OECD papers on the implications of the pandemic for competition law – merger control, cooperation agreement and exploitative pricing

This post reviews three OECD papers on the implications of the pandemic for competition law. Each paper focuses on a different topic. A first paper focuses on merger control in the time of COVID-19. In times of acute crisis, such as the one provoked by COVID-19, many firms may need to leave the market, which may trigger increased merger activity. Without thorough merger review, there is a serious risk that the economic crisis would result in higher market concentration and market power in several sectors. At the same time, the unparalleled economic uncertainty we are living through means that competition authorities face a number of challenges in the exercise of their merger control powers. A first challenge relates to how to conduct forward-looking competitive assessments in turbulent market conditions. Merger reviews assess the effects of transactions by comparison to the circumstances that would have prevailed without the transaction (i.e. a counterfactual). In most cases, the counterfactual starts from the competitive…

Felipe Irarrázabal ‘Competition and the plague’ (‘La libre competencia y la peste)

This piece is available here, but only in Spanish. The summary below reflects my own translation of the piece. Emergencies – such as wars and natural disasters – undermine the assumptions underpinning competition law and policy. Competition enforcement against cartels builds on the premise that fierce competition is highly beneficial for society, whereas firm cooperation will only create benefits in much more restricted situations. Competition enforcement also relies on legal procedures, which are by nature slow and lend themselves to sophisticated disputes. Covid-19 has forced authorities to enact exceptional regimes and pressured them to take urgent and even drastic measures. The coming economic recession will likely require similar measures. The main competition agencies in the world have started to react to this negative scenario. Several of them have declared that they will be alert to any possible violation of competition law. Others have specified that they will not accept excessive prices as a result of the crisis (although this legal…

Frederic Jenny ‘Economic Resilience, Globalization and Market Governance: Facing the Covid-19 Test’

Globalisation contributed to the rapid spread of COVID to all corners of the globe. The economic cost of fighting the virus froze a number of economies and disrupted global value chains, and is likely to be followed by several years of an economic depression that will dwarf the cost of the 2008 financial and economic crisis. The dramatic events of the first quarter of 2020 challenge some of the implicit assumptions underlying the design of our economic systems, and should make us think about some of the dilemmas and trade-offs that this crisis has foisted upon us. This piece, available as a working paper here,  is not mainly about competition – instead, it is a piece that thinks widely about the implications of this pandemic for the economic architecture underpinning globalisation, which also touches on competition. This is because, in the grand scheme of things, competition law and policy plays a relatively limited role when markets are not in equilibrium,…

Francisco Costa-Cabral, Leigh Hancher, Giorgio Monti and Alexandre Ruiz Feases ‘EU Competition Law and Covid-10’

This paper, which is from the whole of Tilburg’s competition department, as far as I can tell, is available here. It explores how EU competition enforcement might be affected by the COVID-19 pandemic. The authors recommend that competition authorities should be watchful of excessive prices and price discrimination, and rely on interim measures if necessary. Collusion should remain an enforcement priority, but a procedural pathway to review agreements that may be in the public interest should be adopted. In merger control, the Commission’s strict interpretation of the failing firm defence is appropriate but, in general, a more sceptical attitude towards mergers may be warranted during this period. Advocacy will play a key role: competition agencies can both point to existing regulations that limit competition and monitor proposed emergency legislation that would harm competition for no good reason. A first section provides an overview of the nature of competition law in the midst of a crisis. Competition law is a political enterprise,…

Or Brook ‘Struggling with Article 101(3) TFEU: Diverging Approaches of the Commission, EU Courts and Five Competition Authorities’ (2019) Common Market Law Review 56: 121

Since May 2004, the European Commission and national competition authorities (NCAs) have applied the EU competition provisions in parallel. Nowadays, almost 90% of antitrust investigations are carried out by NCAs. This decentralised enforcement regime builds on the assumption that the obligation to apply the same competition provisions is sufficient to ensure the uniform administration of the law. This paper, available here, argues that this assumption does not hold, as least as regards efficiency justification/defences. Since the application of the EU competition provisions involves a wide margin of discretion, national, economic and political traditions risk leading to the fragmented application of competition law. The paper presents empirical evidence that the Commission, EU courts and five national competition authorities have followed very different interpretations of Article 101(3) TFEU, which regulates efficiency justification/defences in Europe. The paper is structured as follows: Section 2 outlines the study’s empirical methodology. The paper uses a database comprising: (i) all European Commission and court decisions until 2017;…

Pieter J. F. Huizing ‘Comparing territorial limits to EU and US public enforcement of the LCD cartel’ (2018) Journal of Antitrust Enforcement 6 231

This article, available here, describes the US and EU positions on the territorial scope of public cartel enforcement – i.e. how far outside their territories can competition authorities reach to punish cartel conduct committed abroad by foreign undertakings – by reference to the LCD cartel. Cartelised LCD panels were manufactured by a number of Asian producers with varying levels of direct and indirect imports into the EU and the USA. Both the European Commission (Commission) and the U.S. Department of Justice (DOJ) had to determine the territorial limits to their enforcement in respect of this international cartel, and to then defend their approach in court. In both jurisdictions, it is accepted that competition authorities benefit from long territorial reach and wide discretion in determining the amount of fines. It is submitted that the legal precedents created by decisions regarding this cartel are a cause for concern in view of the increasingly crowded global cartel enforcement arena. This argument is developed…

Dagmar Schiek and Andrea Gideon on ‘Outsmarting the gig-economy through collective bargaining – EU competition law as a barrier?’ (2018) International Review of Law, Computers & Technology 32(2-3) 275

While the use of information technology can enhance personal self-determination, its use in the context of the gig-economy also creates the risk of entrenching casual, precarious and exploitative working conditions. A crucial question that arises is how far gig-workers are able to shape their work conditions. Within the sphere of employment law, the right of workers to organise collectively provides the opportunity to achieve just that. This paper, available here, aims to analyse the barriers posed by EU competition law to collective labour rights of gig-workers. It argues that EU competition law, as currently interpreted by the Court of Justice, would hinder collective organisation of those serving the gig-economy. It also advances an interpretation of the competition provisions which would allow EU competition law to adapt to recent developments in labour markets. It is structured as follows: A first section sketches the basic features of the gig-economy. The gig-economy is mainly characterised by the extensive use of IT for the distribution, allocation,…

Nikolaus Fink, Philipp Schmidt-Dengler, Konrad Stahl and Christine Zulehner on ‘Registered cartels in Austria: an overview’ (2017) European Journal of Law and Economy 44 385

Many countries used to allow firms to engage in anticompetitive practices as long as they registered their agreements with a government authority. This was the case in several European countries, such as Denmark, Finland, Norway, and Sweden after World War II; or the United States under the National Industrial Recovery Act (NIRA). In Austria, cartels were legal until the country’s EU accession in 1995. This paper.  available here, examines archival material on various types of registered horizontal cartels in Austria to learn about their inner working. It undertakes a content analysis of these legally binding cartel contracts with a view to identifying different collusion methods. In short, the authors find that these cartel agreements addresses those issues that the academic literature has identified as potential obstacles to sustaining collusion over time. In particular, the agreements set up compensation schemes, reporting requirements, rules for entry and exit, and mechanisms to ensure quick and credible punishment of cartel deviation. The paper is…

William E. Kovacic, Robert C. Marshall and Michael J. Meurer on ‘Serial collusion by multi-product firms’ (2018) Journal of Antitrust Enforcement 6 96

This paper, available here, is long and so, I am afraid, is the review. In short, the authors of this paper take issue with the assumption that each cartel in which a given firm participates is a single instance of conduct that is independent of other cartel conduct by the firm. Evidence of serial collusion by major multi-product firms is readily observable from the public record in a number of sectors, such as chemicals, electronics, car-parts, financial products or graphite. Further, collusion persists in at least three of these industries, with new investigations having recently been opened into collusion in the chemical, auto parts, and financial products markets. The paper provides empirical evidence that many multi-product firms have each participated in several cartels over the past 50 years. It argues that traditional assumptions regarding how cartelists operate, and consequent enforcement strategies, are deficient in many aspects. Reflecting this, the authors make policy recommendations to reign in serial collusion. The article is structured as…

Vivek Ghosal and Daniel Sokol on ‘The Rise and (Potential) Fall of U.S. Cartel Enforcement’

This working paper, which is available here,  is still rough around the edges, but it contains a number of interesting insights, which I thought might be of interest. This essay traces how the institutional setting of U.S. cartel enforcement evolved over the years, and assesses these developments from an optimal deterrence framework. In doing so, the authors also review the outcomes of the various US policy regimes in terms of number of cartels prosecuted, the level of financial penalties imposed per individual and firm, and of jail time for cartel crimes. The authors also offer an analysis of how cartel enforcement has varied with recent US Presidential administrations. Section 3 describes how cartel enforcement has evolved in the US since 1890. Cartel enforcement in US began with the passage of the Sherman Act, which imposed a maximum fine for collusion of USD 5,000, raised to USD 50,000 in 1955. Jail time was not actively pursued until the late 1950s, when…