The modernization of EU antitrust laws muddied the water with regard to the ways that antitrust authorities and courts should handle situations in which the promotion of some public policies would benefit from corporate collusion.
Should antitrust (competition) rules be relaxed to improve working conditions of gig-economy workers? To allow soda companies to collectively reduce plastic packaging? Or in times of crisis to ensure the supply of food and medicine?
These situations involve public policy considerations beyond what is normally thought of as being protected by competition law. They are referred to as non-competition interests, and they can include anything from culture to sustainability, innovation, or employment. Such questions surrounding the role of non-competition interests have occupied the minds of legal and economic thinkers, practitioners, and policy makers for a long time. In the European Union (EU) context, there has been a controversy regarding these unique situations that traces all the way back to the establishment of the European Communities in the 1950s, when the founding member states agreed to disagree on this sensitive political matter. Instead, Article 101 TFEU – the prohibition against anti-competitive agreements equivalent to Section 1 of the Sherman Act – adopted vague wording, hinting that there is some room for consideration of non-competition interests, but not detailing what type of interests can be taken into account, their role and scope, and the tests guiding their considerations.
Since the member states did not adopt a clear framework, the task of balancing between the protection of competition and the promotion of other public policies was mostly left to the European Commission (“Commission”), with some (rather limited) supervision by the EU Courts. They tackled this challenge on a case-by-case basis, and did not revert to a clear set of balancing principles either.
The debate over the role of non-competition interests attracted growing attention around the turn of the millennium, upon the introduction of a three-pillared reform to the enforcement of EU competition law (the “modernization”). Each of those three pillars affected the consideration of non-competition interests, and generated much need for more effective, clear, and uniform balancing rules:
Under the substantive pillar of modernization, the Commission’s policy papers advocated for introducing greater economic thinking to EU competition law. They considerably reduced allowance for non-competition interests, focusing only on those that could enhance consumer welfare. Attempting to bring EU competition law closer to US antitrust law and its Chicago School influences, many non-competition interests that previously were taken into account were no longer applicable in the Commission’s view, at least to the extent they could not be expressed in efficiency or monetary terms.
Under the institutional pillar of modernization, the enforcement of Article 101 TFEU was decentralized. The Commission lost its exclusive powers to grant exemptions from the prohibition and since May 2004, competition authorities and courts in each country of the EU also have the powers to balance competition and non-competition interests. Since the Commission’s policy papers are binding on it alone, national competition authorities and courts may adopt diverging interpretations, inspired by their legal, economic, and social traditions.
Finally, the procedural pillar of modernization transformed the enforcement settings. Firms are no longer required to notify their anti-competitive agreements (cartels) to the Commission for authorization. Instead, they must self-assess the compatibility of their agreements with EU competition law, and particularly, evaluate whether overriding non-competition interests can justify an otherwise anti-competitive agreement.
Economic and socio-political developments regularly prompt the debate on the role of non-competition interests. The economic crisis[OB1] of 2008, the rise of populist movements, the emergence of large online platforms and Big Tech, the climate crisis, Brexit, and the Coronavirus pandemic have all brought to the forefront new challenges concerning the desirable boundaries of EU competition law.
Given the importance and complexity of these questions, it is unsurprising that legal and economic scholarship have been extensively exploring the role of non-competition interests under Article 101 TFEU for years. Nevertheless, scholarship have mostly focused on the (i) legal/economic theory and “leading” cases; (ii) dedicated balancing tools listed in the Treaties or developed by case law (e.g., Article 101(3) TFEU and the Wouters doctrine); and (iii) policy and practice taking place at the EU level, by the Commission and EU Courts.
My new book, Non-Competition Interests in EU Antitrust Law: An Empirical Study of Article 101 TFEU (Cambridge University Press, 2022), offers new perspective on these decade-old questions. It fills in the gap in literature by empirically studying how the Commission, EU Courts, and national competition authorities and courts of five representative member states have actually administered this balancing in practice. The book examines the role of non-competition interests based on anoriginal large quantitative and qualitative database. Including all of the more than 3,100 (formal and informal) enforcement actions, the database was composed by applying systematic content analysis (“coding”) on all of Article 101 TFEU and the national equivalent prohibitions public enforcement actions taken by the Commission, EU Courts, and national authorities and courts of France, Germany, Hungary, the Netherlands, and the UK, from the creation of the European Economic Community in 1957 through 2017. It lays down a comprehensive description of the development of the principles, rules, and concepts governing balancing in practice over the years and across the member states, summarized in over 50 graphs and figures. The database was later used by other scholars to create DB-COMP, a (free!) curated full-text searchable database of European Commission antitrust and merger case law.
Taking this new perspective helped to uncover a remarkable three-fold shift in the role of non-competition interests in the post-modernization era, raising serious concerns about the effectiveness, uniformity, and legal certainty of balancing.
The first shift is a change in the types of balancing tools employed. The empirical findings reveal that prior to modernization, the Commission and EU courts used the designated balancing tools of Articles 101(1) and (3) TFEU and block exemption regulations. These instruments, which are labelled in the book as the explicit-substantive balancing tools, directly acknowledge and engage in the balancing of conflicting interests. These instruments have been the focus of most previous studies, leading many to suggest that since the Commission have almost never justified an agreement by using such tools following modernization, it could be inferred that non-competition interests no longer play a role.
This conclusion, however, is not supported by the empirical findings. They prove that non-competition interests still play a role, but in a hidden manner, behind closed doors. Instead of using the explicit-substantive tools that are dedicated to the task of balancing, many competition authorities take heed of non-competition interests by choosing not to enforce the competition law prohibition against specific agreements that promote non-competition interests. They refrain from investigating such agreements, settle such cases by accepting negotiated remedies, issue unbinding informal opinions, or revert to sector regulation instead of enforcing competition law. As such, the book sheds light on the dark matter of balancing, the invisible forms of balancing triggered by the institutional setup and the specific enforcement procedures of the Commission and the national competition authorities. These forms of balancing by dint of inaction are collectively labelled as the implicit-procedural balancing tools.
The shift from the explicit-substantive to the implicit-procedural balancing tools poses a threat to the effectiveness, uniformity, and legal certainty of balancing. Differing from the explicit-substantive balancing tools, competition authorities and courts have a carte blanche to account for non-competition interests when they decide not to take up a case or to resolve it by alternative measures. There is no limit on the types of benefits they can take into account or on the legal or economic tests guiding the assessment. There is no guarantee that the competition and non-competition interests are being weighed against each other, or that the harm to competition is limited to what is necessary for respecting the non-competition interests. Such lack of controls also raises good governance concerns, and risks for regulatory capture.
The second shift revealed by the book pertains to the locus of the balancing tools, namely a transition from EU-based to national-based balancing. Following modernization, national competition authorities and courts devised their own approaches on how to apply the explicit-substantive balancing tools, in a manner that often stands in conflict with the Commission’s more economic approach. In addition, some member states have created their own national balancing tools, which do not always aligned with those of the EU level.
The influence of national practices is highly significant. Since 2004, around 90% of the enforcement of Article 101 TFEU is performed by national authorities. The lack of a uniform, EU-wide approach entails that in practice, firms across the common market are subjected to considerably different standards when conducting business.
The third shift is a transformation in the role of the EU Courts. In the past, the Courts had an active-leading role in shaping the fundamental balancing principles. Following modernization, however, while the Courts did not embrace the Commission’s new approach to balancing (at least in part), they have also not staked out a clear position on the applicable principles.
This is particularly regrettable when taken together with the other two shifts. Despite the uncertainty surrounding the role of non-competition interests (balancing hidden in the dark matter) and the lack of a uniform approach (balancing hidden in national rules and practices), the EU Courts did not issue clear guidance. Combining the above three shifts in balancing, the book highlights the great ambiguity surrounding the role of non-competition interests, and concludes that while the modernization of EU competition law might have been successful in general, its effect on balancing has been counterproductive.
So what can be done? I strongly believe that now is the time to rationalize the role of non-competition interests, that is, move away from ad hoc and case-specific solutions to establishing a set of transparent and systematic principles grounded on theory. Rationalization does not have to be tied to a (politically unlikely) Treaty amendment. It could take place on a bottom-up basis by re-shifting the balancing back toward the ambit of the explicit-substantive tools instead of avoiding settling difficult questions by deciding not to take up cases. An active and transparent consideration of non-competition interests will compel competition authorities and courts to clarify many of the open questions surrounding balancing and will facilitate legal, economic, and public debate on sensitive issues related to the objectives of Article 101 TFEU, types of benefits that can be taken into account, the balancing method, and the limits of the implicit-procedural and national balancing tools. It will benefit the supporters of polycentric competition law as well as the advocates of a consumer-welfare centric approach. The Commission, unfortunately, does not seem to embrace such a course of action. On the contrary, its recent initiatives introduce new implicit-procedural tools to account for non-competition interests related to sustainability, collective agreements for self-employed service providers, and the Covid crisis. While they may offer some short-term solutions, they do not contribute to the rationalization of EU competition law in the long run.
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