to the ew goal) is to contribute to the creation of the single market….anyway, mergers are very unlikely to affect interstate trade….on the contrary, they further the creation of the single market. Thus, following the tinbergen principle, the eurmr’s test should only have 1 goal: maximising ew….this is corroborated by Recital 23 eumr: when ec assesses a merger, must be within art2 tfeu, and art2 teu.
However, ec disagrees, saying that eumr only has 1 main goal: protection of competition….this is corroborated by eumr: the siec test is limited to both competition and max.ew goals….protecting market rivalry is a secondary goal…. just like in eu antitrust goals (above)