OECD papers on the implications of the pandemic for competition law – merger control, cooperation agreements 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…

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,…

Marco Botta and Klaus Wiedemann  ‘To Discriminate or not to Discriminate? Personalised Pricing in Online Markets as Exploitative Abuse of Dominance’ (2019) European Journal of Law and Economics 1

The advent of big data analytics has favoured the emergence of forms of price discrimination based on consumers’ profiles and their online behaviour (i.e. personalised pricing). This paper, available here, analyses this practice as a possible exploitative abuse by dominant online platforms. It concludes that such practices can have ambiguous welfare effects, and be subject to a case-by-case analysis. It also argues that competition law is more suitable than omnibus regulation – particularly data protection and consumer law – to tackle the negative effects of personalised pricing, particularly because competition authorities could negotiate with online platforms different kinds of behavioural commitments that could significantly tame the risks of personalised pricing. Section II looks at price discrimination in online markets. Economists typically distinguish between three different types of price discrimination. First-degree price discrimination takes place when a firm is able to discriminate perfectly among its customers. Second-degree price discrimination means that the firm discriminates between its customers by granting discounts once…

Nicolo Zingales ‘Antitrust intent in an age of algorithmic nudging’ (2019) Journal of Antitrust Enforcement 7 386

This article, available here, surveys EU case law on the role of anticompetitive intent in abuses of dominance, with the goal of understanding how intent can be relevant to the assignment of liability for anticompetitive algorithmic outcomes. The role of subjective intent in EU antitrust analysis remains controversial. Some argue that evidence of intent is an invaluable tool in the antitrust arsenal, allowing agencies and litigants to address anticompetitive conduct where facts are ambiguous or evidence of harm to competition inconclusive. Others warn against relying on intent. First, ‘sales talks’ encouraging employees to beat – and indeed eliminate – competitors is common and merely indicative of a (competitively desirable) aggressive business strategy. Secondly, banning any exhortation to compete aggressively would encourage firms to deploy more subtle forms of inducement when engaged in anticompetitive conduct, while favouring those with the resources to develop such strategies. The law seems to follow a middle path in this debate, suggesting that the notion of subjective…

Paolo Siciliani ‘Tackling Anticompetitive Parallel Conduct under Personalized Pricing’ (2019) World Competition 42(3) 377

From an economic standpoint, personalised pricing is not a novel (theoretical) concept. However, this practice has become topical thanks to digital technological developments that make it actually feasible, even if there is very little evidence that the feasibility of personalised pricing has led to its widespread implementation so far. The current debate explores the circumstances in which intervention under not only competition law, but also consumer law and data protection law, would be warranted. The focus is primarily on exploitative outcomes under imperfect competition, whereby firms with substantial market power charge consumers high prices that could be deemed excessive and/or unfair. There is a consensus that enforcement against such practices would be challenging. For example, it is not straightforward to establish under a consumer welfare standard that consumers are in aggregate worse-off under personalised pricing. This is because personalised pricing can entail lower prices for consumers who would otherwise not buy the product in question, thus leading to a welfare…

Massimiliano Kadar ‘Article 102 and Exclusivity Rebates in a Post-Intel World: Lessons from the Qualcomm and Google Android Cases’ (2019) Journal of European Competition Law & Practice 10(7) 439

Article 102 of the Treaty on the Functioning of the European Union (TFEU) prohibits behaviour by a dominant undertaking that is capable of harming competition. The notion of ‘capability to harm competition’ has been at the centre of the legal and economic debate for many years. A strict interpretation of ‘capability’ would require evidence of actual or quasi-actual effects on the market in the form of, for example, the exit of existing competitors or sustained price increases. A lax interpretation of capability could make it possible to enforce competition rules also in circumstances where harm to competition is purely hypothetical and not supported by concrete evidence. This discussion – which is ultimately about the level of the standard of proof – not only influences the likelihood of Type 1 and Type 2 letters, but also the amount of resources that administrative agencies needs to devote to individual enforcement cases. Modulating this impact are presumptions, which can lead to significant savings…

Cani Fernández ‘Presumptions and Burden of Proof in EU Competition Law: The Intel Judgment’ (2019) Journal of European Competition Law & Practice 10(7)

Some of the procedural tools used by competition authorities and courts (in particular, presumptions) present an inherent link to the burden of proof and to the rightful exercise of the rights of the defence. In principle, the use of presumptions can be an efficient response to the enforcement of competition policy both in situations where a given behaviour usually amounts to an infringement or where it is competitively innocuous. In any rule of law system, presumptions of illegality must be rebuttable. Indeed, a resort to presumptions not surrounded by proper procedural guarantees may infringe the presumption of innocence and undertakings’ rights of defence. The Intel judgment provides a good opportunity to discuss the role of presumptions under Article 102 TFEU and their implications for the burden of proof. In addition to this, this article, available here, analyses how defendants in exclusivity rebate cases can rebut the presumption of illegality in practice, with a special focus on the efficiency defence. It does so…

Sean Ennis ‘Price Abuses: An overview of EU and national case law’ (2019) Concurrences

Pricing abuses can be viewed as a hybrid between regulation and competition law enforcement, since they raise questions of principle over when pricing that takes advantage of market power should be prevented by competition law action, by regulation or simply left unchallenged. In many cases – e.g. in predation, margin squeeze, rebates and excessive pricing cases – companies may have practical difficulties in assessing ex ante whether their pricing policies are illegally low (in the case of predation and rebates), illegally high (in excessive pricing cases) or some combination of both (in margin squeeze). This has the potential to influence those companies’ incentives significantly, an effect compounded by lack of predictability as to when such cases will be brought. As such, it is important to have a clear view of what types of cases have been brought recently. This is the object of this paper, available here, which reviews recent instances of price abuses in Europe. Section 2 looks at…

John Ratliff ‘Unilateral conduct in the energy sector: An overview of EU and national case law’ (2019) Concurrences Special Issue Energy & Dominance

This paper, available here, provides an overview of European Commission (“EC”) and European national competition authorities’ (“NCAs”) practice as regards the application of competition rules to unilateral conduct in the energy sector. It covers more than 120 cases, including national court judgments and investigations up to June 2019. While the article divides the various practices into 19 different sections, I will do so as follows: In the introduction, the author summarises European and national approaches, as well as recent developments. The 2007 EU Energy Sector Inquiry prompted much enforcement of Art. 102 TFEU in the energy sector. Most of enforcement concerned traditional foreclosure practices in relation to infrastructure capacity, access to the infrastructure, capacity hoarding and withholding of generation capacity. Other cases have dealt with new types of abuse, such as strategic underinvestment and market manipulation, and there have also been cases on excessive pricing. Energy markets remain a priority for the European Commission. Recent developments include closing investigations against…

Michael Funk and Christian Jaag ‘The More Economic Approach to Predatory Pricing’ (2018) Journal of Competition Law & Economics 14(2) 292

This paper, available here, argues that legal requirements and economic reasoning are not aligned as regards predatory pricing. Predation is not a strategy predominately used by ex ante dominant firms, but rather a strategy to gain ex post dominance. Consequently, the current legal practice in Europe and other jurisdictions, which requires ex ante dominance to pursue predatory pricing, makes the prosecution of predatory pricing virtually impossible because it overlooks the basic economic rationale for predatory pricing. This inconsistency has become even more severe because the adoption of a “more economic approach”: in fact, the more accurate the economic assessment is, the less probable is a conviction of harmful predation under the current legal framework. The authors suggest prohibiting predatory pricing independently from other exclusionary abuses. Instead, predatory pricing should be subject to the same analytical framework as mergers, where a similar economic and business logic applies. Since recoupment of predation is akin to the unilateral effects arising from the merger…