This is a very substantial paper on the appropriate analytical framework for identifying anticompetitive agreements . It can be found here.
The paper focuses on how the debate on rules and standards, and on the balance of Type I and Type II errors, affects the analytical framework for identifying infringing agreements in the US and EU. From their standpoint, these debates have been influential in discussions about how to identify anticompetitive unilateral practices and mergers, but have not been relevant for similar discussions regarding horizontal agreements. Also, from their point of view: “the question of how agreements are to be analysed under both the US and the EU jurisprudence is also unduly opaque; it is frequently difficult to ascertain whether agreements, including joint venture and other horizontal collaboration and distribution agreements, are compatible with the law. In particular, confusion about the role and scope of per se rules, the role and scope of ancillary restraint doctrines, and how competing anti- and procompetitive effects of mixed agreements are to be balanced against each other have led to excessive complexity in the system.”
This paper commences in section 2 by considering what factors might shape development of a coherent and optimal framework for antitrust analysis in a jurisdiction. Once these factors have been set out, sections 3 and 4 examine how the US and EU, respectively, have approached the analysis of horizontal agreements and what features of each system have moulded their development. Section 5 concludes that both systems require some development to create more intelligible frameworks for the antitrust analysis of horizontal agreements.
In more detail:
- Section 2 begins by looking at the nature of rules and standards. As they point out, “A sound competition law system seeks to avoid both overreliance on bright line rules (or the misuse of categorical analysis) and the indiscriminate acceptance of open-ended, multi-factored standards to analyse conduct.” However, “if, as is common in most competition law systems, the legal regime employs a mix of bright-line rules and standards, the regime will require an initial sorting exercise that places observed behaviour into one of two baskets: conduct suitable for summary condemnation (or approval), and conduct requiring a more elaborate inquiry. The application of a system that employs a mix of rules and standards requires a threshold decision, explicit or implicit, that the behaviour belongs in one category or the other.”
This leads to a discussion of the circumstances in which per se prohibitions and exemptions (i.e. safe harbours) – with their advantages in terms of clarity and procedural economy, which is calculated to outweigh the cost of some false positives and negatives – should be adopted. It then moves to the vexata quaestio of how seemingly formless standards (e.g. “competition on the merits) can be made “administrable”. This problem “has inspired an extensive modern search for methods to make the traditional rule of reason more workable. Commentators and enforcement agencies have made extensive efforts to suggest how a reasonableness standard might be structured to minimize the information costs associated with the traditional formula and to sort out, at a more preliminary state of the analysis, whether the challenged conduct presents serious competitive hazards and whether efficiency considerations might justify the behaviour. These structured or truncated forms of analysis often rely on presumptions to determine which party bears the burden of coming forward with evidence, respectively, about competitive harms and justifications
- Section 3 is devoted to how the US has dealt with these issues regarding horizontal agreements. In the authors’ view, “The jurisprudence of the courts since 1890, and of the FTC since 1914, has displayed recurring tensions in choosing between rules and standards to address concerted practices.” It describes the evolution of US federal law, to conclude that: “the general progression in US doctrine has been toward recognition of an analytical continuum whose boundaries are set, respectively, by a rule of categorical condemnation (per se illegality) and an elaborate, fact-intensive assessment of reasonableness. These poles are connected by a range of intermediate tests that seek to combine some of the clarity and economy of bright-line rules with the greater analytical accuracy that a fuller examination of evidence can produce”.
They arrive at three conclusions regarding the US rules on horizontal agreements: (i) on one extreme, the development of a criminal enforcement regime creates strong pressure to recognize per se illegality as a distinct, well-defined category of infringement. The DOJ has demanded recognition of a category of per se illegal offenses to assist in persuading juries and judges that certain behaviour deserves criminal punishment, and since the early 1980s, DOJ has focused criminal enforcement solely upon horizontal price-fixing, market and customer allocations, and related schemes; (ii) judicial perceptions about overreaching in the US system of private enforcement have induced significant efforts at equilibration (sic) in the form of heightened evidentiary and pleading standards that private plaintiffs must meet in order to invoke rules of per se liability; (iii) concerns about the capacity and expertise of the courts to deal with analytical complexities posed by the rule of reason might be resolved through greater use of the FTC’s administrative process to adjudicate cases.
- Section 4 moves across the Atlantic to look at EU law. It begins by noticing that the development of a coherent framework for horizontal agreements is made difficult by the objectives of the EU competition rules not being clearly articulated. On the contrary, although they have undoubtedly evolved, such objectives remain keenly contested. In particular, the Commission’s original monopoly over the grant of Art. 101(3) exemptions affected the development of the law by creating incentives for a formalist, (too-)wide interpretation of Art. 101(1) which still impacts the law today (in the authors’ own words: “The Commission tended, arguably motived both by ideology and practicalities, to interpret the concept of a restriction of competition set out in Article 101(1) broadly to encompass many restraints on firms’ economic freedom and/or ability to engage in cross-border trade, and to rely on Article 101(3) as the main vehicle for authorising agreements”). The section then segues into the Commission’s efforts to “Modernise Antitrust’, and how these efforts met with judicial resistance: while the European Commission has since the 1990’s pursued the view that antitrust analysis is, or should be, underpinned by a consumer welfare objective, it is the Court of Justice of the European Union which is charged with responsibility for interpreting EU law and its case law has refused to endorse consumer welfare as the ultimate objective of EU competition law.
Following this, the article tries to map out the current analytical framework used to assess horizontal agreements in the EU. It first looks at the doctrine of “objective” restraints of competition and at mechanisms that establish the per se legality of agreements. It then finds that, due to the substantial reliance on object restraints in their infringement decisions by the Commission and NCAs, and on de minimis rules and Block Exemption Regulations by firms, the question of how antitrust analysis is to be conducted regarding horizontal agreements arises relatively rarely before EU courts. As a result, there is no steady flow of cases before the EU courts which allows them to develop and hone the case-law in this area. Nonetheless, a few principles can be obtained. Ultimately, the analysis concludes that the EU enforcement structure has had a significant, and enduring, influence on the substantive interpretation of Article 101’s provisions.
- Section 5 provides some overall conclusions. It begins with the somewhat trite observation that the contours of an antitrust analytical framework must be moulded to fit each individual competition regime taking account of range of factors, including the objectives and make up of its rules, the maturity of the regime, and the way in which it is enforced. It nonetheless arrives at a number of general conclusions, e.g. that the interaction between rules and standards should be refined over time by recourse to legal presumptions and the allocation of evidentiary burdens; or that the application of criminal or quasi-criminal sanctions may push the system towards adopting bright line rules. It further proposes that EU decision-takers should become more willing to analyse whether theory, experience and especially context justifies a finding that an agreement is restrictive by object, before concluding on a nice comparative note (“Mutual reflection on the different evolutionary paths could deepen understanding about possible doctrinal options and inform improvements in both regimes.”)
This is a very interesting (and, to my view, necessary) dissection of the lack of analytical coherence of antitrust law regarding horizontal agreements. The analytical lens has for so long been pointing at unilateral conduct that we tend to forget that many agreements fall in a grey zone concerning their legality under competition law, and that assessing their legality is not necessarily any simpler or less resource intensive than in cases regarding abuses of dominant position / monopolistic practices.