Atale of Two Cities: Brussels, Washington, and the Assessment of Unilateral Conduct
| DOI | 10.1177/0003603X1105600107 |
| Author | Alden F. Abbott |
| Date | 01 March 2011 |
| Published date | 01 March 2011 |
| Subject Matter | Foreign Antitrust |
A tale of two cities: Brussels,
Washington, and the assessment
of unilateral conduct
BY ALDEN F. ABBOTT*
Achieving convergence between American and European competition
law approaches to the assessment of single firm conduct (SFC) would
reduce costly business uncertainty and promote beneficial commercial
activity. In 2009, the European Commission issued formal guidance on
its analysis of SFC; a 2008 Justice Department Report on SFC was
critiqued by the Federal Trade Commission and withdrawn in 2009.
Although withdrawal of the Justice Department Report may have
narrowed the perceived gap between American and European SFC
policy (and reduced potential tensions between Justice Department
and FTC approaches), it has not fully eliminated it. Steps that might
be taken to bridge this gap include framing bilateral discussion in
commonly accepted economic terms; working toward a common
understanding of balancing tests; seeking to establish consensus
approaches to particular practices; analyzing the centrality to the
competitive process of conduct under scrutiny; taking into account the
most recent findings from economic research; and cooperating in
investigations. Although not a panacea, these and similar approaches
should lead to greater consistency between U.S. and European
enforcement policy and thereby promote welfare.
* Deputy Director for Special Projects, Office of International Affairs,
Federal Trade Commission.
AUTHOR’S NOTE: The views expressed in this article are solely mine. They do not
necessarily represent the views of the Federal Trade Commission or any Federal Trade
Commissioner.
© 2011 by Federal Legal Publications, Inc.
104 : T H E A N T I T R U S T B U L L E T I N : Vol. 56, No. 1/Spring 2011
I.
INTRODUCTION
The past decade has featured significant efforts to promote conver-
gence of antitrust law standards (“competition law” in international
parlance) worldwide. These efforts have borne substantial fruit in
core fields including merger process, substantive merger analysis,
and cartel prosecution.1 In the areas of monopolization and (the Euro-
pean analogue) dominant single firm conduct (SFC), however, there
remains a gap between the approaches taken by the two enforcement
“market leaders,” the United States and the European Union. Just as
significantly, there is uncertainty about the approaches to SFC that
will guide policy at the U.S. Department of Justice (DOJ) and the U.S.
Federal Trade Commission (FTC). In a global economy increasingly
characterized by international transactions, the existence of divergent
enforcement approaches to SFC engenders costly business uncer-
tainty and may deter consumer welfare–enhancing commercial activ-
ity.2 Given the importance of clear SFC rules to both the business
community and to enforcers (who need to reduce the costs of cooper-
ation and multijurisdictional enforcement), policy convergence in this
area (both at home and abroad) would be highly beneficial. The
salient question, however, is how do we achieve such convergence?
1
The International Competition Network (ICN), a multilateral forum of
international competition officials and private sector experts founded in 2001,
has been the major force in promoting convergence. Through its working
groups and annual meetings, it has worked to promote acceptance of best
practices in merger process, substantive merger analysis, cartel enforce-
ment, and single firm conduct. A description of the ICN’s initiatives may be
found at http://www.internationalcompetitionnetwork.org/index.php/en
/about-icn.
2
The ICN has a Unilateral Conduct Working Group, which focuses on
issues of single firm dominance. At the 2009 ICN 8th Annual Meeting in
Zurich, Switzerland, the ICN Membership adopted reports on the analysis of
tying and bundled discounting and on the analysis of single-product loyalty
discounts and rebates in over thirty jurisdictions. At the 2008 ICN 7th Annual
Meeting in Kyoto, Japan, ICN Members adopted recommended practices on
the assessment of dominance (or substantial market power) and on the analy-
sis of state-created monopolies. Over the next year, the Unilateral Conduct
Working Group intends to focus on how members assess refusals to deal (and
related conduct, such as “margin squeezes”).
U N I L AT E R A L C O N D U C T : 105
Following background observations on the crafting of SFC rules,
this article briefly assesses the approaches to SFC taken in a September
2008 DOJ report (the Section 2 Report or the Report) and in a rebuttal
statement issued by a majority (three out of four) of the FTC’s Com-
missioners (the Section 2 Statement or the Statement).3 After dis-
cussing DOJ’s May 2009 withdrawal of the Section 2 Report, the article
sets forth considerations that the FTC and DOJ may wish to weigh if
they seek to harmonize their positions on SFC. It next turns to an eval-
uation of the European Commission’s (EC) December 2008 Guidance
Paper (the Guidance Paper) on exclusionary SFC under European law.
It then briefly summarizes differences between the Guidance Paper
and U.S. policy, in light of the withdrawal of the Section 2 Report. The
3
Compare U.S. DEP’T OF JUSTICE, COMPETITION AND MONOPOLY: SINGLE-
FIRM CONDUCT UNDER SECTION 2 OF THE SHERMAN ACT (Sept. 2008) [hereinafter
DOJ SECTION 2 REPORT], available at http://www.usdoj.gov/atr/public
/reports/236681.pdf with U.S. FEDERAL TRADE COMM’N, STATEMENT OF COMMIS-
SIONERS HARBOUR, LEIBOWITZ, AND ROSCH ON THE ISSUANCE OF THE SECTION 2
REPORT BY THE DEPARTMENT OF JUSTICE (Sept. 8, 2008) [hereinafter FTC SECTION 2
STATEMENT], available at http://www.ftc.gov/os/2008/09/080908section
2stmt.pdf. The FTC Section 2 Statement, agreed to by three of the four Federal
Trade Commissioners (Chairman Kovacic did not sign on), states plainly that
“the Department of Justice . . . issued a Report that, if adopted by the courts,
would be a blueprint for radically weakened enforcement of Section 2. . . . The
Federal Trade Commission . . . does not endorse the Department’s [Section 2]
Report.” FTC SECTION 2 STATEMENT, supra, at 1 (citation omitted). Chairman
William Kovacic issued a separate statement calling for greater empirical
examination of and research on the issues raised by the DOJ Section 2 Report.
See Statement of FTC Chairman William E. Kovacic, Modern U.S. Competition
Law and the Treatment of Dominant Firms: Comments on the Department of
Justice and Federal Trade Commission Proceedings Related to Section 2 of the
Sherman Act (Sept. 8, 2008) [hereinafter Comments on the Section 2 Report
and FTC Statement], available at http://www.ftc.gov/os /2008/09/080908sec-
tion2stmtkovacic.pdf. DOJ withdrew the Section 2 Report on May 11, 2009,
making clear that it no longer reflected DOJ antitrust enforcement policy. See
Press Release, U.S. Dep’t of Justice, Justice Department Withdraws Report on
Antitrust Monopoly Law (May 11, 2009) [hereinafter Section 2 Withdrawal
Press Release], available at http://www.usdoj.gov/atr/public/press
_releases/2009/245710.htm. Although the DOJ Section 2 Report has been
withdrawn, defense counsel in antitrust litigation may continue to cite it.
Accordingly, although it no longer represents government enforcement policy,
it may continue to have some influence and thus merits a brief discussion.
106 : T H E A N T I T R U S T B U L L E T I N : Vol. 56, No. 1/Spring 2011
article concludes by suggesting guiding principles that may help Euro-
pean and American competition policy makers find common ground
as they seek to bridge remaining transatlantic SFC policy differences.
II.
BACKGROUND—WHAT ASSUMPTIONS SHOULD
INFORM SFC RULES?
Crafting appropriate antitrust rules applicable to SFC is an inher-
ently problematic exercise. It is often difficult to decide whether
aggressive unilateral behavior seeks inappropriately to exclude rivals
and harm the competitive process (and thus reduce consumer wel-
fare) or, instead, to enhance overall efficiency and thereby strengthen
the competitive process (despite the harm inflicted on less effective
competitors).4 Relatively “restrictive” antitrust rules designed to dis-
courage “bad” SFC may also discourage “good” single firm behavior
from being undertaken in the first place and lead to incorrect prosecu-
tion of some aggressive looking but procompetitive conduct (false
positives or type I error). By contrast, relatively lax antitrust rules
devised to allow more aggressive procompetitive SFC may also lead
to incorrect failure to challenge some anticompetitive conduct (false
negatives or type II error). In principle, applying decision theory,5 the-
4
As Judge Easterbrook put it: “Aggressive, competitive conduct by a
monopolist is highly beneficial to consumers. Courts should prize and
encourage it under the antitrust laws. Aggressive, exclusionary conduct by a
monopolist is deleterious to consumers. Courts should condemn it under the
antitrust laws. There is only one problem. Competitive and exclusionary con-
duct look alike.” Frank L. Easterbrook, When Is It Worthwhile to Use Courts to
Search for Exclusionary Conduct?, 2003 COLUM. BUS. L. REV. 345 (2003). The
Court of Appeals made an analogous point in United States v. Microsoft, 253
F.3d 34, 58 (D.C. Cir. 2001) (“Whether any particular act of a monopolist is
exclusionary, rather than merely a form of vigorous competition, can be diffi-
cult to discern: the means of illicit exclusion, like the means of legitimate com-
petition, are myriad. The challenge for an antitrust court lies in stating a
general rule for distinguishing...
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