-WHAT IS THE TEST TO DECIDE WHETHER AN UA EFFECT IS ELIGIBLE (UNDER 1STCOND, OR UNDER EAF)?
EC+CMA: ELIGIBLE ARE ONLY THOSE (PRESENT OR FUTURE) AU EFFECTS THAT INCREASE/PROTECT [CONSUMER WELFARE = CONSUMER SURPLUS (CS)]
EC+CMA: EU POLICY GOALS CAN BE CONSIDERED IN THE EP, ONLY IF CAN BE SUBSUMED INTO THE 4CONDITIONS.
WHY REGULATE BANKS?
A. efficiency goals [ewpiua goals]: to remedy market failures, to increase societal welfare (sw). eg: government decision (paternalism) that, is insufficient (to clear a merger) that consumers are willing to pay for the correction of negative externalities (eg polution, or systemic financial risk),
B. non-economic goals [newpiua goals]:
eg risk or income redistribution (eg paternalism – eg: banks banned from selling certain savings products, because too many consumers would not correctly balance the short term benefits (of high interest rates) v the long term harms (low interest rates) ; other paternalism example: education, or basic banking services must be offered to the disadvantaged with a subsidy. ;moral or social preferences; safeguarding public values like honesty and fairness; increasing the number of bank branches in rural areas. etc.
regulation affects markets, sometimes negatively…thus, regulation should only be where it could have a positive welfare effect.
BANKS ROLE IN SOCIETY
Bank loans are about 60% of firms’ external financing.
ec’s state aid scoreboard revealed that eu banks get state aid of nearly 1 trillion euros per year
2 bank services crucial for society:
a. intermediary between lenders and borrowers (both are members of the public)
b. operating the payment system
THE GOALS OF BANKING [REGULATION=INTERVENTION]
banking regulation is a ewpiua policy that may conflict with eucl.
diff:
- cl: prohibities the lessening of existing competition.
- sectorspecificregulation: force uas to increase competition. eg the payment account directive, can force banks to agree on an easy way for consumers to switch bank
cl is of little relevance in banking economic regulation….. the uk FSA has a specific duty to promote competition. also, there are only a couple of directives that deal with cl in banking regulation. p.69.
banking regulation :
3 sources: government; selfregulation by banks; and rescue mergers.
2 types:
a.prudential: focuses on solidity of banks and stability of the financial system.
b. business conduct: how banks do business with consumers and counterparties.
consumer law(crl) v cl:
-in cl, a consumer is a buyer, thus it can be a multinational, or even central gov.
-cl protects society’s prosperity…..crl protects individual consumers.
-cl’s main goal is the max. of (perceived) ew…. cl does not address other market failures, nor is worried with fairness, nor the rightness of products…….crl’s goal is individual consumers(eg from info asymmetry)…and, in pursuing this goal, crl , indirectly, pursues also cl’s main goal.
THE EP
The EAF (exemption analytical framework) solves conflicts [cl v eg.selfregulation]. newpiuas cannot be included in eaf.
THE EP – 101 tfeu
EPpreserves uas that infringe the cartel prohibition, as long as they produce sufficient benefits for buyers [not the same as consumer….buyer can also be a multinational, even central gov]
101 tfeu, should not block any ua [wether newpiua, or ewpiua], that, on balance, increases ew….thus, any goal that may increase ew, can be included in the EP. this is the first eaf test.
beofre the EP balancing is possible, wpis must be able to be translated into monetary terms, so they can be compared. the balance is a balance of probabilities. no hard evidence is required by ecj.
The ep has 4 conditions, in the eaf:
CONDITION 1
the ua must ‘contribute to improving the production or distribution of goods/services, or tech, or economic progress.’
CONDITION 2
the ua must allow consumers a fair share of the benefits
Eg an increase in societal ew, from th internalisation of negative externalities, fails this 2nd cond, if consumer surplus is not increased
-whether the ua benefits are beneficial enough, depends on the effects for all affected buyers (current and future), as a group….
-benefits for society must not be considered
-beneficiaries receive a fair share of the ua’s benefits, only if they are at least compensated (for the anticompetitive harm)
CONDITION 3
the competition restriction is indispensable to attain the benefits
the only applicable test is whether the comprestriction may produce the claimed benefits, as in the meaning of the 1stcond.
the nolessrestrictivealternatives test, is not applicable.
CONDITION 4
the ua may not eliminate a substantial part of competition, in a market.
the comprestriction must not eliminate innovation on a key product , or feature, beyond the short term.
CONDITION 1
‘the ua must contribute to improving the production or distribution of goods/services, or tech, or economic progress’
cond.1 is to balance conflicts between ewpiua goals, and the cartel prohibition:
eg. bank self regulation to achieve ewpiau goals, harms competition between banks…if so, the cartel prohibition may block such self regulated ewpiau goals. but if the benefits of such selfregulation outweight the anticompetitive effects, it would be negative for society at large.
2 rms may be used to weight/balance:
a. the EP
b. the Wouters doctrine = LOAD
The 1st cond, admits for balancing, either nefwpiuas or efwpiuas, only as long as they can be translated into monetary, ew terms; and where that translation evidences that ua may generate the benefit of increased ew [buyers gaining more ew thanks to this ua]….iow, the 1stcond only admits for balancing nefwpiuas or efwpiuas, that have the potential to become ebwpiuas.
-will such [nefwpiua or efwpiua] [eg innovation], really , in the future, become ebwpiua? , and if so….to what extent?…is hard to predict, but even if is a ‘may be’, and is to be realised after many years…it may still be admited for balancing.
<> padi can challenge EPs granted by courts, if a proposed benefit failed to materialise, or did so to little extent.
newpiua effectss are not eligible, because they cannot be compared to anticompetitive effects, becasue newpiuas cannot be measured in money, but in different units. This lack of a common unit between anticompetitive effects, and newpiua effects, means that this conflict can only be resolved by political, subjective decisions (law-by parliament). this should not be decided by the courts, and even less, by the undertakings themselves (their sole duty is not to reduce consumers prosperity by collective action)…..but the law is silent about how to balance….which is a shame….eg: the min.amount of biofuel that should go into gasoline, is not to be decided by a horizontal agreement among suppliers, nor by the cma, or ec. this should be decided by democratically elected legislators….or by large consumer associations that represent consumers with their consent….
padi could argue that a particular newpiau effect, of a [proposed, or existing] merger, offsets its anticompetitive effects, so it should be allowed…. or that it does not offset it, and should be blocked…. to support either possibility, padi can argue that , since the law is silent about how to balance, and neither courts , nor ec/cma, nor the undertakings themselves, are legitimised to balance…. padi, as a charity democratically elected by consumers, representing them with their consent,or, alternatively, padi is subject to control by a demo elected body…. then, padi is more legitimised (than courts/cma/ec…), to balance….padi will offer , to the undertakings, a position paper, under an NDA, advising on how the uas should be amended…. or PAP
-govs as undertakings, and undertakings as govs:
gov may delegate {never political decisions} to private parties [eg: undertakings, trade associations and ngos], the exercise state functions, like the execution of a public policy …. but gov cannot delegate away its overarching duties and power [ to check if that private party is really serving the wpi, and to intervene, if they dont], nor can gov delegate policy making or the [prioritisation=balancing] of public policies.
cl does not apply to private parties exercising state functions…. but..does cl apply to a State acting as an undertaking? yes, it applies, because:
a. not all state functions are equally demo.legitimised.
b. eucl would be jeopardised if member states could unilateraly violate it….memberstates are not allowed to invoke their demolegitimacy to ignore eucl.
-the undertakings have the duty to establish whether they comply with the EP…. and courts have a duty to apply the EP…. the EP applies from the moment the 4 conditions are met….there is then no need for the cma/ec to be involved. … ec/cma lack demolegitimacy to balance [newpiua BENEFITS V EW], in the EP.
-ec has a bit of demolegitimacy, thanks to the involvement and control , of ec, by the euparliament and eucouncil , in ec…..ec can issue law proposals, and implement policies and laws (eg cl), and issue delegated acts [nonlegislative]…. ….but ec cannot balance , nor decide the substance of laws or policies.
-courts decide the scope of the EP, but cannot [balance=rm] public policies. courts balance rights, laws, legal principles, and interests thereof, in connection with private litigants who are before the court physically present… [and not all buyers, or all society…as they cannot all be present before the court, court should not balance] ….this is why newpiua BENEFITS, are not eligible for inclusion in the balancing of the EP.
eg: when ecj balances exceptions to freedom of movement within eu, ecj does not balance the freedom of movement rule v member states legitimate interests….ecj leaves it to the statemembers to balance
<> padi’s EEAC [awards locus standi] only flow from claims v State/gov/sosbib decisions [eg parliament decision to write a law , which is unlawful; sosbib balancing decision; etc]……
EXCEPTION: if there is ultravires, padi also has standi (eeac) to claim v :
<> PADI v State that is acting ultravires [by overdelegating] ….
<> PADI v the delegated body (eg ec, cma, private parties that won a public tender, courts [padi can void a court decision], countries, ngos, etc), as is also acting ultravires,[by carrying state functions that lack demo.legitimacy (eg prioritisation=balancing, of public policies)]
Private paternalism:
means that consumer surplus (CS) cannot be used to det ew. Thus, paternalistic private wpiuas go against buyers preferences, thus, cannot be included in eps first condition, because private undertakings lack demolegitimacy to balace, on behalf of buyers.
if paternalism emerges from a private ua, or from a selfregulated ua, it cannot benefit from the EP, as lacks demolegitimacy.
if paternalism emerges from gov, it does not need the EP, since the gov can , and should, balance, rather than a court.
ICs = integration clauses = policy linking clauses
allows public policies to be developed together, in a holistic view.
12 tfeu: consumer protection must be considered when defining other eu policies
11 tfeu: environmnt protection must be considered when defining other eu policies
7 tfeu: eu shall ensure consistency between its policies and activities, taking all its objectives into account.
integration clauses have been used: to interpret eu law; to identify the limits of eu’s competence; and to identify the limitations and justifications for memberstates actions/omissions.
public policies must be developed and implemented by following the integration clauses as much as possible…., BUT ONLY to the extent that this choice does not conflict with the main policy, and serves the goals of all integration clauses at
Ics do not allow private uas, to balace newpis/ ewpis. Thus, ics are not in the EP, [unless the ic requires thats its, non comp, policy, [icnewpi] must be prioritised over cp.if so, the ic poicywould have to be icluded inthe EP balancing act.] to offset the cp.
In cisac, ecj held that ecs decision to ban a cartel, would harm eu cultural diversity, and thus would be contrary to ic on culture. But ecj rejected this opinion.
In universal/emi, ec held that this merger would reduce consumer choice, which could, indirectly, also harm eu cultural Diversity..Thus, cp and cultural effects, do not directly conflict. Thus, cultural effects are not to be included in the ep balancing.
Ics do not require newpi benefits in the ep.
1st cond ep. Caselaw:
Ecj: supporting employment can be included [ in 1st cond ep]
Ecj, binon case, media plurality is in ep, not on economic/ competition grounds, but on democratic grounds….thus, the attainment of ew, was not required, becos promoting media plurality does not increase consumer surplus….Thus, ecj disagrees with the eaf…
1st cond ep. Ec practice:
Costs and qualitative efficiencies = direct economic effects . DEES are included…in 1stepcond
Dees. = improvements in price, quality, range, or service, for direct and indirect buyers, in a given market, affected by the anticompetitive ua. ALL DEES ARE ALSO EBS]. egs of :
a.less production costs.
b.Innovation increase.
c.Entry of new markets
Bnp.dresdner: these banks cooperated by exchanging know how, developing it systems, mutual reselling, and joint operations abroad.ec held that these are dees and thus, must be included, as banks consumers benefited from the coop
uas can produce iees [indirect ec. effects] . ec is more reluctant to accept iees, than dees…..however, these iees may be included in the 1st EP condition:
a.reduction of fin stability risks because of selfregulation
b.limiting the risks of overindebtness of borrowers
c.cost reductions that sellers may enjoy, if consumers increase use of payment cards, instead of cash.
CECED case:
ec held (in line with the 2001 horizontal guidelines), that 101.3 tfeu may only exempt environment protection ebwpiuas, that outweigh their costs for competition.
in this case, the environment protection ebwpiuas, were measures removing [ieewpiuas =negative externalities] = the reduction of carbon emissions
ec carried these steps:
- translated this ebwpiua into monetary terms, ….iow, ec converted this ebwpiua, into an eewpiua.
- balanced by weighing the ‘cost savings’ v the expected anticompetitive effects (price increases).
However, the ec has , since the 2011 guidelines on art 101.1, changed to a ‘more economic approach’. this means that the only 2 types of ebwpiua, that ec now deems eligible for ep balancing are: [cost efficiencies; and qualitative efficiencies] = [deewpiuas]… eg the benefit of lower running costs ,of washing programs, due to reduced water, electricity, soap consumption;
Thus, no longer any ebwpiua that can be translated into eewpiua, is eligible for EP balancing …. now, the only eligible ebwpiuas, are deewpiuas…thus, iefwpiuas may no longer be eligible …eg: environprotection; selfregulation to remedy a market failure; etc
EC AND CMA OPINION:
- DEEWPIUAS ARE ELIGIBLE UNDER 1STCOND AND UNDER EAF
- IEEWPIUAS CAN BE, BUT EC IS RELUCTANT TO DEEM IT ELIGIBLE UNDER 1STCOND. THEY ARE ELIGIBLE UNDER EAF
- NEFWPIUAS ARE NOT ELIGIBLE UNDER 1STCOND. BUT THEY ARE ELIGIBLE UNDER EAF, IF THEY CAN BE TRANSLATED INTO EW , THUS BECOMING EBWPIUAS.
GSN CASE:
A cooperative joint venture (ua) between the 3 largest dutch banks, regarding the processing of cash. Brinks, a cash transport company, complained to the dutchcma that the banks cooperation violated the cartel prohibition. dutchcma agreed, but concluded that the competition restrictions could benefit from the EP (eg bundling of cash transports could save costs). as the benefits outweighted the anticompetition harm, the ua was allowed to continue.