Guidance on Abuse in Europe: The Continued Concern for Rivalry and a Competitive Structure

• Author: Liza Lovdahl Gormsen,Philip Marsden
• Date: 01 December 2010
• Published date: 01 December 2010
• DOI: 10.1177/0003603X1005500408
• Subject Matter: Article

Guidance on abuse in Europe:

The continued concern for rivalry

and a competitive structure

BYPHILIP MARSDEN*AND LIZA LOVDAHL GORMSEN**

Both the United States and the EU allegedly protect the competitive

process through an effects-based approach to the analysis of

exclusionary abuses. Importantly though, each jurisdiction starts from a

different end of the spectrum. The article finds that while U.S. antitrust

appears to protect the competitive process to enhance consumer welfare

in the form of allocative and productive efficiency, EU competition law

protects the structure of competition to protect rivalry. When applying

Article 102 TFEU, the European Commission and the courts rely on two

presumptions that hearken back to Ordoliberalism. The existence of

dominance creates a presumption of harm to the structure of

competition (foreclosure), and that harm to the structure of competition

in turn creates a presumption of likely harm to consumers

(anticompetitive foreclosure). These presumptions are apparent in case

law as well as the Commission’s Guidance Paper on Article 102. This

article concludes that despite having the same aim, there is still a trans-

Atlantic divide about how best to protect the competitive process.

THE ANTITRUST BULLETIN:Vol. 55, No. 4/Winter 2010 :875

—* British Institute of International and Comparative Law.

** London School of Economics and King’s College London.

AUTHORS’ NOTE: This article develops themes raised in Philip Marsden, Monopoli-

zation: What is Behind the Trans-Atlantic Divide?, in CHALLENGES IN THE

ENFORCEMENT OF ARTICLE 82 (Federico Etro & Ioannis Kokkoris eds., 2010) by in

particular tracing further evidence of Ordoliberal thought in current enforcement practice

and case law.

© 2010 by Federal Legal Publications, Inc.

I. INTRODUCTION

On either side of the Atlantic top enforcement officials have recently

stated that the aim of their prohibitions of monopolization and abuse

of dominance—Sherman Act section 2 and Article 102 of the Lisbon

Treaty (ex Article 82),1respectively—is to protect the competitive

process through an effects-based approach.2Indeed, over the past few

years, the two jurisdictions seem to have been coming closer together.

According to current Assistant Attorney General Christine

Varney,“[B]oth jurisdictions eschew per se and formulaic approaches,

and instead embrace effects-based analyses of single-firm conduct.”3

This was echoed by then-Competition Commissioner Neelie Kroes:

“An effects-based approach has also been central to our Article 82

[now Article 102] enforcement in recent years.”4

That said, each jurisdiction starts from a different end of the

spectrum, as Varney has emphasized:

There still may be some level of disconnect between the U.S. and the EC

in our fundamental attitudes—or underlying presumptions—about what

it means to protect the competitive process and how competition law best

achieves that objective.

. . . .

876 :THE ANTITRUST BULLETIN:Vol. 55, No. 4/Winter 2010

1The Lisbon Treaty came into force on December 1, 2009, and Article 82

EC was renumbered Article 102 of the Treaty on the Functioning of the Euro-

pean Union.

2Neelie Kroes, Competition Commissioner, Preliminary Thoughts on

Policy Review of Article 82, Speech to Fordham Corporate Law Institute (Sept.

23, 2005), available at http://europa.eu/rapid/pressReleasesAction.do ?reference

=SPEECH/05/537&format=HTML&aged=0&language=EN&guiLanguage=en;

Christine A. Varney, Assistant Attorney General, Striving for the Optimal Balance

in Antitrust Enforcement: Single-Firm Conduct, Antitrust Remedies, and

Procedural Fairness, Remarks Prepared for the Council on Foreign Relations 3

(Oct. 8, 2009), available at http://www.justice.gov/atr/public/speeches

/250814.htm.

3Varney, supra note 2, at 4.

4Neelie Kroes, Competition Commissioner, Exclusionary Abuses of

Dominance: The European Commission’s Enforcement Priorities, Speech to

Fordham Corporate Law Institute (Sept. 25, 2008), available at http://europa

.eu/rapid/pressReleasesAction.do?reference=SPEECH/08/457&format

= HTML&aged=0&language=EN&guiLanguage=en .

[T]here still seems to be more scepticism in Europe than in the U.S. about

the generally procompetitive nature of price discounting and the impor-

tance of efficiencies.5

There is thus still a trans-Atlantic divide about what it means to

protect the competitive process and how best to do that. Both the

United States and the EU protect the competitive process

instrumentally, i.e. as a means to an end. However, the United States, in

our view, protects the competitive process to enhance consumer

welfare6in form of allocative and productive efficiency, whereas the EU

still protects a competitive structure to protect rivalry. It does this for

various stated ends, including economic freedom7and consumer

welfare,8even though these ends may conflict with each other.9In the

United States historically, we saw a similar concern for rivalry—rather

than mere economic efficiency—but then it was called “populism” or

“structuralism,” and it produced results that were very different from

those the authorities and courts have produced since the focus

changed, in the 1970s, to economic efficiency and consumer welfare.10

ABUSE OF DOMINANCE :877

5Varney, supra note 2, at 6.

6Reiter v. Sonotone Corp., 442 U.S. 330, 343 (1979); ROBERT BORK, THE

ANTITRUST PARADOX: A POLICY AT WAR WITH ITSELF 91, 427 (1993); Joseph Farrell

& Michael L. Katz, The Economics of Welfare Standards in Antitrust, 2 COMPETITION

POL’YINT’L1 (2006); Thomas O. Barnett & Hill B. Wellford, The DOJ’s Single-

Firm Conduct Report: Promoting Consumer Welfare Through Clearer Standards for

Section 2 of the Sherman Act, 2 GLOBAL COMPETITION POL’Y2 (2008); Christine A.

Varney, Vigorous Antitrust Enforcement in this Challenging Era, Remarks

prepared for the United States Chamber of Commerce 7 (May 12, 2009).

7Economic freedom means that the economic system should allow all

individuals the freedom to participate in the marketplace unimpaired by the

power of other companies.

8One common definition of consumer welfare is consumer surplus,

which is the aggregate measure of the surplus of all consumers. The surplus

of a given consumer is the difference between his or her valuation of a good

and the price he or she actually pays for it. See MASSIMO MOTTA, COMPETITION

POLICY: THEORYAND PRACTICE 18 (2004).

9Liza Lovdahl Gormsen, The Conflict between Economic Freedom and

Consumer Welfare in the Modernisation of Article 82 EC, 3 EUR. COMPETITION J.

329–31 (2007).

10 Liza Lovdahl Gormsen, The Parallels between the Harvard Structural

School and Article 82 EC and the Divergences between the Chicago and Post-Chicago