, I

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t
Brugge
College of Europe
College d'Europe t-
Natolin

GCLC Global Competition Law I Centre

13 th ANNUAL CONFERENCE OF THE GCLC

"FAIRNESS" IN COMPETITION LAW AND POLICY:

SIGNIFICANCE AND IMPLICATIONS

25-26 January 2018

LIST OF PARTICIPANTS

NAME FIRST NAME POSITION FIRM / INSTITUTION

Akman Pinar Professor University of Leeds
Alfter Mette Associate Director Frontier Economics
Amato Piera Student College of Europe
Andre Guillaume Student ESSEC
Andrea Melissa student College of Europe
Aoucheva Marem Student Universite Libre de Bruxelles
Aranze Janith News Reporter Global Competition Review
Arts Dirk Partner Allen & Overy
Audera Maria Student College of Europe
Bailey David Professor King's College London
Baird Gavin Legal Analyst Google
Bakas Povilas Student College of Europe
Barka Mario Student College of Europe
Bersou Laure Lawyer N/A
Bhatiani Ravi Director Legal Independent Retail Europe
Affairs
Biontino Sarah Founding partner Biontino Europe
Blockx Jan PhD researcher University of Antwerp
Blondeau Victorien Student College of Europe
Bock Claudia Attorney at law Schonherr Rechtsanwalte GmbH
Badoni Stephanie EU News Bloomberg
correspondent
Bourgeois Jacques Senior advisor Sidley Austin
Boyce John Partner Slaughter & May
Breen Simon Partner Slaughter & May
 NAME FIRST NAME POSITION FIRM/ INSTITUTION
Breuvart Charlotte Partner Jonesday
Bruzzone Ginevra Deputy Director Assonime / Luiss School of European
General/ Professor Political Economy
Buendia Jose Luis Partner Garrigues
Burnside Alec Partner Dechert
Buyoya Samuel Referenda ire Competition Appeal Tribunal
Calciu Diana Associate Gide
Calvet Jordi Lawyer Uria Menendez
Carbajo Gimenez Maria Paz Lawyer European Commission
Carre Ariane Legal Adviser Independent Retail Europe
Cerqueira Aurelie Student College of Europe
Chari Carlo Associate Allen & Overy
Sushant
Chelyadina Inga Student College of Europe
Chowdhury Avantika Principal Oxera Consulting
Clark Marie Assistant Director Competition and Markets Authority
Cluzel Chloe Associate Latham & Watkins
Conte Chiara Associate Steptoe & Johnson
Coppi Lorenzo Executive Vice Compass Lexecon
President
Cordon Ana Student College of Europe
Costesec Dominique Associate Sidley Austin
Crouzet Sixtine Student College of Europe
Cywinski Milosz Associate Allen & Overy
Davis Elaine Legal Counsel ByrneWallace
Davis Peter Senior Vice Cornerstone Research
President
de Barsy Laureen Graduate College of Europe
De Grauwe Paul Professor London School of Economics and
Political Sciences
de Villoutreys Stanislas Associate Skadden, Arps
Dechamps Pascale Partner Oxera Consulting
Derenne Jacques Partner Sheppard, Mullin, Richter &
Hampton
Di Lillo Silvia Trainee Lawyer Maresca & Partners
Dolmans Maurits Partner Cleary Gottlieb Steen & Hamilton
Donnelly Alexa Student College of Europe
Dostourian Macrui Senior The Capitol Forum
Correspondent
Droukopoulos Spyros Senior Consultant Oxera Consulting
d'Udekem Benoit Vice President Analysis Group
Elkan Daniella Attorney Law firm Poul Schmith
Eymard Laurent Economist MAPP
Fafchamps Nicolas Student Universite catholique de Louvain
Farman Darius Student College of Europe
Fernandez Cani Partner Cuatrecasas
Fito Ridao Enrique Student College of Europe
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 NAME FIRST NAME POSITION FIRM / INSTITUTION
Foo Yun Chee Senior competition Thomson Reuters
correspondent
Foster David Director Frontier Economics
Fox Eleanor Professor New York University School of law
Franzen Caroline Student College of Europe
Fuchikawa Kazuhiko Associate Professor Yamaguchi University
Gabathuler David Consultant Baker Botts
Gal Michal Professor University of Haifa and ASCOLA
Gallagher Sarah Student College of Europe
Garben Sacha Professor of Legal College of Europe
Studies
Garzaniti Laurent Partner Freshfields Bruckhaus Deringer
Gavriilidou Lydia Student Queen Mary University of London
Geissmann Celine Student College of Europe
Gelissen Tim Senior advisor Ministry of Economic Affairs &
competition policy Climate
Georgieva Kristi Student College of Europe
Georgiou Ekaterini Student King's College London
Gerard Damien Director Global Competition Law Centre
Gerbrandy Anna Professor Universiteit Utrecht
Giacomotto Serge Student College of Europe
Giepmans Sylwia EU Public Policy Google
Manager
Gonzalez Cobos Claudia Student College of Europe
Govaere Inge Director of Legal College of Europe
Studies
Hancher Leigh Professor Tilburg University
Hennen Brice Student College of Europe
Hernandez De Diego Student King's College London
Lamotte
Hinchy Emma-Jean Administrateur Cour de Justice
Hirst Nicholas Antitrust reporter Politico
Hoorelbeke Bram Senior Associate Baker & McKenzie
Horgan Chiara Student College of Europe
Hryko Alena Student College of Europe
Huang Joanna Associate Linklaters
Hutt Pierre-Lou is Student College of Europe
lnfanzon Gonzalo Student College of Europe
Fernandez
Janssens Thomas Partner Freshfields Bruckhaus Deringer
Jenkins Helen Managing Partner Oxera
Jenny Frederic Chairman OECD Competition Commission
Johansen Tormod Special Adviser Norwegian Competition Authority
Johnston Jules Competition PaRR
Reporter
Jonsdottir Inga Lawyer EFTA Surveillance Authority
Ju bra ii Dina Lawyer Hogan Lovells

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 NAME FIRST NAME POSITION FIRM / INSTITUTION
Kamvysi Maria Student College of Europe
Kellezi Pranvera Member of the Swiss Competition Commission
Cameo/attorney at (Cameo)
law
Kemp Roeland International Wolters Kluwer
Account Manager
Keres Camille Associate Steptoe & Johnson
Kianzad Behrang PhD-Fellow CeBil - Faculty of Law - Copenhagen
University
Kienzle Lukas Phd student FU Berlin
Kim Hee-Eun Senior Legal Samsung
Counsel
Kokott Juliane Advocate General European Court of Justice
Komninos Assimakis Partner White & Case
Kownator Dahlia Government Affairs Qualcomm
Krajewska Elzbieta Senior Associate Allen&Overy
Kureckova Tereza Remedies Officer Competition & Markets Authority
Lafitte Jacques Consultant Avisa Partners
Lagrue Marie Associate Sheppard, Mullin, Richter &
Hampton
Laitenberger Johannes Director General DG Competition
Lamadrid Alfonso Principal Associate Garrigues
Lambertz Armin Trainee Linklaters
Ansgar
Lavoie Chantal Partner Lavoielegal
Lee Sangyun Student University of Amsterdam
Lemaire Christophe Partner Ashurst
Lopez del Villar Claudia Student College of Europe
Lorenzon Enrico Associate Slaughter and May
Louka Tero Senior Competition Google
Counsel
Li.ibbig Thomas Partner Freshfields Bruckhaus Deringer
Lugard Paul Partner Baker Botts
Majcher Klaudia PhD Researcher Universite Libre de Bruxelles
Manuel Lara Student College of Europe
Marcoartu
Martinez de Ainhoa Student College of Europe
Butron
Martos Stevenson Beatriz Student College of Europe
McNelis Natalie Reporter MLex Market Insight
Merino Troncoso Carlos Advisor National Authority for Markets and
Competition
Merola Massimo President Global Competition Law Centre
Meyring Bernd Partner Linklaters
Micheletti Francesca Reporter PaRR
Miotto Francesca Senior Associate Allen & Overy
Moh ringer Peter Student Fair Trade Advocacy
Monar Jorg Rector College of Europe
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 NAME FIRST NAME POSITION FIRM/ INSTITUTION
Morgan de Rivery Eric Lawyer Jones Day
Mullan Hugh Assistant Director Competition and Markets Authority
of Economics
Murzanovska Anastasiia Student College of Europe
Nadbath Enrico Student College of Europe
Navarro Edurne Partner Uria Menendez
Newman Matthew Senior MLex Market Insight
Correspondent
Niejahr Nina Counsel Baker & McKenzie
Nikolaenko lryna Student College of Europe
Nordlander Kristina Partner Sidley Austin
Ogez Juliette ELEA Students College of Europe
Ortiz Blanco Luis Partner Garrigues
Paolini Guido Academic assistant College of Europe
Papandropoulos Penelope Member of Chief DG Competition
Economist Team
Pappas Athos Student ULB
Parret Laura Professor Universiteit Utrecht
Patouni Polyxeni LLM student IEE-ULB
Perez de Lamo David Student Universidad Aut6noma de Madrid
Peristerakis Nikolaos Counsel Linklaters
Perraut Anne-Sophie Associate Jones Day
Pijnacker Hordijk Erik Attorney-at-law Pels Rijcken & Droogleever Fortuijn
Pillard Helo"ise Student College of Europe
PloSeco Maximo Student College of Europe
Poure Maxime Student College of Europe
Pranckute Milda Student College of Europe
Prat Garcia Mireia Student College of Europe
Pronk Silvia Lawyer Bird & Bird
Quigley Conor QC Serie Court
Rahman Isabelle Partner Sheppard, Mullin, Richter &
Hampton
Reinart Stephanie Rechtsanwaltin Van Bael & Bellis
Relange Mathieu Lawyer Bird & Bird
Rivas Jose Partner Bird & Bird
Rodrfguez Fraga Manuel Student College of Europe
Roig Miserendino Miquel Student College of Europe
Rosenblatt Howard Partner Latham & Watkins
Rossoglou Kostas Head of EU Public Yelp
Policy
Roth Peter Chair Competition Appeal Tribunal
Ruocco Lorenzo Student College of Europe
Rusu Catalin Associate Professor Radboud University Nijmegen
of European Law
Sadrak Katarzyna PhD student University of Heidelberg
Saenz de Buruaga Maria Student College of Europe
Sanchez-Calero Patricia Associate Shearman & Sterling
5
 NAME FIRST NAME POSITION FIRM / INSTITUTION
Sarma Styliani KM Lawyer Latham & Watkins
SchiBler Jan Student University of Amsterdam
Seeger Sebastian Student College of Europe
~ereikaite Samanta Student University of Amsterdam
Shehu Mediona Student Universite Libre de Bruxelles
Sibony Anne-Lise Professor Universite catholique de Louvain
Sidiropoulos Konstantinos PhD Candidate Oxford University
Simon Stephan Senior Expert European Commission
Siragusa Mario Partner Cleary Gottlieb Steen & Hamilton
Professor College of Europe
Soames Trevor Partner Quinn Emanuel Urquhart & Sullivan
Soares Marina Lawyer OCH
Sourmaille Estelle Student College of Europe
Spector David Professor Paris School of Economics and MAPP
Stancanelli Paolo Legal Adviser European Commission
Stuyck Jules Senior Counsel Crowell & Moring
Svoboda David Officer Czech Office for the Protection of
Competition
Tamble Philipp Student College of Europe
Tan Kim Song Professor Singapore Management University
Taneja Ashna Masters Candidate University of Melbourne
Tatian Gabriela Business Eurideas
Development
Assistant
Tawfik Hana Trainee Solicitor Berwin Leighton Paisner
Thompson Rhodri Barrister Q.C. Matrix
Thomsin Lyndsey PhD candidate Utrecht University
Timan Natalie Economic Director Competition and Markets Authority
Todino Mario Partner Jones Day
Troncoso Ferrer Miguel Lawyer Gomez-Acebo & Pombo
Unver Mehmet Bilal Doctoral Anglia Ruskin University Law School
researcher
Uogintaite Evelina Chief adviser Competition Council of the Republic
of Lithuania
Vallindas Dimitris Counsel Sheppard, Mullin, Richter &
Hampton
Van Audenrode Marc Partner Analysis Group
van der Woude Marc Vice President EU General Court
Van Dorpe Simon Competition PaRR Global
reporter
Van Gerven Gerwin Partner Linklaters
Vasant Khushita Competition PaRR
Reporter
Verdonk Tom PhD student University of Leuven
Verouden Vincent Director E.CA Economics GmbH
Vestager Margrethe Commissioner for European Commission
Competition

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 NAME FIRST NAME POSITION FIRM / INSTITUTION
Villafafiez Diego Student College of Europe
von Bonin Andreas Partner Freshfields Bruckhaus Deringer
Vroninks Annick Partner Ashurst
Wahl Julia Sabine Senior Economics Copenhagen Economics
Walckiers Alexis Chief Economist Belgian Competition Authority
WardE:ga Emilia Associate WKB Wiercinski, Kwiecinski, Baehr
White Aoife Journalist Bloomberg News
Winterstein Alexander Deputy Chief European Commission
Spokesperson
Witt Alexander Associate Shearman & Sterling
Wozniak Anna Paralegal Kapellman Rechtsanwalte
Zdzieborska Monika Lawyer Sidley Austin
Zeynalova Aygun Student College of Europe
Zukakishvili Keti Academic Assistant College of Europe

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 • G

t
Brugge
College of Europe
College d'Europe t-
Natolin

GCLC Global Competition Law I Centre

13 th ANNUAL CONFERENCE OF THE GCLC

"FAIRNESS" IN COMPETITION LAWAND POLICY:

SIGNIFICANCE AND IMPLICATIONS

25-26 January 2018

RESIDENCE PALACE, BRUSSELS

SPEAKERS' BIOGRAPHIES

Pinar Akman, University of Leeds

Pinar Akman is a Professor of Law at the University of Leeds, specialising in

competition law. She is the Director of the Centre for Business Law and Practice.
She has previously held a Chair at the UEA Law School, University of East Anglia.
She is an Associate Member of the ESRC Centre for Competition Policy. Prior to
coming to the UK, she worked at the University of Ankara Law School,
Department of Commercial Law and qualified as a lawyer in Turkey.

Her main research interests lie in EU and UK competition law, law and economics,
law and technology, consumer law and contract law. She is particularly interested in
the interface between legal and economic concepts underlying competition law and
in particular the prohibition of abuse of dominance. She is also interested in the
pistorical origins of com etition law and the interplay between competition law
and other areas, such as consumer law, contract law and behavioural economics.

Prof. Akman is the author of The Concept of Abuse in EU Competition Law: Law
and Economics Approaches (Hart Publishing, Oxford, 2012). Her peer-reviewed
articles have been published in some of the most prestigious journals such as the
Oxford Journal of Legal Studies, Modern Law Review, European Law Review,
Journal of Business Law, Journal of Law and Society, etc. She was nominated for
an Antitrust Writing Award in 2015/16 organised by Concurrences Review and
George Washington University Law School Competition Law Center.

Dirk Arts, Allen & Overy

Dirk is the head of A&O's Belgian competition law department. He specialises in

Belgian and EU competition law as well as general EU law. He advises and assists
clients in administrative and judicial procedures, both before national and
European authorities and courts. Dirk has particular experience within the energy,
media, chemical, retail and automobile sectors. He represents clients in cartel
investigations conducted by both the Commission as well as the Belgian
competition authority, and advises on merger control cases.

Dirk is a member of the editorial board of Tijdschrift voor Belgische Mededinging

(fBM) and a founding member of the Belgian Association of Competition
Lawyers. He worked as a research assistant at the Institute for European Law of
the KULeuven before serving as a Rfferendaire 0egal secretary) in the General
Court. He teaches Judicial Protection in the EU at the Vrije Universiteit Brussel
and a yearly introductory course at the College of Europe in Bruges.

David Bailey, King's College London

David is a graduate of King's College London and Harvard University where he

obtained respectively the degrees of LLB and LLM. David has been a Visiting
Professor of Law at King's since December 2012; prior to that he had been a
Visiting Lecturer since 2001. He is a qualified Barrister and Solicitor in England &
Wales; he is also an Attorney in New York. He worked as a referendaire at the UK
Competition Appeal Tribunal from 2007 to 2012; prior to that he worked at the
law firm Linklaters from 2003 to 2006. David is the co-author (with Richard
Whish) of the seventh edition of Competition Law. He is also the co-editor (with
Vivien Rose) of the seventh edition of Bellamy and Child's European Union of
Competition Law.

Luis Ortiz Blanco, Garrigues & College of Europe

Luis Ortiz Blanco is a partner in the EU and Competition Law Department at

Garrigues, where he has continued to pursue his professional career after spending
ten years (1987-1996) as an official in the Directorate General for Competition in
the European Commission, Brussels.

2
Luis specializes in EU and Competition Law and, in particular, in advising and
representing clients in administrative and court proceedings before authorities and
courts at Spanish and European level (European Commission, National Antitrust
Commission, commercial courts, National Appellate Court, Supreme Court and
Court of Justice of the European Union). His practice areas cover cartels,
cooperation agreements between competing companies, distribution and agency
agreements, abuses of a dominant position, merger control, State aid, free
circulation of goods and trade defense proceedings.

Luis teaches competition law and trade defense procedures at the College of
Europe (Bruges, Belgium) and the Brussels School of Competition (Brussels). He
is also a lecturer on private international law at the law faculty of Universidad
Complutense, Madrid and director of the annual EU and Spanish Competition
Law Program at the IEB (Instituto de Estudios Bursa.tiles), Madrid.

Jacques Bourgeois, Sidley Austin LLP & GCLC

Jacques Bourgeois is a recognized authority on European Union law, with over

four decades of experience in private practice and public service. He advises Sidley
lawyers and clients around the globe on all aspects of EU law, with a specific focus
on trade and competition matters. Jacques has represented clients before the
European Commission, the Council of the European Union and other EU
institutions, as well as before the European Courts in Luxembourg and Belgian
courts. He assists clients with complex EU trade and market access issues,
including anti-dumping investigations, anti-subsidies. He also has extensive
experience advising on matters related to the World Trade Organization, he has
chaired a WTO dispute settlement panel and has represented clients in high-stakes
WTO dispute settlement proceedings. Jacques advises on EU competition matters
related to restrictive business agreements and dominant positions, as well as on the
review and clearance of mergers and acquisitions. Since 2006, he has served as
Chairman of the Competition Commission advising the Belgian government. He is
also a member of the Executive Committee of the Global Competition Law Centre
(GCLC).

Prior to entering private practice, Jacques served for over 25 years as a senior
official with the European Commission. From 1987 to 1991, he was the principal
legal adviser of the Commission in charge of foreign trade policy and, later,
antitrust policy. Previously, he served for several years as head of the Trade Policy
Instruments Division in the Directorate-General for External Relations, and was
responsible for the implementation of the EU's regulations on anti-dumping and
subsidies, as well as for safeguard measures and protection against illicit
commercial practices.

3
Lorenzo Coppi, Compass Lexecon & College of Europe

Lorenzo Coppi is an Executive Vice President based in Compass Lexecon' s

London and Brussels offices. He has twenty years of experience in the application
of economics to competition law cases and regulation.

Having spent a number of years practicing in London and Washington, DC, Dr.
Coppi has worked on a variety of EU, US, and UK mergers as well as on cases
involving various allegations of anticompetitive practices under EU, US, and UK
competition law, in litigation and regulatory settings. He has also testified in
several international arbitrations.

Dr. Coppi's analytic focus has been on merger analysis, State aid, market definition,
assessment of market power, abusive pricing practices, and the market impact of
cartels. His sector expertise includes energy, various high technology industries,
financial markets, media and telecommunications, chemicals, retailing,
manufacturing, and several consumer goods industries.

Dr. Coppi is Visiting Professor at the College of Europe (Bruges), where he

teaches Economics of Competition Law. He is also a frequent speaker at
conferences and has published widely on the economics of competition law and
regulation. Dr. Coppi holds a Ph.D. from the London School of Economics.

Maurits Dolmans, Cleary Gottlieb Steen & Hamilton LLP

Maurits Dolmans is a partner with Cleary Gottlieb LLP. His practice focuses on
EU, UK and international competition law, especially in high-tech and EU
intellectual property law. He has extensive experience in information technology,
internet, telecom, media and entertainment, as well as in energy, medical devices
and financial services. He has appeared in proceedings before the European
Commission and the EU courts, national courts and national competition
authorities of several Member States, and ICC and NAI arbitrations. Many of his
competition cases involve multi-sided platforms, high-tech products, new economy
services, licensing or refusals to license, standardization, IP strategy, access to
networks, mergers, joint ventures and other transactions, intellectual property
arbitration and litigation, abuses of dominance, vertical agreements and cartels.

Paul De Grauwe, London School of Economics and Political Sciences

Paul De Grauwe is John Paulson Professor at the London School of Economics.

He was a member of the Belgian parliament from 1991 to 2003. He is honorary
doctor of the University of Sankt Gallen (Switzerland), the University of Turku

4
(Finland), the University of Genoa ,the University of Valencia and Maastricht
University. He was a visiting professor at various universities: Paris (Dauphine),
Amsterdam, Berlin (Freie Universitat and Humboldt), Genoa, K.iel, Milan,
Pennsylvania (Wharton School) and Michigan. He obtained his Ph.D from the
Johns Hopkins University in 197 4. He is an associate research fellow at the Centre
for European Policy Studies in Brussels and CEPR fellow in London. He is Vice-
President of the Portuguese Fiscal Council.

His research interests are in the economics of monetary unions and behavioural
macroeconomics. His book publications include: "The Limits of the Market",
Oxford University Press, 2017, "The Economics of Monetary Union", Oxford
University Press, 11th Edition, 2016, and "Lectures on Behavioral
Macroeconomics", Princeton University Press, 2012.

Cani Fernandez, Cuatrecasas

Ms. Fernandez is director of the Competition and EU Law Practice at Cuatrecases.

She has extensive experience in company acquisitions and mergers, competition
and anti-dumping, telecommunications and energy, and EU litigation. She was
referendaire at the European Court of Justice from 1994 to 1997. From 2012 to
2014 she has been co-chair of the Antitrust Committee of the International Bar
Association (IBA). She is currently Vice-chair of the Economics Committee of the
Antitrust Section at the American Bar Association (ABA). She is also Non-
Governmental Advisor (NGA) of the EU Commission and the Spanish
Competition Authority (CNMC) before the International Competition Network
(ICN).

Ms. Fernandez also advises leading Spanish and international companies on

Spanish and EU competition law matters, including advice on merger control,
antitrust issues (defending clients in investigations by national and European
authorities in relation to cartels and abuse of dominance) and litigation in these
fields. She has experience in a wide range of sectors, including pharmaceuticals,
chemicals, food, automotive, financial sector, media, transport,
telecommunications, digital markets and energy.

Eleanor Fox, New York University School of Law

Eleanor M. Fox is the Walter J. Derenberg Professor of Trade Regulation at New

York University School of Law, where she specializes in antitrust law and
international and comparative competition policy with a focus on Europe and
developing countries. She was a partner in the New York law firm Simpson

5
Thacher & Bartlett. She served as a member of international competition policy
advisory commissions and committees under Presidents Carter and Clinton.

Eleanor Fox received her law degree from New York University School of Law in
1961 and an honorary doctorate degree from the University of Paris-Dauphine in
2009. She was awarded an inaugural Lifetime Achievement award in 2011 by the
Global Competition Review for "substantial, lasting and transformational impact
on competition policy and practice." She received the inaugural award for
outstanding contributions to the competition law community in 2015 by
ASCOLA, the world network of professors of antitrust law and economics. She
was awarded the Lifetime Achievement Award of the Antitrust & Economic
Regulation Section of the Association of American Law Schools in 2017. Her
books include Global Issues in Antitrust and Competition Law with Daniel Crane,
2d ed. West 2017, EU Competition Law casebook with Damien Gerard, Elgar
2017, The Design of Competition Law Institutions edited with Michael Trebilcock,
Oxford 2013, and US Antitrust in Global Context casebook, 3d ed. West 2012.

Michal Gal, University of Haifa and ASCOLA Chair

Michal Gal (LL.B., LL.M., S.J.D.) is Professor and Director of the Forum on Law
and Markets at the Faculty of Law, University of Haifa, Israel. She was a Visiting
Professor at NYU, Columbia, Georgetown, Melbourne and Lisbon. Prof. Gal is
the author of several books, including Competition Policy for Small Market
Economies (Harvard University Press, 2003). She also published scholarly articles
on competition law issues and has won prizes for her research and for her
teaching. Inter aha, she was chosen as one of the ten most promising young legal
scholars in Israel (Globes, 2007) and as one of the leading women in competition
law around the world (Global Competition Review). Her paper, "Merger Policy for
Small and Micro Economies", won the Antitrust Writings Award for best paper on
merger policy in 2013, and her paper on "Access to Big Data" (with Daniel
Rubinfeld) won the award for best paper on unilateral conduct (2016).

Prof. Gal is also the President of the International Academic Society for
Competition Law Scholars (ASCOLA). She served as a consultant to several
international organizations (including OECD, UNCTAD) on issues of competition
law and was a non-governmental advisor of the International Competition
Network (ICN). She also advised several small economies and regional
organizations on the framing of their competition laws. She is a board member of
several international antitrust organizations, including the American Antitrust
Institute (AAI), The Antitrust Consumer Institute, the Asian Competition Law and
Economics Center (ACLEC). She clerked at the Israeli Supreme Court, and her
work is often cited in the decisions of the Court on competition matters.

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Anna Gerbrandy, Utrecht University School of Law

Prof. Dr. Anna Gerbrandy is Professor of Competition Law at the Europa

Institute of Utrecht University School of Law. She is member of the Renforce
research programme, and part of the leadership team of the Sustainability and
Resilience Pillar of the University's Research multidisciplinary research focus on
Institutions for an Open Society, and co-initiator of the research platform Markets
and Corporations in Open Societies. Anna's institutional responsibilities at Utrecht
University also covers leadership of education, and includes responsibility for the
multidisciplinary Masters programme Law and Economics. In addition, she holds
several positions of trust at societal organizations, including a position of honorary
judge at the High Court of Tariffs and Trade for appellate competition law cases in
the Netherlands.

After graduating from Law School and before returning to academia, Anna worked
as European Law advocate at one of the leading law firms of the Netherlands and
as senior law clerk for the competition law chamber of the district court of
Rotterdam. In 2009 she defended her cum laude-dissertation on "Convergence in
Competition Law". Anna's current research focus lies on the interplay between
competition law and public interests and more fundamentally on the theoretical
foundations of competition law in a changing societal context. More recently, her
research has moved to include questioning how competition law responds (and
might respond) to technological developments and the digital economy.

Leigh Hancher, Tilburg University

Leigh Hancher is a professor of European law at the University of Tilburg. Her

research interests are energy market regulation, EU state aids and
energy market governance.

Leigh has been a Professor since 1991, initially at the Erasmus University,
Rotterdam In 1996 she was Visiting Professor in "Natural Resources Law" at the
University of Calgary, Canada. She has broad experience in energy regulation issues
at the European and national levels. Her expertise as well as her academic research
is focused on the changing role of the government in stimulating the liberalisation
of traditionally heavily regulated sectors.

Leigh studied law at the Universities of Glasgow and Sheffield, and at the EUI. In
1989 she obtained, with distinctions, her doctorate in law at the University of
Leiden.

7
Helen Jenkins, Oxera

Helen has more than 20 years of professional experience in applying economic

principles to issues of strategic importance for businesses, predominantly in the
context of litigation and competition investigations. She has broad sectoral
experience, including in energy, financial services, retailing, communications, media
and pharmaceuticals. Helen has worked with a range of clients on the economic
issues that underlie the application of the relevant competition legislation in the
UK, Europe, Australia and the Middle East. She is a respected expert, appearing
before courts and competition authorities in the USA, UK, Republic of Ireland,
South Africa and Hong Kong. Her recent clients include MasterCard International,
Microsoft, National Grid, Virgin Media, Royal Mail, The Royal Bank of Scotland,
and Scottish Power.

Helen has been listed in The International Who's Who of Competitz'on LaU!Jers &
Economists since 2001, and is author of E conomics for Competition Lawyers (Oxford
University Press, 2nd edn, 2016). She is also a Trustee of the Swarovski
Foundation, an independent charitable foundation which aims to support
charitable projects across the areas of fostering culture and creativity, promoting
wellbeing and human rights, and conserving natural resources.

Frederic Jenny, ESSEC Business School and OECD Competition Commission

Frederic JENNY is professor of Economics at ESSEC Business School in Paris.

He is Chairman of the OECD Competition Committee (since 1994), and Co-
Director of the European Center for Law and Economics of ESSEC (since 2008).
He was previously Non Executive Director of the Office of Fair Trading in the
United Kingdom (2007-2014), Judge on the French Supreme Court (Cour de
cassation, Economic Commercial and Financial Chamber) from 2004 to August
2012, Vice Chair of the French Competition .Authority (1993-2004) and President
of the WTO Working Group on Trade and Competition (1997-2004).

Prof. Jenny was Global Professor of Antitrust in the New York University School
of Law's Hauser Global Law School (2014), visiting professor at University College
London Law School (2005-2012), Haifa University School of Law in Israel (2012),
University of Capetown Business School in South Africa (1991), Keio University
Department of economics in Japan (1984), Northwestern University Department
of Economics in the United States (1978). He holds a Ph.D in Economics from
Harvard University (197 5), a Doctorate in E conomics from the University of Paris
(1977) and an MBA degree from ESSEC Business School (1966).

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Juliane Kokott, Court of Justice of the European Union

Prof. Dr. Dr. Juliane Kokott is one of the eleven Advocates General at the Court
of Justice of the European Union Luxembourg. Since October 2003, she has been
responsible for about 900 cases and has delivered more than 400 Opinions, of
which roughly 10% concerned competition problems. Before joining the Court she
was a professor at the Universities of Augsburg, Heidelberg, Diisseldorf and St.
Gallen. She also was a visiting professor at UC Berkeley School of Law. Juliane
Kokott is a graduate of the Universities of Bonn, American
University/Washington D.C., Heidelberg and the Harvard Law School. She has
authored and co-authored and edited a broad variety of publications and has
initiated and organised many high-level expert conferences and symposia.

Assimakis Komninos, White & Case, GCLC

Dr Assimakis Komninos is a Partner at the Brussels office of White & Case LLP
and a former Commissioner of the Hellenic Competition Commission. He is
currently a visiting fellow of the Centre for Law and Governance in Europe at
University College London (UCL) and a member of the Executive Committee of
the Global Competition Law Centre (GCLC) at the College of Europe.

Johannes Laitenberger, Director General, DG COMP

Johannes Laitenberger is the Director-General of DG Competition at the

European Commission. He took office on 1 September 2015. He has been Deputy
Director-General of the Commission's Legal Service (2014-15), Head of Cabinet of
President Barroso (2009-14), Spokesman of the European Commission (2005-09)
and Head of Cabinet of Commissioner Reding (2003-04).

Johannes Laitenberger started his career in the European Institutions in 1996 as an

adviser in the General Secretariat of the Council. In 1999, he joined the
Commission as a case handler in the Directorate-General for Competition
(formerly DG IV) and soon became Member of Cabinet of Commissioner Reding
(1999-2003). He studied Law at the Rheinische Friedrich-Wilhelms-Universitat,
Bonn, and qualified as a German lawyer.

Christophe Lemaire, Ashurst

Christophe specialises in antitrust law, mergers, state aid and regulatory matters.
He is particularly specialised in the concept of free movement; assisting companies
during investigations carried out by the competition authorities; the putting in

9
place of compliance programmes; representing clients before the sector-specific
regulatory boards.

Christophe was Rapporteur permanent and Counsel for European Affairs at the
French Competition Council (2003 - 2006). He worked in the legal department of
the French Ministry for Foreign Affairs (Community and international economic
law division) where he was in charge of competition affairs and network industries,
in particular representing the French government before the Court of Justice (2002
- 2003). In 2007, Christophe published his thesis on the liberalisation of the energy
sector in Europe.

Thomas Liibbig, Freshfields

Thomas is an ACT partner in the global transactions group at Freshfields. He leads

their competition practice in Austria. He focuses on EU competition law,
especially antitrust, merger control and state aid law. Thomas also practises
German competition law and regulatory law in the competition law context.
Further, he has an active litigation practice - notably before the EU courts - but
also before the German ones.

Thomas is very experienced in getting deals through merger control, including

complicated cases with remedy packages. In core antitrust law enforcement, his
focus is on abuse of dominance and vertical practices, while in state aid cases he
regularly represents both companies and state authorities before the EU. He works
across many industries, but is particularly experienced in the pharmaceutical and
chemical industries, as well as in transport and logistics.

Massimo Merola, Bonelli Erede & GCLC

Massimo Merola, a member of the Rome and Brussels Bar, is the managing partner
responsible for the Brussels Office of Bonelli Erede Pappalardo and is the
scientific director of the firm's European Law group. Massimo oversees a broad
regulatory practice specializing in competition law, State aid law and more broadly
EU law (including customs law, public procurement, structural funds, fundamental
freedoms, etc.). He regularly appears before the European Commission (and
occasionally before national agencies and sanctioning bodies in various EU
Member States) to represent leading corporate clients and has extensive experience
across a broad range of industries. In addition to his extensive transactional
expertise, Massimo maintains since more than 20 years an intense litigation practice
before the EU Courts.

10
In conjunction with his active legal practice, Massimo Merola is a professor at the
College of Europe in Bruges since 1993 and he presently teaches an obligatory
course in State aid and public undertakings law. He has also served as visiting
professor at the University of Perugia and the University of Pescara in Italy, and
the University of Valencia and the University of Barcelona (Universidad
Autonoma) in Spain, in addition to several other teaching experiences. As a
renowned practitioner and scholar, Massimo is a regular speaker at European
conferences and seminars on Competition and State aid and the author of
numerous publications.

Graduated, magna cum laude, from the Faculty of Law of the University La
Sapienza in Rome, he completed his studies at the College of Europe, Bruges,
Belgium, where he obtained a Master degree with high distinction, and at the
Universite Libre de Bruxelles as a researcher. He is President of the Global
Competition Law Center.

Jorg Monar, College of Europe

Professor Jorg Monar is Rector of the College of Europe (Bruges/Natolin,

Warsaw campuses) since 1 September 2013. His former positions include Director
of the Department of Political and Administrative Studies of the College of
Europe (2008-2013), Professor of Contemporary European Studies and Co-
Director of the Sussex European Institute, University of Sussex (Brighton, UK),
EU Marie Curie Chair of Excellence and Director of the SECURINT project on
EU internal security governance at the Robert Schuman University in Strasbourg
(France), Professor of Politics and Director of the Centre for European Politics
and Institutions at the University of Leicester (UK), and Director for the Institute
for European Politics (IEP) in Bonn (Germany).

In addition to his research and teaching functions, Professor Monar also held
consultancy assignments with the European Parliament, the European
Commission, the Planning Staff of the German Ministry of Foreign Affairs, the
Dutch Scientific Council for Government Policy (WRR, The Hague), the German
Bundestag, the French Commissariat general au Plan (Paris) and the British House
of Lords and House of Commons (London). He has also been elected a Fellow at
the Royal Historical Society (London).

Professor Monar holds a Ph.D. in Modern History (University of Munich, 1989)

and in Political and Social Sciences (European University Institute, 1991 ). He is the
author of over 200 articles and books on the political and institutional
development of the EU, EU justice and home affairs and EU external relations.
He is also a founding editor of the European Foreign Affairs Review.

11
Nina Niejahr, Baker & McKenzie

Nina Niejahr is a counsel in the Baker & McKenzie's European & Competition
Law Practice in Brussels and co-chair of the European State Aid Group. She is an
active participant in the State Aid Working Group of the European Competition
Lawyers Forum. Ms. Niejahr has published extensively and speaks regularly at
seminars and conferences on a variety of EU competition and state aid law topics.
She is the author of the chapter on EU legal protection in state aid cases, published
in the 2011 Miinchener Kommentar zum Wettbewerbsrecht (Kartellrecht) and in
the 2016 Sacker/Montag European State Aid Law: A Commentary.

Kristina Nordlander, Sidley Austin LLP

Kristina Nordlander is a Partner with Sidley Austin LLP. She has a thriving EU
competition and litigation practice, representing clients in various sectors. Kristina
is involved in many high-profile antitrust investigations and cases before the EU
Courts. The current focus of EU competition law enforcement on the digital single
market, online selling and technology is a key component of Kristina's practice, as
well as antitrust issues arising in connection with mobile and electronic payments
and EU state aid law. Kristina is the founder of the Women's Competition
Network (WCN). The Financial Times named Kristina to its exclusive "Top 10
Innovators" list in the FT European Innovative Lawyer Awards 2017 .

Sir Peter Roth, Competition Appeal Tribunal

Sir Peter was called to the Bar in 1977 and was appointed Queen's Counsel in
1997. He was appointed a Recorder in 2000 and a High Court Judge in 2009. He
was, for many years, a leading practitioner in competition law and, as a Judge, has
heard many of the recent competition cases brought in the High Court. From 2003
to 2009, he was Chairman of the Competition Law Association. He held a visiting
professorship at King's College, London, teaching competition law on the Master
of Laws (LLM) course and he was the General Editor of the 5th and 6th editions
of Bellamy & Child on the European Union Law of Competition. He is a treasurer
of the European Association of Competition Law Judges and a trustee of the
Incorporated Council of Law Reporting (ICLR).

David Spector, Paris School of Economics and MAPP

David Spector's specialization is in the economics of competition and the

application of economic theory to competition law. He regularly publishes articles

12
in leading academic journals, as well as contributions to collective books, on
subjects ranging from collusion to the competitive impact of mergers, exclusionary
strategies and state aids. He is also the author of two books. In 2011, David
Spector was appointed 'non-governmental advisor' to the French Competition
Authority. In this capacity, he has been taking part in the activities of the
International Competition Network regarding mergers and abuses of dominant
positions.

David Spector is an Associate Professor at the Paris School of Economics. He

previously taught at the London School of Economics, the Massachusetts Institute
of Technology and the Ecole Normale Superieure, from which he graduated.
David Spector received his Ph.D. from the Ecole des Hautes Etudes en Sciences
Sociales (Paris) and the London School of Economics. He holds the 'agregation'
degree in mathematics.

Paolo Stancanelli, EU Commission Legal Service

Paolo Stancanelli, an Italian national, is a graduate in law and international politics.

After having worked in two law firms, in Italy and then in Brussels, he started his
career in the Commission in 1994 in the Directorate for Internal Market and
Financial Services. Following assignments across the Commission, he moved to
the Legal Service in 2006 as a Legal Adviser to the Director General. Since
September 2015, he is a Principal Legal Adviser, in charge of the team dealing with
State aids and trade defence instruments matters.

Jules Stuyck, Crowell & Moring

Jules Stuyck is a senior counsel in Crowell & Moring's Brussels office and is a
member of the firm's Antitrust and Advertising & Product Risk Management
groups. Jules is an experienced litigator, focusing on European competition law,
intellectual property, and market practices. He counsels clients on state aid, the
customs union, free movement, public procurement, trademark and trade practices
law, media law, and environmental law.

Jules is a leading authority on Belgian and European antitrust/ competition law,

offering more than three decades of experience as a practitioner, government
adviser, and law professor. He has advised on European sales law and has on
several occasions been invited by the European Parliament's Committee on
Internal Market and Consumer Protection to offer his perspective on unfair
trading practices, consumer law, sales law, and internal market issues.

13
Jules is also an emeritus professor of top European universities: KU Leuven
(Catholic University Leuven) (BE) and Raboud Universiteit Nijmegen (NL). He is
a guest professor at Universite Pantheon-Assas Paris 2 (FR), and former guest
professor at Central European University Budapest (HU). He is also the director
and chair of Almancora Societe De Gestion SA, a statutory manager of KBC
Ancora SCA, and he is chair of the SELDIA (the direct selling association) Code
Administrator.

Margrethe Vestager, EU Commissioner for Competition

Margrethe Vestager is a Danish politician, who is currently serving as the European

Commissioner for Competition. She served as a Member of the Danish Parliament
(Folketin~ from 20 November 2001 until 2 September 2014, representing the
Danish Social Liberal Party (Radikale Venstre). She was the political leader of her
party from 2007 to 2014, and served as Minister of Economic Affairs and the
Interior from 2011 to 2014.

Marc van der Woude, EU General Court

Born 1960; law degree (University of Groningen, 1983); studies at the College of
Europe (1983-84); Assistant Lecturer at the College of Europe (1984-86); Lecturer
at Leiden University (1986-87); Rapporteur in the Directorate-General for
Competition of the Commission of the European Communities (1987 -89); Legal
Secretary at the Court of Justice of the European Communities (1989-92); Policy
Coordinator in the Directorate-General for Competition of the Commission of the
European Communities (1992-93); Member of the Legal Service of the
Commission of the European Communities (1993-95); Member of the Brussels
Bar from 1995; Professor at Erasmus University Rotterdam from 2000; author of
numerous publications; Judge at the General Court since 13 September 201 0; Vice-
President of the General Court since 20 September 2016.

14
 The speaker and his firm represent online firms like
CLEARY GOTTLIEB Google. This presentation, however, is not on behalf
of or paid for by any client. Comments and positions
are personal to Maurits Dolmans and do not bind the
firm or its clients, and thoughts are work in progress.

Press requested to check quotes

"Fairness" and competition law,

25-26 January 2018

13th GCLC Annual Conference - "Fairness" In Competition Law And Policy:

Panel 1 on Fairness as an Objective of Competition Law: Exploring the Roots
Maurits Dolmans
clearygottlieb.com
"Fairness" - a universal standard?
Rawls, A Theory of Justice, 1971

1. Principle of Equal Liberty

Each person's liberty is bounded by
others' equal liberty
2. Difference Principle
Differences allowed so long as they
raise living standards of everyone, and
equality of opportunity is guaranteed

Corning, The Fair Society", 2011

1. Equality
Cover basic needs for all
2. Equity
Distribute surplus according to merit
3. Reciprocity
Require contribution in proportion to
ability
"Fairness" - a variable standard?
• "more fairness (less self-interest) in distributive justice is evident by children
growing up in small-scale urban and traditional societies thought to promote
more collective values." Rochat, 2009
Our sense of fairness is affected by
cultural background, personality, a
variety of unconscious biases and
"rules of naive accounting that
diverge in major ways from the
standards of rationality assumed in
economic analysis."

"many actions that are both

profitable in the short run and not
obviously dishonest/are likely to be
perceived as unfair exploitations of
market powe0uch perceptions
can have significant consequences
if they find expression in legislation
Osani circle game / Ubuntu or regulation."(-- Kahnernan)19afL
Fairness in competition law
(the complainant's and defendant's perspective)
 C 2017 Cleary Gottlieb Steen & Hamilton LLP. All rights reserved.
Throughout this presentation, "Cleary Gottlieb" and the "firm" refer to Cleary Gottlieb Staen & Hamilton LLP
and its affiliated ent~ies in certain jurisdictions, and the term "offices" includes offices of those affiliated entities.
Fairness and competition
law: A fairness paradox
Article I Concurrences N°4-2017
www.concurrences.com

Maurits Dolmans
mdolmans@cgsh.com
Partner, Cleary Gottlieb Steen & Hamilton, London

Wanjie Lin
wlin@cgsh.com

Associate, Cleary Gottlieb Steen & Hamilton, London

 Article

Maurits Dolmans*
mdolmans@cgsh.com
Partner, Cleary Gottlieb Steen & Hamilton,
London
Fairness and
Wanjie Lin
competition
law: A fairness
wlin@cgsh.com
Associate, Cleary Gottlieb Steen & Hamilton,
London

ABSTRACT
"Fairness", a popular word in policy discussions.
is experiencing a resurgence in public debates about EU
paradox
competrtion law. "Fairness", however, is an imprecise
and subjective moral concept. It means different things
at different times and in different countries to different
people, depending on their political, philosophical,
religious, social or cultural backgrounds. There is,
therefore, a fairness paradox: on the one hand,
competition law should reflect the values of 1airness;
on the other hand, if fairness were actually employed
in substantive decision-making as a goal and criterion,
I. Introduction
that would lead to unequal and inefficient results.
This paradox is resolved by engaging in objective and 1. Recent speeches by antitrust enforcers put "fairness" at the heart of
rigorous analysis applying established concepts of competition policy. Former US Assistant Attorney General for Antitrust Renata
competition law and economics: (a) "consumer
welfare" and efficient allocation of resources as key
Hesse referred to "promot[ing] the interests of the public over the power of the few"
goals of competition law, (b) "competition on the and "the ultimate goal of antitrust, economicfairness." 1 European Comm·issioner
merits" and "effect on competition" as the core criteria for Competition Vestager (who as the FT notes once campaigned under the
for a finding of infringement, (c) proportionality and
"useful effect" as a benchmark for remedies, and (d) charmingly anti-populist slogan: "Listen to the economists. That's what we do" 2)
due process and the rule of law as the hallmarks of the defined her task as competition commissioner as to promote ''fair competition.'' 3
proper procedure for the application of competition law. This is echoed in the European Commission's most recent Competition Policy
It is through adherence to these concepts that
competrtion law, and competition regulators, may Annual Report, which sets out its intention to "make markets work more fairly for
protect lhe value of "fairness" and deliver on their vision everyone" and "spread the benefits of fair competition in Europe and worldwide. " 4
of a fair market and fair society.
In total, the words ''fair," ''fairness," "fairly" or ''fairer" appear 28 times in the
Le mot "equite", qui revient frequemment dans /es 18-page document. By contrast, there is but one mention of "competition on the
discussions politiques, connail une resurgence dans
/es debats publics sur le droit de la concurrence de /'UE.
merits" and no mention of "consumer welfare."
"Equite", cependant, est un concept moral imprecis et
subjectif. Ce/a signifie des choses differentes ii des 2. These statements recognise a need to promote greater public understanding
moments differents, dans des pays differents et pour
des personnes differentes, en fonction de leurs origines and appreciation for antitrust authorities' work, in the face of populist pressures. 5
politiques, philosophiques, re/igieuses, socia/es ou Today's competition decisions are making headlines more than at any time in the
culturelles. Par consequent, ce mot represente un
paradoxe: d 'une part, le droit de la concurrence devrait
ref/eter /es valeurs de /'equite; d' autre part , si la prise
de decisions de fond en tan/ qu'objectif et critere etait
vraiment equitable, cela aboutirait ii des resultats R. HC5SC,And Never the Twain Shall Mee!' Connecting Popular and Professional Visions for Antilrust Enforcement, September
inegaux et inefficaces. Ce paradoxe se resolve en 20, 2016 ("The language of economic theory does 110/ so1111d like the language of economic faimess that is the raw material for

retenant une analyse objective et rigoureuse qui applique
/es concepts etablis du droit de la concurrence et de
/'economie: (a) "le bien-etre des consommateurs"
el ta repartition efficace des ressourr:es en tant
qu'objectifs c/es du droit de la concurrence, (b)
"la concurrence tondee sur /es merites" et "/'effel
sur la concurrence" en tant que criteres essentiels
d'une constatalion d'infraction, (c) la proportionnalite et
"/'effet utile" en tant que references pour /es recours, et
(d) la procedure equitable et la primaute du droit en tant
que caracteristiques de la procedure d'application du
droit de la concurrence. C'est en adherant ii ces
concepts que le droit de la concurrence et /es autorites
de regulation peuvent proteger la valeur de l"'equite"
et concretiser /eur vision d'un marche juste et
d'une societe juste.
·The authors have worked with large and small clients
in the IT sector, but this article raflects views that are
personal to the authors, do not bind the firm or ~s clients,
and are work in progress as we learn every day. We are
grateful to Gavin Baird for research, Vassilena Karadakova
for her contribution to the section on remedies and
Hannah Disselbeck and Patrick Pagni for their review from
a philosophical perspective.
most popular discussions about competition a11d alllitrust. (. .. )Animating the beliefs of ordinaryAmerica11s who demand vigorous
antitrust e11forcemem are the rafoe of fairness and the belief that proper!J·functioni11gcompetitillt' markets are lhemselllt's fair. To sa)'
it a,iother 1ra)', competition is fair because it gires a chance to the small business owner to succeed i11 her business vem11re, because
it delirers loH·er prices to com11mers, and because it dri~·es the i1111oratio11 that improves prodrtcts, business processes, a11d more.") .
M. Vestager, Lunch with the FT, September 22, 2017, https://www.rt.eom/content/aa9el468-9f20-11e7-8cd4-9320671bf946.
M. Vestager, How competition can build trust in our societies, TED Talk New York 20 September 2017; Why global markets
need rules, Ascona on 5 August 2017; Competition for a Fairer Society, Speech al 10th Annual Global Antitrust Enforcement
Symposium, Georgetown, September 20, 2016; Working Together to Support Fairer Compelition Worldwide, Speech at UCL
Jevons Institute Conrerence, London, June 3, 2016: The Values of Competition Policy, Speech at CEPS CorporaJe Breakfast,
Brussels, October 13, 2015. She has approached the subject in moral terms, drawing parallels between competition policy and
religious norms:"/11 my work 011 competition, I sometimes say that 1rhat is at stake is as old as Adam a11d Eve. Forall the economic
theories and the b11si11ess models, it all comes doll'// to greed."M . Vcstager, Luther and the modern world, Speech al 9th Luther
Conrerence and the award ceremony or the Luther Rose 2016, November 14, 2016. See also J. Laitenberger, EU compelilion law
in innovation and digital markets: fairness and the consumer welfare perspective, October I 0, 2017 (" Whm co11sumers feel that
the game is rigged, some may feel acluded and left behind. When entrepreneurs are victim of rogue rivals, th()' may lose heart and
drop their pla,is altogether. So.far from being a 'H'easel word', used to just if)• volu111aristicalfr desired outcomes.fairness only ri11gs
true if it is understood as a call to rigour, cohere11cea11d comistwcy"), available al http://ec.europa.eu/competition/specch!.'S/text/
sp2017_15_en.pdr.
4 European Commimon Report on Competition Policy 2016, COM(2017) 285 final, May 31, 2017, p. 2. In total, in the 18-page
documenl, the words"fair,n'fairness,'ufairl}"'or"fairer"appear 28 times.There is one mention of"competition on the mcrits"and
0 mentions of "consumer welfare."
5 Populism is a broad term, but can be defined as a political movement where an opportunistic strong leader"pits a virtllous a11d
homogeneous people agai11st a set of elites and da11gero11s 'others' H'ho are togethtr depicted as depriving (or attempti11g to deprive)
the sm·ereig11 people of their rights, va/r,es,prosperity, identil)\ and voice"(D. Albertazzi and D. McDonne11, Twellly-First Cet1tllrJ'
Pop11/ism, London: Palgravc Macmillan, 2008) ,

Concurrences Nc4-2017 I Article I Maurits Dolmans, Wanjie Lin I Fairness and competition law...
 recent past, and it seems natural to reach for the everyday
language of "fairness," to explain and justify policy goals
and enforcement decisions in terms readily accessible,
and acceptable, to the general public.• Certainly, few
of us would dispute the intrinsic value of building a
fair market and a fair society, and it is heartening and
even inspiring to see this value being championed at
the highest levels of government. However, we should
question whether "fairness" has a role to play beyond the
realm of political discourse: can and should competition
policy and competition law be decided on the basis of
"fairness," and is this the best way to bring about a
society we might all celebrate as "fair." 7
3. This paper takes a critical look at the role of "fairness"
in competition law. The first section analyses the concept
of fairness, including sociological studies, and concludes
that it is an imprecise and subjective term with multiple
and sometimes contradictory meanings, some of which
appear directly opposed to basic tenets of competition
law. The next sections explore the relationship between
fairness and competlt10n policy, taking in turn :
fairness and the goals of competition policy, fairness
as a criterion for finding an infringement, fairness as a
benchmark for outcomes and remedies, and fairness as it
relates to enforcement procedures. The paper concludes
that the concept of fairness is too subjective and imprecise
to be used in the day-to-day business of competition
law-making and enforcement. 8 Instead, competition
law and economics have developed more objective
and rigorous concepts to safeguard and deliver on the
promises of a responsible free market economy. These are:
(a) "consumer welfare" and the efficient alloca-
tion of resources, as key goals of competition law;
6 Se, also A. Lamadrid de Pablo, Competition Law as Fairness, JECLAP, 15 February
2017 ("Co111iecti11g 'fairness' to competitio11 {OH' is( .. ,) 1101 a lfOJ' to dirorce the discipli11e
from eco11omics bllt to reconcile it •rith societJ; shmri11g the lfider public that it co11 conlrib-
ute to th,ir •·tlf-bti11g").
Su also V. Postrcl, U.S. Antitrust law is not broken, Bloomberg, 29 September 2017,
avai!able at hllps://www.bloombcrg.com/vicw/articlcs/2017-09-29/u-s-anlilrust-law-
is-not-broken; CPI A111i1r11st Chrouicl,, October 2017, Vol. I, "Antitrust's Inequality
Conundrum" with contributions from H. HOltnkamp (Antitrust Policy and lnC1Jualil)
of Wealib), D. Crane (Further Rl!Hections on AntiLrust and Wealth Inequality),
M. Trebilcock and E Ducci (The Muliiface!ed Nature of Fairness in Competition Policy),
S. F. Ennis. P Gonzaga and C. Pike (The EITects of Market Power on Inequality),
B. Lyons (Inequality and Competition Policy), E. F01 (Tracing Inequality from the
United States to South Africa), A. Raslan (Competition Policy and Inequality), and
D. Kllkovec (Antitrust and Inequality - Time for a Paradigm Change).
Fairneo. is explicitly mentioned in Article l01(3)TFEU, but this reference is not discll-""d
in detail because of it.s specific context that does not appear to be of more general rel-
C\'ancc. Pursuant to thal provision, rcstricth-e agrecmcnls seeking exemption from the
prohibition on anti-<ompetitive agreements must give ri.!e to efficiencies ",·hit, ollo•·i11g
c/JtlSIUllmafair shart of 1h, r,su/1ing btn,jits.'This requires an a=mcnt of whether con-
sumers rccci\'c enough of the posiliw cOCCLS said to arise from lhc restriction on competi-
lion, such lhal lhe oulcome is ultimately helter for consumers, compared to ir the agree-
ment ,wre prohibited.As !he Commilsion explains:"( ... ) 1heco11ctpl of fair short' implies
that th, pass-011 of bm,jils murl al /"'51 compmsatr connunmfor .,,, actual or /ikr/y nrg-
atfre impact ca11sed to 1hm1 by the rrsrricrion of compttitio11 fo1111d wuJer Article (IOI (I))"
(Guidelines on the application of Anicle 81(3) of the'lreaty (2004/C 101/08), para. 85).
These p~itive cITl'Cts might take the form of incrc-.d.SCd oulpul and lower prices, or a new
product and quality imprmements.The"fair sharc"criterion is thus a requirement to weigh
the negative and positive effects of an agreement to determine when consumer welfare is
maximised.The"fair share''crilerion embodies a dynamic view of consumer \\el fare: agree-
ments may still qualify under Article I01 (3) if the benefit., do not immediately materialise,
but the greater the time lag of the pus-on 10 the consumer, the greater the efficiencies must
be lo compensate consumers for their losses in the preceding period (Guidelines on the ap-
plication of Article 81 (3) of the Treaty (2004/C l 01/08), para. 87).
2 Concurrences Nc4-201 7 I Article I Mauri1 s Dolmans, Wanjie Lin I Fairness and competition law...
(b) "anti-competitive effect" and "competition
on the merits" as the core criteria for determining
compliance;
(c) proportionality and "useful effect" as bench-
marks for remedies; and
(d) due process and the rule of law as the prin-
ciples underpinning the proper procedure for the
application of the law.
It is through adherence to these precepts that competi-
tion law protects the values represented by our various
notions of "fairness," and antitrust authorities should
respect and abide by these principles to realise their
vision of a fair market and a fair society.
II. Fairness:
An imprecise moral
concept
4. Ken Binmore's fascinating book, Natural Justice,
argues that an individual's sense of "fairness" derives
from a "deep structure," a kind of reciprocal altruism
formed by evolution and the practicalities of food
sharing, that is common across people of different back-
grounds and cultures. He concludes: "Fairness is evolu-
tion's solution to the equilibrium selection problem for our
ancestral game of life. ( .. .) What we count as fair depends
both on our cul/lire and on our genes. Since cultures vary,
any universal principles of juslice-its deep structure-
must presumably be wrillen into the genes. " 9
5. Binmore believes that the "categorical imperative"-
Kant's view of the ultimate rationale for all social
obligations-reflects that "deep structure" that all
humanity shares. 10 The categorical imperative can be
described (admittedly in a simplified and imprecise way)
as an objective equivalent of the Golden Rule, 11 or a rule of
reciprocity: a person should act according to rules that, if
followed by everyone else in a like situation, would yield
an acceptable outcome. 12 The same thread runs through
Rawls' famous "theory of justice," often called the theory
9 K. Binmore, Natural J11stice, Oiford Unimsity Press, 2005, p. 141T. See also
K. Binmore, Bargaining and fairness, http://www.pnas.org/content/l l l/
Supplemenr_3/l 0785.full.
10 Not just humanitJ', it turns out. Sarah Brosnan and Frans d, Waal showed that primalfS
and o[her animals also manifest a serue of fairn~, in their famous"capuchin monkcy"cx-
pcrimcnt. They found that capuchin monkcJ> would l'ocally object to ri1>ls being giwn
grapes when they only recciwcucumbm, and would prefer to go without food than accept
this iniquity.They sometimes hurled the cucumber back at the RSearcher. S. Brown and
Ede Waal, Monkeys reject unequal pay, Naturr425 (6955), 297- 299 (2003).
Jl "Do to others as yo11 H'Ollld hare them do to you,"a rule found in all major religions. See,
for instance, Matthew 7: 12 and Luke 6:31, and hadith 13 of the40 Hadi!h of an-Nawa-
wi1.. No,ie of yo111ru!J' belieres until he loreJfor his brother tt·hat he lores for himseff."
12 "A ct o,ily accordi11g to that ma.rim lfhereby you can, at the same time, will that it should
become a 1111irersal lall'."E. Kant, Grmmdi11gfor the MetaphJ·sics of Morals, 1785, trans-
lated by J. W. Ellington (3rd ed.) (l 993), Hackett, p. 30. This is not to say that Binmore
is not crilical of Kant: he memorably dismii<ics Kant's writings as "tht ll'ork of a,i
emperor H'ho ll'0S c/01hed i1111othi11g more tha11 the obsrnrity of his prose."
 of "justice as fairness." Rawls presents a thought experi-
ment to justify state authority and develop a just political
system, in which people find themselves in an "original
position," where they meet and design a social system
while remaining behind a "veil of ignorance," that is to
say, without yet knowing what position they will have in
the society or economy, and what their personal charac-
teristics will be. A political system is "fair" if it is accept-
able to all participants in that discussion, before they
know where in that system they will be placed. 13 Binmore
links Rawls' thought experiment to his notion of an
innate shared understanding of fairness: "The idea [of the
original position] certainly hits the spot when they hear it
for the first time, but I don't believe this is because they
have a natural bent for metaphysics. I think it is because
they recognize a principle that matches up with the fairness
norms that they actually use every day in solving the equi-
librium selection problem in the myriads of small coordina-
tion games of which daily life largely consists." 14
6. Binmore's finding of a "deep structure," and the
attempts of moral philosophers to formulate a universal
principle of fairness, might suggest that fairness has a
coherent meaning, with clear and predictable outcomes
for any given situation. ln fact, Binmore finds "differ-
ences in observed norms" that are "explained largely by
cultural or contextual variations in the standards of inter-
personal comparisons." It turns out that fairness has
multiple strands of meaning, some of which are not
always consistent with a competition-driven market-
place. It is a morally laden construct, frequently associ-
ated with what is good, right or just, and influenced by
other values and beliefs in society. Thus, even if fairness
is an innate instinct common to all, it is also moulded by
each individual's society, education, experience, religious
and cultural situation, and coloured by each individual's
unique character. As Lord Nicholls of Birkenhead said,
"Fairness is an elusive concept. It is an instinctive response
to a given set of facts. Ultimately it is grounded in social
and moral values. These values, or altitudes, can be stated.
But they cannot be justified, 15 or refuted, by any objective
process of logical reasoning. Moreove1; they change from
one generation to the next. It is not surprising therefore
that in the present context there can be different views on
the requirements of faimess in any particular case. " 16
13 J. Rawls, A Theol)' of Jusrice. 1971 , "( .. .) if a ma11 k11e.· 1ha1 he H'as weahhy, he mighl
find it rarional ra advancr rh, principle that WJrious taus for w,lfar, m,asum b, counted
1mj11st; if he kneH' that he were poor, he •,mufd most fike/J' propose the collfrary princi-
ple. 10 represem rhe desired res1ricrio11s, one imogi11es a sir,wtion in 1t1licl1 ereryo11e is de-
prired of this sort of informatio11."For an example of lhc principles of such a social con-
tract , drsigncd to amid lhe exe&es of capilalism and socialism, see P. CorniDg, Thr Fair
Society: The Scie11ceof HumD11 Nawrea11d the Pursuit of Social J,mice, 2011, where he
posits a"biosocial contract"bascd on three precepts:"Goodsand seniices must be distrib-
wed to each of us accordillg to our basic 11ttds (i11 this, there m11S1 be equality); S11rph1ses
bqoud the prorisio11i11g of our basic needs mus/ be distribwed occordi11g to 'meril ' (there
must also be eq11ity); /11 relllm, each of us is obligated to comribute proporrionotefJ' lo the
collectfre s11n:frol elllerprise i11 accordance with our abili(J• (there nrnst be reciprocity) ."
Compelilion (as bounded and prolecled bycompclition law) would be the mechanism lo
implement the second precept.
14 K. Binmorc, op. ciL note 9.
15 The better word may hal'e been"pr01<d."Lord Nicholls ignores Kant here.
16 Mcfarlo11e I'. Mcfarla11e [2006] UKHL 24, pasa. 4.
Concurrences N: 4-2017 I Article I Maurits Dolmans, Wanjie Un I Fairness and competition law...
7. Behavioural economists and psychologists also have
examined how fairness operates in the real world. Their
studies confirm that notions of fair and unfair can vary
among individuals and across cultures. 17 In a seminal
1986 study, Kahneman, Knetsch and Thaler 18 devised
scenarios where a firm (such as merchant, landlord
or employer) made a price or wage-setting decision.
Respondents were asked to rate the action "completely
fair, acceptable, unfair or very unfair." Across the different
scenarios reported, most scenarios returned a 3: 1 or 2: 1
distribution in one direction, showing that while there
might be a prevailing view of what was fair in a situation,
there was nothing anywhere near unanimity. 19 In only
a few cases were the splits more extreme. 2° Kahneman's
study indicates the varying standards of fairness that
may exist within what appear to be relatively homoge-
nous populations. 21
8. Other psychology experiments show how our sense of
fairness may be influenced by our culture and community.
Rochat and others investigated attitudes to distributive
fairness by studying how 3- and 5-year-old children
growing up in different socio-economic and cultural
groups approached the task of splitting desirable items
between themselves and an adult stranger, or between
two dolls. 22 The study found that children tended to
show more fairness in sharing as they aged, and "more
fairness ( less self-interest) in distributive justice is evident
by children growing up in small-scale urban and traditional
societies thought to promote more collective values. " 23
17 How the common substrate interacts \\ith di[erences in culture or pcrsonalil)' can also
be seen in game cxpcrimenls. In an"ultimatum game," onc pcrwn is asked to share a
stack of money with an unknown counterpart, who can react either by agreeing (in
which case the counterpart rcceiH!S what was orrercd, and the oITeror keeps the rest)
or by vetoing (in which case neither party receires anything). The "subgame perfecl
Nash equilibrium" (the optimal rational outcome) is thal the first moving licensor
(the offeror) receives close to monopoly rent and the remaining licensors and licensees
(lhc orTerces) recei\"e just enough not to turn them awa)' from licensing and implemcnl-
ing. Experimental game theory indicates, howc\'n, 1hat most people do not consider the
purely rational oplimal outcome fair. Ordinary indi.,.·iduals playing ullimatum games
tend lo share more than the rational minimum with their counterpart. This is known as
"iniquity awrsion"and is a reflection of the shared sense of fairness. But how much is
actually shared and accepted depends on cullural background or country, as well as age.
Cf. for imlanceA. A. Stanton, Evolving Economics: ASynthesis, April 26, 2006, arail-
able at http://mpra.ub.uni-muenchen.de/2J69.
18 Kahneman and Thaler hare both been awarded the Nobel Prize for their work in be-
havioural economics: Kahneman in 2002 (in a prize shared with Vernon L. Smith), and
Thaler m-y recently, in October 2017.
19 D. Kahneman, J. L. Knetsch, and R. Thaler, Fairness as a Constraint on Profit Seeking:
Entitlements in the Market, The America11 Eco11omic Reriew ( I986): 728--741.
20 For instance, 9l'Yo of respondents in the stud)' considered it unfair to deliberate))'
exploit a special dependence, such as whcrr a landlord raised the rent on learning his
tenant had taken ajob close to home. There were also situations where respondents were
about equally divided. such as this one: "A smallfac,ory prod11m /ables and sells all that
ii ca11 make at S200 each. The cost of moki11g each table has rece11rly decreased bJ· $20.
The factory does not change its prier for th, table."
21 Thcstudi· was carried oul through telephoncsun~ys of randomly selected residents of
Toronto and Vancouver in calls made during the evening hours, and an equal number of
adult female and male respondent! were interviewed.
22 They tested ,mn groups of children from remote rural to highly urbanis,d regioru, in-
cluding Chinese children in a large communist party-run preschool in Shanghai; Norlh
American children attending prirntc prl'Schools in melro Atlanta, Georgia; Fijian chil-
dren from a small fishing village community; and Peruvian children from the cenlral
Andean highlands, tested in day care centres on the outskirt of Huancayo, al their home.
or outdoors in fields of small village communities near the city.
23 P. Rochat, M. D. G. Dias, G. Liping, T. Droesch, C. Passos-Ferreira, A. Winning, and
B. Berg, Fairness in distribuliw justice by 3-and 5-year-old.s acrMl seven cullures,
Journal of Cross-C11lt11rol Psychology 40.3 (2009): 416-442, p. 416 .
3
 Finkel and others studied ordinary people's understand-
ings of unfairness by asking them to detail instances of
unfairness, which they deconstructed and organised into
types of fairness----e.g., the relationship between rewards
and efforts; the relationship between punishment and
behaviour; differential or discriminatory treatment; and
lack of due process. They carried out this experiment with
groups in Spain, America and Japan. They found that
the Japanese and American groups generated instances
of unfairness that fit within the same type categories,
but the distribution across those categories was "signifi-
cantly different" between the groups. 24 The Spanish group
displayed some overlaps with the American group, but
also exhibited a distinctive sense of fairness rooted in
respect for the individual. The experimenters found:
"[L]ooking at both outcome and process claims, American
participants seem to focus more on outcome unfairnesses,
which we 'label' as an 'outcome bias. "' 25 For the Spanish:
"[B]oth equality and equity, in the outcome or process, are
not only important in themselves, but crucial in the preser-
vation of honor and dignity. To be treated inequitably or
unequally is to be disrespected. So the 'bottom line' of 'no
es justo' is not so much the violation of equity or equality
per se, but that these violations may bring the value of the
person into question." 26
9. These and other experiments show that fairness is
not an absolute standard. While it has deep common
roots, as Binmore found, views of fairness are coloured
by prevailing social, cultural and other norms, as
well as personal judgment reflecting the individual's
psyche. These differences render it unsuitable for use
as an objective standard by which to develop complex
competition law and policy. To give some examples:
should the pursuit of profit be denounced as selfish
greed, a story as old as Adam and Eve, or accepted as
a driver of innovation and improvement, a story as old
as Prometheus? Should competitors be required to help
their rivals, or should they be allowed to favour their affil-
iates because that discourages free riding and stimulates
rivals to make competitive investments that eventually
benefit consumers. Appeals to fairness can be made by
both sides in this debate. There is a fairness paradox: on
the one hand, competition law should reflect principles
of fairness; on the other hand, if fairness were actually
used as a criterion, that would inevitably lead to inconsis-
tent, unequal and potentially inefficient results.
10. A review of philosophical discussions of "fairness"
confirms the diversity of opinion. Various philosophers
have attempted to define what fairness means. In the
theories discussed above, "fair" and "moral" are treated
together, so that a fair action is a moral one. Fairness has
24 N. J. Finkel, D.S. Crystal and H. Walllnabe, But it\ not fair! Commonsense notions of
unfairness in Japan and the United States, Psychology, Public Polity, and la• 6 (2000):
898 and N. J. Finkel, R. Harre, and J.-L. Rodsiguez Lopez, Commonsense Morality
Across Cultures: Notions or Fairness, Justice, Honor and Equit)', Discourse Studies 3.1
(2001): 5-27.
25 Finkel el al. (2000), p. 14.
26 Ibid .• p. 17. For example, tyrannical treatment by a hos, or inferiors was"110 es justo"
bccaUS< it offended their personal dignity, and the appointment or incompetent prores-
sors was"no es justo"because il demonstrated a lack or respect for the studenls.
4 Concurreoces N" 4-2017 I Article I Maurits Dolmans, Wanjie Lin I Fairness and competition law...
often been given a meaning along the lines of equality . .
Aristotle argued for equal treatment, while recognising
that this did not mean treating all individuals the same.
He wrote that "equals should be treated equally and
unequals unequally. " 27 Aristotle's version of fairness
acknowledges differences between people and that these
differences must be taken into account to be fair. Rawls
also argued for equality but focused on equality of
opportunity: that each person must have access to equal
rights and liberties, that is, the same opportunities and
freedoms. Social and economic inequalities are accept-
able as long as all individuals had equal access to oppor-
tunity and any inequalities benefitted the least advan-
taged in society. This approaches our understanding of
competition policy, that "[a] single producer may be the
survivor out of a group of active competitors, merely by
virtue of his superior skill, foresight and industry( ... ) The
successful competitor, having been urged to compete, must
not be turned upon when he wins. " 28 Liberal and libertarian
theorists also focus on process rather than outcome,
arguing that it is not the end state that it is important, but
how it came to be. Thus, an outcome is fair if it emerged
through a legitimate process from an initial distribution
of endowments that was fair or equal. 29
11. Other writers have investigated the meaning of fairness
when used to assess an outcome and justify redistribution
of assets if the outcome is unequal. Hal Varian proposes
that a distribution is fair from an economic perspective
when a group of agents divide a bundle of goods and
"no agent wishes to hold any other agent's final bundle." 30
This might be a situation where everyone gets the same
bundle ("even division allocation"), or when-perhaps
after trading----each finishes with a bundle which best
matches her preferences. Dworkin called this the "envy
test." 31
12. Finally, "fairness" has also been used to mean
reciprocity, or a sacrifice of self-interest for mutual
benefit. Hart writes, "When a number of persons conduct
any joint enterprise according to rules and thus restrict
their liberty, those who have submitted to those restrictions
when required have a right to a similar submission from
those who have benefited by their submission." 32
27 Nicomachea11 Ethics by Aristotle (translaled by W. D. ROSI, revised by J. 0. Unman),
available in The Complete Jlorks of Aristotle: The Rtristd O,ford Tra11Slatio11, One
Volume Digital Edition (2014), edited by I. Barnes, Princeton Unimsity Press al
p.1729.
28 Judge l.earned Hand in Unittd Stoles ..Aluminum Co. of Amtrica, 148 E2d. 416,430
(2nd Cir. 1945).
29 R. Nozick, Distributive Justice, PhilosophJ' & PublicAffoirs 3 .I (FaU 1973): 45-126.
This approach suffers from a problem of "infinite regress," because one
would always have to ask why the initiaJ distribution of endowments was
fair.
30 H. Varian, Distribu1i1< Justice, Welfare Economio;, and th, Theory of Fairness,
Philosophy and Public Affairs 4.3 (1975): 223- 247, p. 240 . This type of
thinking is inherent in the old Germanic and Biblical rule for the division of
inheritance: "Divide or Choose" where one party divides the estate in two
parts, allowing the other party to choose first (su, for instance, Ge11esis. Cb. 13).
31 R. Dworkin, What is Equality? Part 2: Equality of Resources, Philosophy 011d P11blic
Affairs (1981): 283-345 .
32 H. L. A Hart, Are There Any Natural Rights? Philosophical R"ieH' 64 (I 955): 175-
191, p. 185 .
13. What would these philosophers say about competition
policy? None of their different concepts of fairness apply
universally; they are relevant for different situations and
different purposes. Many of them would disagree with
some basic tenets of competition law. Take equality of
outcome (redistributive justice) and sharing: the notion
that every person should receive an equal share, or that
the weak should benefit from special protection, conflicts
with the result of efficient competition policy, which
allows the nimble to reap the harvest of their investments
and innovation, while leaving the inefficient behind.
Aggressive and selfish conduct by strong firms is often
perceived as unfair, but the law "does not consider an
intention even by a dominant firm to prevail over its rivals as
unlawful. " 33 Alternatively, consider fairness as reciprocity
and mutual cooperation, which promotes exchanges
between parties for mutual benefit. Competition law is
highly suspicious of collusion, and sharing information
or resources between competitors normally violates the
law even if the exchange results in an outcome that is effi-
cient in that it better reflects each participant's preference.
To encourage efficient allocation of resources and inno-
vation, competitors are expected to generate their own
information and resources, and compete in research and
development. Where cooperation and mutual support
are the norm in fairness, they are the exception in compe-
tition policy (at least as between competitors).
14. Finally, turning to dictionary definitions for
guidance, we find that the most commonly used senses
of "fair" and "fairness" have to do with justice and the
avoidance of arbitrariness. According to the Oxford
English Dictionary, it means, for conduct, methods and
arguments: "free from bias, fraud, or injustice; equi-
table; legitimate, valid, sound. " 34 According to Merriam-
Webster, fair "implies a proper balance of conflicting inter-
ests," and is synonymous with "just," "impartial" and
"objective." 35 None of these definitions have anything
much to do with how firms should behave in the market.
Saying that firms should "properly balance" their own
and their rivals' "conflicting interests," or that they
should deal without favouritism or discrimination with
their customers or rivals may result in inefficient and even
anti-competitive results. Competition law may be "fair,"
in the sense of "providing an equal chance of success to all;
not unduly favourable or adverse to anyone." 36 This sense
of fairness-which is used to describe a set of condi-
tions or circumstances-is perhaps the most apposite
for competition policy-although the word "unduly"
begs the question, and competitors are supposed to be
adverse to each other. While it does not, therefore, tell us
what "fair competition" looks like, this definition at least
suggests that the ideal for a well-functioning market is
a level playing field, even if the outcome of the contest
on that level field is that there are few winners and many
33 Commission decision in AKZO, OJ L 375, 31.12.1985, para. 81.
34 "Fair, adj , and n.1;'OED On/in,, June 2017, Oxford Unimsily Pres.s, http://www.oed.
com/view/Entry/67704?rskey=kugKtC&result=2 (acce.s.sed July 10, 2017) .
35 "Fair," Mmiam-W,bster.com, 2017, Merriam-Webster, https://www.merriam-websLer.
com/dictionary/fair (accessed July 10, 2017) ,
36 op. cil. note 34
Concurrences Ne 4-2017 I Article I Maurits Dolmans, Wanjie Un I Fairness and competition law...
losers. And, we might add, so long as the spectators-the
consumers-benefit from the game.
15. What emerges from this overview is that fairness is
a fluid concept with multiple meanings. Fairness, with
its moral overtones, confers a rhetorical flourish and
intrinsic righteousness when used to describe an act or
situation. It is appealing advocacy. It is this quality,
coupled with the general imprecision of the notion,
that makes "fairness" an attractive tool for implying a
consensus within an audience of individuals who may
in fact have many different political views. But it is this
quality, too, that demands care and critical judgment in
its deployment as a yardstick to differentiate between
permissible and impermissible competitive conduct.
Casual use reduces "fair" to the idea of "right" or
"good." In this case, "fair competition" is empty
of meaning-it is merely value-laden shorthand for
competition the speaker deems "good" or "permissible,"
as opposed to competition that is allowed by the law and
reflects rational economic policies to benefit consumers.
It does not tell a firm how to behave in a way that avoids
infringement.
16. Not only is fairness too vague to be a useful tool in
decision-making, and one that could lead to paradoxical
results, the next sections show that we do not need
fairness as a goal or yardstick in competition policy.
While fairness has a historical association with competi-
tion law, competition law has progressed to more precise
and useful criteria to assess competitive behaviour.
III. Objectives:
Fairness versus
"consumer
welfare" as goals of
competition policy
17. Fairness played a role in the genesis of modern
competition law in Europe. David Gerber explains that
modern competition policy was first conceived in 1890s
Austria, in part "to increase the perception of economic
fairness and thereby reduce antagonisms between workers
and owners, and among regional ethnic groups." 31 Ideas
of fairness were a consideration for the enactment of
competition legislation in the I 920s, and their develop-
ment after the Second World War: "[C]ompetition laws
were designed not only to foster economic growth, but
also to demonstrate to the skeptical social classes that
supported greater equality and democracy that large busi-
nesses would not be allowed to utilize their power to the
37 D. Gtrber Fairnffll in Competition Law: European and U.S. Experience, Conference on
Fairn"" aodAsian Compelilion Laws, March 5, 2004, Kyoto, Japao, p. 6.
5
 detriment of either consumers or competitors." 38 It may be
this ordo-liberal sentiment-for a social market economy
based on free market principles, which encourages the
dispersion of economic power (and with that, polit-
ical power) 39-which resonates in Vestager's speeches,
when she says: "People don't just want to be told that
open markets make us better off They want to know that
they benefit everyone, not just the powerful few. And that
is exactly what competition enforcement is about ( ... ) [CJ
ompetition enforcement also sends a message of fairness.
That public authorities are here to defend the interests of
individuals, not just to take care of big corporations. And
that everyone, however rich or powerful, has to play by the
rules. That's what President Juncker referred to last week
as the social side of competition law." 40
18. It should be kept in mind, however, that Article 119
TFEU (ex-Art. 4 TEC) refers not to "fair" competition,
but to "the principle of an open market economy with
free competition." 41 Similarly, Protocol 27 of the TFEU
confirms "that the internal market as set out in Article 3 of
the Treaty on European Union includes a system ensuring
that competition is not distorted." The operative provisions
of the treaties and the protocols contain no reference to
"fair" or "unfair competition." 42 Nor do they favour
small firms, or oppose concentration in markets. Indeed,
while Article 102 TFEU forbids any abuse of a dominant
position, it does not prohibit the existence of a dominant
position itself, nor is there a ban on oligopolies. 43
19. With the advent of modern economics and the
Chicago School, concerns arose that past competition
policy lacked objective and rational criteria for consistent
enforcement, and had had counterproductive effects
on efficiency and innovation. 44 Competition policy
thus shifted away from political goals to promoting
consumer welfare, efficient allocation of resources, and
the promotion of dynamic, innovation-based, competi-
tion. This transition to a "more economic approach" was
formalised in the EU during the modernisation process in
38 Ibid., p. 7.
39 A. Ezrachi, Sponge, Jo11mal of A11titms1 E11Jorccn,e111 (2016): 1-26, p. 5 ("[The] phil-
osophical fmmda1io11s lof European compclition lawl Wtrt influrnctd, to a larg, almt,
by the German ordo-/iberal school, which reflects humanist values protecting indfrid/lOI
freedom from go~·emmmtaf 011d prirate power").
40 M. Vcs1ager, Compclition for a Fairer Society, Speech at I0th Annual Global Antitrust
Enforcement Symposium, Georgetown, September 20, 2016.
41 See also others, such as Article 120 TFEU, stating that" The Member States 011d the
Union shall act;,, accordance 1rith the principle of a,i open market economy H'ilhfree com-
petition.ja,ouring an efficient a/local ion of mourw, and in compliance with the princi-
ples set oU/ in Article J/9."
42 "Fair competition" is menlioncl..l onlJ in the Preamble, stating that "the removal of er-
is ting obslacles calls for co11certed actiofl i11 order to g11aramee steady apa11sio11, bola11ced
trade 011dfair competitio11."
43 Case C-413/14 P Intel i: Commission ECLI:EU:C:2017:632, para. 133 ("[l]t is in 110
way th, purpose of Art it/, 102 1'FEU to prevmt an Wldertaking from acq11iring, on its
mrn merits, the domi11a111 positio11 011 a market") , See also Communication from the
Commis.sion - Guidance on the Commission's cnfortcmcnt priorities in applying
Article 82 of the EC Treaty to abusive exclusionary conduct by dominant undertakings,
2009/C 45/02 ("Anicle 82 Guidance Paper"), para. I ("( ... )ii is 1101 in itself ii/ego/for
011 1111dertaki11g to be;,, a domi11a11t position a11d s11ch a domi11a11t 1mdertaki11g is elllitled
to compete 011 the merits").
44 R. H. Bork, The Antitrust Paradox, New York: Free Press (1978).
6 Concurrences N"' 4-2017 I Article I Maurils Dolmans, Wanjie Lin I Fairness and competi1ion law .. ,
the 1990s to the early 2000s. 45 When the 1989 EU Merger
Regulation was negotiated, the drafters faced a choice
between, on the one hand, an economics-led and market-
based approach "built on [abuse of] dominance, substan-
tial lessening of competition and other familiar consid-
erations," and on the other hand, "a general review of
whether the deal was in the public interest." The former
approach won the day. 46
20. Today's canon of Council Regulations, Commission
Guidelines and guidance papers uniformly recognise
"consumer welfare" as the prime objective of EU
competition law. The European Commission's Guidelines
on the Application of Article 101(3) state: "The objective
of Article [101] is to protect competition on the market as
a means of enhancing consumer welfare and of ensuring an
efficient allocation of resources." 47 Similar statements are
found in the Horizontal Merger Guidelines, the Vertical
Guidelines, the Technology Transfer Guidelines and
the Guidelines on Article 102 Enforcement Priorities. 48
Indeed, "Consumer welfare is now well established as the
standard the Commission applies when assessing mergers
and infringements of the Treaty rules on cartels and
monopolies. Our aim is simple: to protect competition in
the market as a means of enhancing consumer welfare and
ensuring an efficient allocation of resources." 49 Market
participants legitimately rely on these statements of
policy.
45 Early European Commi~ion Reports on Cornpclilion Policy also mark this shift, and
suggested thal European competition policy was aimed at lhc promotion of consumer
welfare:"( ,. ,) competitio11 policy endearnurs to mai11tai11 or create effectfre co,1ditio11s of
competitio,i b)' mea,is of mies appl)'illg to wterprises i11 both prirnte and public sectors.
Such apolicy encourages the best possible use of product ire resources for the grealest pos-
sible benefit of the eeonomy as a whol, and/or th, bm,fit, in particular of tht consumer"
(European Commission First Report on Competition Policy,April 1972, p. 12).
46 J. Faull, reported in R. Knox, The antitrust world must stick together, says rormer EU
official, Global Competitio11 Review, June 19, 2017 . The Commission's commilment to
this competition-based standard was put to a test in its 1991 decision to block a merger
belwcen Boeing's de Havilland division and Alenia-Alitalia, in the face of considerable
opposition from the induslrJ poliq commissioner and cerlain Member State govern-
ments. N. Lei')', EU Merger Control: From Birth to Adolescence, Uorld Competition LaH"
and Economics Re,iew, 2003, Vol. 26 Is.sue 2, pp. 195-218, p. 204.
47 Guidelines on the Application of Article 81(3) of the Treaty, OJ [2004] C 101/08,
para.13.
48 Guidelines on the assessment of horizontal mergers under the Council Regulation on
the control of concentrations between undertakings, OJ [2004] C 31/03, para. 61;
Guidelines on Vertical Restraints, OJ [2010] C 130/01, para. 7; Guidelines on the ap-
plication of Article 101 of the Treaty on the Functioning of the European Union to
technology transfer agreements, OJ [2014] C 89/03, para. 5; and Article 82 Guidance
Paper, para. 5.
49 N. Kroes, European Competition PoliC)' - Delivering Beller Markets and Better
Choices, Speech at European Consumer and Competition Day, London, September
15, 2005. Her predecessor, Mario Monti, has stated: "[T]he goal of competitio11 policy,
;,, all its aspects, is to protect consumer welfare by mni111ai11i11g a high drgree of compe-
titio11 i11 the commo11 market,"adding that "lplreservi11g competitio11 is 1,01, hmrn·er, a11
wd i11 itself The ultimate poliq goal is the protection of co11mmer 1relfare"(M. Monti,
The Future for Competition PoliC)' in the European Union, Speech at Merchant
TaJfor's Hall, London, July 9. 2001. and The Eco11omi,1, Europe's Merger Monitor,
No\\Ombcr 9, 2002) . Vice-President Almunia said the same on his nomination as com-
missioner for compctilion: "All of 11s here 10day know rerJ' ll'ell whar our u/tir,lllfe ob-
jectire is: Comperirio11 poliq is a roof at rhe serrice of consumers. Co11sumer •relfare
is ar the heart of our policy a11d irs achie~·eme111 drires our priorities a11d guides our de-
cisions" (I. Almunia, Competition and consumers: the future of EU competi-
tion policy, Speech at European Competition Day, Madrid, May 12, 2010) . For
the US, see M.Ohlhauscn, Chair or the FTC, Antitrust Enrorcement in the Digital
Age, Georgetown University. September 12, 2017, al'ailable al hllps://w11,\'Jtc.gov/
system/files/documen ts/pu blic_statements/12 53163/georgetown_mko_9- l l-l 7.pdr
("Gi,en th, c/,ar consumer bmefits of ltchnology-drivrn in nova/ion, I am concerned about
th, push to adopt an approach that will disregard consumer benefits in the pursuit of olhtr
perhaps ,vrn conf/itling goals").
21. The consumer welfare goal has also been articulated
by the European Court of Justice in various cases.
In Osterreichische Postsparkasse, the Court of First
Instance held that the goal of protecting consumer welfare
follows from the provisions of the treaty: "[T]he ultimate
purpose of the rules that seek to ensure that competition is
not distorted in the internal market is to increase the well-
being of consumers. That purpose can be seen in particular
from the wording of Article [IOI TFEU]. Whilst the prohi-
bition laid down in Article [IOI (I) TFEU] may be declared
inapplicable ( ... ) that possibility, for which provision is
made in Article [101(3) TFEU], is inter alia subject to the
condition that a fair share of the resulting benefit is allowed
for users of those products. Competition law and compe-
tition policy therefore have an undeniable impact on the
specific economic interests offinal customers who purchase
goods or services. Recognition that such customers-who
show that they have suffered economic damage as a result
of an agreement or conduct liable lo restrict or distort
competition-have a legitimate interest in seeking from the
Commission a declaration that Articles [101 TFEU] and
[102 TFEU] have been infringed contributes lo the attain-
ment of the objectives of competition law. " 50
22. More recently, in Post Danmark II, the Court of
Justice stated that dominant firms seeking to establish
an objective justification for their conduct must "show
that the efficiency gains likely to result from the conduct
under consideration counteract any likely negative effects
on competition and consumer welfare in the affected
markets." 51
23. It is sometimes said that EU competition law protects
the structure of competition, but that, too, is ultimately
based on consumer welfare considerations. The Court of
Justice stated in TeliaSonera: "Article 102 TFEU is one of
the competition rules referred to in Article 3 (I) ( b) TFEU
which are necessary for the fimclioning of the internal
market. The function of those rules is precisely to prevent
competition from being distorted to the detriment of the
public interest, individual undertakings and consumers,
thereby ensuring the well-being of the European Union.
( ... )Accordingly, Article 102 TFEU must be interpreted as
referring not only to practices which may cause damage to
consumers directly, but also to those which are detrimental
to them through their impact on compelition." 52
50 Joined-Cases T-213101 and T-214101 Osterreichische Postsparkasse
v. Commission ECLl:EU:T:2006: 151, para. 115. Daskalova explains lhal the court's
choice of words in referring to lhe"we11-bcing of consumcrs"is a quirk of translation,
and the French \'ersion of the judgment uses the Lerm "bien-irre du co,isommateur,"thc
French economic lerm for consumer welfare (V. Daskalova, Consumer Welfare in EU
Competition Law, The Competition La,· Re,ieH', I 1.1 (July 2015): 133-162, p. 152).
51 Case C-23/14 Post Da11mark ,. Ko11k!lrm,ceradet ECLI:EU:C:2015:651, para. 49.
52 CaseC-52109 Konk!lrrmsmket ,. TeliaS011era S,erige ECLI:EU:C:2011:83, para.21-24.
The Court of Justice's statement in GlaxoSmithKline and similar statements should be
read in this light: "Seco11dly, it m11S1 be borne i11 mi11d that the Court has held that, like
other competition mies laid down ill the Trealy, Arlicle I101 TFEU) aims to pro/eel 1101
only the imerests of competitors or of consumers, but also the stmclllre of the market
011d, i11 so doi11g, competitio11 as s11ch"(Joined-Cases C-501106 P, etc. GlawSmithK/i11e
,. Commissio11 ECLl:EU:C:2009:610, para. 63). See also Opinion or Adrncate General
Kokott in Case C-95/04 British Ai1ways ,. Commissio11 ECLI:EU:C:2007: 166, para. 68,
echoed in the judgment or the Court or Justice, at para. I06.
Concurrences N~ 4-2017 I Article I Maurits Dolmans, Wanjie Un I Fairness and competition law. ..
24. While some commentators have sought to distinguish
the protection of consumer welfare and the protection
of competition as such, 53 this seems a false dichotomy. It
overlooks that the entire purpose of "protecting compe-
tition, not competitors" is not for any intrinsic value in
competition itself, or to protect competitors against the
ravages of ruinous rivalry, but because of the benefits
competition delivers to consumers. As Whish and Bailey
explain: "EU law has recognised from the early days that
consumers can be indirectly harmed by action that harms
the competitive structure of the market, and it continues
to do so today: there is no inconsistency between these
statements and the proposition that EU competition law
is oriented around the promotion of consumer welfare. " 54
25. The goal of advancing consumer welfare is to
maximise the value received by consumers, through
ensuring the market is efficient so as to allow supply of
goods and services at the optimal quality, quantity and
price. Consumer welfare is fundamentally an economic
concept, rather than one rooted in philosophical,
political, or moral notions of fairness. Competition
law does not protect against what some would see as
the unfair or chance effects of market conditions on
competitors, or even-in the words of Advocate General
Wahl-the effects of "[c]onduct that does not restrict
competition ( ... ) however morally or ethically reprehen-
sible it may be." 55
26. This is how it should be. As explained above, fairness
is too broad and subjective a concept, providing at best
little direction and, at worst, guidance in different and
even inconsistent directions. This concern is the greater in
an economy characterised by rapid technical innovation,
and increasingly divergent political pressures. " [HJ ere in
lies the true genius of current US. law. By focusing entirely
on consumer welfare, it limits the power of special inter-
ests in driving antitrust decisions. Consumer welfare
is broad-based-far more so than the interests of the
rivals, suppliers or employees who might find their price-
raising powers limited by competition from a more effi-
cient, if larger, business. Consumer welfare even includes
the benefits to future consumers, an interest group unrep-
resented in, say, land-use regulation. If regulators get to
consider a grab bag of other factors, by contrast, they can
all too easily make judgments shaped by lobbying clout or
53 See, e.g., R. Naz.zini, The Fo1mda1ions of E11ropea1J U11io11 Compelition Law: The
Objwi" and Principles of Arlie/, 102, Od'ord University Pre,s (201 I), p. 14, and I.
Liano.s, Some ReHections on lhe Question of lhe Goals or EU Competition Law, CLES
Worki11g Paper Series, 2013, p. 33.
54 R. Whish and D. Baile)', Competitio11 Law (Eighth Edition), Oxford Uni1<r>ity Press
(2015), p. 20 (footnotes omitted).
55 Opinion of Advocate General Wahl, Case C-194114-P, A C Tre11ha11d v. Commissio11,
para. I ("The mies applicable to 1111dertaki11gs 1111der Articles( ... ) JOI TFEU 011d 102
TFEU (.. .) or, int,nd,d to prohibit mtrietians onfru comptlilion. Th, identification
of a restriclio11 of competition presupposes that ii has bern established.following 011 ec~
11omic analysis, that, by its co11d11ct, the 1mdertaki11g i11 question has fully or partia!IJ'
a,istd to conslitut, a constroint-tht dt/iningfealllre ~f effectire competitio11-Jor the
olher operators 011 the marke1 or markets concerned, to the detrimwt, ultimatelJ•, of eco-
nomic effici,ncy and consum,r w,/far< Conduct thaJ dots not mtrict compttition in th,
iray described abore, 011 the other ha,id, hmrerer morally or ethically reprehwsible ii may
be, ca111,ot be caught by the prohibitio11s laid do.-11 i11 E11ropea11 U11io11 (EU) la•· (.. .)"),
ECU:EU:C:2015:717. The Court or Justice did not follow Advocate General Wahl's
Opinion in this case for reasons not related to Lhc principles cited.
7
 political allegiances. ( ... ) Consumer welfare isn't a perfect
standard, but it's at least a proxy for the public good. " 56
27. What might be judged "fair" for competitors (like
cooperation, reciprocity, mutual assistance, asset
sharing, information exchange) can turn out to be
quite disadvantageous to consumers. Other areas of
the law (such as tort law and rules on unfair trade prac-
tices) are arguably better suited to address ethical issues
than competition law, so it is not a question of a wrong
without a remedy-rather that competition law is not the
solution to concerns about unfairness.
28. This is not to say that "consumer welfare" is a
completely unified and clear concept either. There
continues to be debate on what it represents. One
question is whether consumer welfare refers to the
narrow economic concept of "consumer surplus," or a
broader meaning that encompasses price, quality, choice
and innovation. In economics, consumer welfare is
used to refer to "the individual benefits derived from the
consumption of goods and services." 57 Given the subjec-
tivity of individual preferences, in practice, economists
measure welfare by considering how much individuals
would be willing to pay for a particular good or service,
and consumer surplus is assessed in terms of the price an
individual would have been willing to pay for the product
over the price actually paid. But the broader conception
of consumer welfare, which has been embraced by the
Commission, extends beyond price and includes quality,
choice and innovation. It looks beyond the static (how
consumers value a product at a point in time) towards
the maximisation of long-term consumer welfare and
dynamic efficiencies. 58 Thus, competition law accepts
prices with a very substantial profit margin, which in
itself could be considered extortionist, if it is the result
of patent laws that create exclusive rights to foster
innovation. 59
56 V. Postrel, U.S. Antitrust Law Is Not Broken, Bloombrrg,
29 September 2017, available at https://www.bloomberg.com/,iew/
articles/20 I 7-09-29/u-s-antitrust-law-is-not-broken.
57 OECD, Glo,sary of Industrial Organisation Economi<> and Competition Law, p. 29,
http://www.oecd.org/regreform/sectors/2376087 .pd[ (accessed July I0, 2017).
58 See. Daskalo,a, op. cit. note 50.
59 R. Whisb, op. cil note 54
8 Concurrences N° 4-2017 I Article I Maurits Dolmans, Wanjie Lin I Fairness and competition law...
29. Another issue is whether "consumer welfare" refers to
consumer surplus or total surplus (comprising consumer
surplus and producer profits). Albaek described this as
a choice between ''favouring consumers through compe-
tition policy" and "making the pie (total welfare) as big
as possible," and using other policies such as tax and
welfare systems to redistribute the pie. 60 Others have
questioned whether the "consumer" should include
companies in a supply chain, or should be confined end
users. The Commission appears to have taken a position
on this issue, having stated in its Article 101(3) Notice:
"The concept of 'consumers' encompasses all direct or
indirect users of the products covered by the agreement." 61
30. A further debate is whether welfare should
be measured solely in terms of price and quality.
The reference to "public interest" and "the well-being
of the EU' in TeliaSonera (cited above), and the provi-
sions of Article 101(3) TFEU are relevant here. They
do not mean that the goals of competition law should
be non-economic, not focused on consumers, or based
on some concept of fairness. Instead, they confirm
that competition policy need not just seek lower prices
and increased output, but serve to maximise "value"
to consumers, of which price and quality are but two
elements. Other elements could include innovation and
choice (so consumers can find the good or service that
best matches their individual preference from a range
of available products), as well as aspects that are often
not properly internalised in the price, such as environ-
mental considerations, safety, privacy and avoidance of
over-exploitation of unpriced resources to the detriment
of society as a whole (the "tragedy of the commons").
31. In sum, notwithstanding some debate over its
precise scope, there appears to be a consensus that
consumer welfare is the right goal for competition
policy. Compared to fairness, it is a more objective
and rational concept, whose maximisation can be said
to deliver material and measurable benefits. The next
section discusses the economic tools and methods used to
determine the outcome in individual cases. It shows that
economic criteria and methods are not perfect, including
because they rely on stylised models and assumptions.
However, they provide a rational, reasonably objective,
and predictable approach for making complex decisions.
60 S. Alb'"1<, Consumer Welfare in EU Competition Policy in C. Heide-Jergen.sen,
C. Bergqvist, U. Neergaard, and S.ltoels Poulsen (ecls.),Aims a11d Values i11 Competition
La.-, Dl0F Publishing, 2013, pp. 67-88, p. 71.
61 Guidelines on the Application of Article 81(3) O.J.C. 101/97, para. 84.
in GlaxoSmithKline, the General Court declared that the objective of Article 81(1) EC
was to prerent agreements which"reduc(ed] th, wt/fart of th,jina/ consumtr of the prod-
ucts in questio11,"and as a restriction of parallel trade cannot in and of it.self mean that
consumer weJrare was decreased, there was no restriction by object and the Commission
had failed to establish a restriction by elfeet (Ca,e T-168/01 GlaxoSmithKline
,. Commis.rwn ECLl:EU:T:2006:265, para .I IS). This decision was quashed by the
Court or Justice. which held that ''for afinding tlwt an agmmtnt lws an anti-comp,ti-
riv, obj,ct, it is nor n,cessary that final consumrrs b, dtpri,td of thtadwmtagts of eff,ctiv,
comp,ritio11 in terms of s11pply or pric,"(Joined-0!,e C-501/06 P, etc. GlaxoSmithKline
,. Commission ECLI:EU:C:2009:6IO, para. 63). While this judgment has been read as a
rejection of the (primacy of the) consumer welfare goal, for reasons explained abore, the
judgment is better underslood as a rejeclion of a narrow view of the consumer welfare
goal focusing on "final consumers,"• reaffirmation of the validity or the"by object"ap-
proach in some cases, and the priority given to other objeeti"" in well-defined cases
(such as market integration in the case of import bans).
rv. Benchmark:
"Fairness" versus
"competitive effects"
and "competition
on the merits" as
criteria to discern
infringements
32. In view of the recent repeated references to fairness
in speeches, we ask ourselves whether "fairness" could
be_ used as a benchmark to resolve that "most difficult
question in competition law[:] determin[ing] when the
individual behaviour of a firm with significant market
power crosses the line from being legal to being ille-
gal. "62 The recent emphasis on "fairness" suggests that
the concept may play a determinative role in the minds
of the decision-makers. Johannes Laitenberger, the
current director-general for competition, recently revis-
ited the role of "fairness" in competition law, contending
"there is case-law giving practical content to the notion. " 63
The European Court and European Commission have
generally not invoked "fairness" in their reasoning and
decision practice, and where they have encountered the
term in legal provisions, have substituted it with more
precise and objective standards rather than develop an
autonomous meaning for the concept. There are good
reasons for that.
33. Behavioural economists have recognised that
traditional economic models based on the purely self-
interested analysis of a fictional homo economicus do not
fully explain market behaviour in all situations. Through
various bargaining games and social interaction exper-
iments, they have shown that people may opt for a less
than profit-maximising outcome, or be motivated by
notions of fairness and reciprocity rather than selfish-
ness. 64 The study by Kahneman, Knetsch and Thaler
(already discussed above), sought to understand how
62 R. Whish, Review of O'Donoghue and Padilla, The law and Economics of
Article 82 EC, Compttitio11 Policy lnttrnatio11al, 2.2 (2006):189-193. p. 190. Su also
E H. Easterbrook, When Is It Worthwhile to Use CllurLI to Search for Elclusionary
Conduct?, 2003 Co/um . Bus. L. Rtv. 345, 345. ("Aggrmi<,, compttiti,·, co11duct by a11y
firm, cvm on, wilh lllllrktl powu, is btneficiJJI to conswntrs. Courts should prize and ,n-
couragt i1 .Aggrtssirt, aclusionary co11duc1is dtleterious lo cons11mtrs, and courts should
co11dtm11 it. The big problem lies in this:compttitfrta11d aclusionarJco11duct look alike").
63 J. laitenbergcr, EU comp<tition Jaw in innovation and digital markets: fairnes, and the
consumer 11,Jfas, p<rsp<cti1<, Speech at MLex I Hogan Lovells event, Br=ls, October
10, 2017.
64 Ste, e.g., the literature described inE. Fehr and K. M. Schmidt, Theories of Fairn.., and
Reciprocity- Evidence and Economic Application.,, published in M. Dewatripont, L. P.
Hansen and S. J. Turnovsky (eds.), Ad,a11w in Eco11omics a11d Econometrics: TheorJ' a11d
App/icatio11s, Eighth World Congress, Econometric Society Monographs, Cambridge
University P,..,, 2003, pp. 208-257, and E. Fehr and K. M. Schmidt, ATheory of
Fairness. Competition, and Cooperation , The Q11arterly Jo11mal of Eco11omics (August
1999): 8 I7-868.
Concurrences N° 4-201 7 I Article I Mauri1s Dolmans, Wanjle Un I Fairness and competition law...
individuals conceptualise fairness in different price-set-
ting situations, and to see whether "rules of fairness"
could be derived that could be used to adapt and enrich
economic analysis, and perhaps the law.65
34. These experiments provide a number of interesting
insights into how people perceive "fairness," as it
applies to economic decisions. Their findings indicate
that fairness is an unsuitable marker for principled and
predictable decision-making on the legality or illegality
of competitive conduct, because "fairness" is a subjective
concept, and because fairness judgments are vulnerable
to personal and situational cognitive biases.
35. Fairness is a subjective concept. First, as already
discussed, Kahneman's study confirms that different
people have a different sense of whether an outcome is
fair or not. Such subjective views are not reliable criteria
for regulation or decision-making. They are not uniform,
can be arbitrary, and are unpredictable, which is inconsis-
tent with the need for legal certainty.
36. Change tends to be seen as unfair. Second, Kahneman's
experiments suggest that people's sense of fairness tends
to be backward looking. Kahneman found that standards
of fairness are influenced by "reference transactions,"
which may include market prices, advertised prices, or
often, a history of past transactions. For example, 83%
of respondents held that it was unfair for a photocopying
shop to reduce its employee's wage from $9 to $7 an
hour, after its competitors had done the same in light of
increased unemployment in the area. By contrast, 73%
thought it would be acceptable if the reduced wage were
offered to a replacement employee hired after the existing
employee had left. 66 In essence, "[a]firm is not allowed to
increase its profits by( ... ) violating the entitlements of its
transactors to the reference price," but may raise prices (at
its transactors' expense) to protect its established histor-
ical level of "reference" profit. 67
37. There is no intrinsic logic, or coherent economic
justification, for this rule. The reference transaction
apparently "provides a basis for fairness judgments
because it is normal, not necessarily because it is just.
Psychological studies of adaptation suggest that any stable
state of affairs tends to become accepted eventually." 68
This means that change may be perceived as unfair, even
if it is economically efficient, and the status quo may be
perceived as fair, even if it is inefficient. This is an addi-
tional and important reason to be sceptical of using
"fairness" to assess competitive behaviour, particularly in
markets characterised by rapid innovation and introduc-
tion of new business models.
65 D. Kahneman, J. L. KneLlch and R. Thaler, Fairn.., as a constraint on profit seeking:
Entitlements in the market, Th, Amtrica11 Eco11omic Revitw (1986): 728-741 .
66 Ibid., p. 730.
67 Ibid. pp. 729- 730.
68 [bid., pp. 730-731 .
9
 38. In dynamic environments, regulators should be
especially careful not to assume that what is normal
should be the norm, as this could come at the cost of
chilling innovation and deterring efficient developments
that benefit consumers in the long run. Some courts have
acknowledged this, such as the Hamburg District Court
in Wetterdienstleister, which examined a claim to stop a
search engine modifying its search result page in a way
that would reduce traffic to the plaintiff's site. The court
held : "The prohibition on the abuse of a dominant market
position does 1101 aim to preserve outdated business models
that cannot withstand change. However. this is exactly
what the ban sought by the applicant would entail: It would
prevent the I st defendant from developing its search criteria
further by not only referring to links of other providers but
directly delivering their own content. ( ... )In other words:
The I st defendant would be forced not to implement innova-
tions it deems beneficial so that other companies ( like the
plaintiffs members) can benefit from the search positions
they are used to, affording them an advantageous listing for
advertising revenue purposes. The notion of competition on
the merits, properly understood, never requires this. ( ... )
Competition on the merits does not require the 1st defen-
dant to leave its offer unchanged and 1hus, to accept being
left behind by its compelitors." 69
39. Fairness assessments may be based on irrational
considerations. Third, conduct may be perceived as unfair
even if it is rational, reasonable, and good for society or
for consumers in the long run. Kahneman found that
the human sense of fairness is influenced by a variety of
unconscious biases and "rules of naive accounting that
diverge in major ways from the standards of rationality
assumed in economic analysis." 7° For instance, "[people]
are more sensitive to out-of-pocket costs than lo oppor-
tunity costs and more sensitive to losses than to foregone
gain." 71 Thus, 62% of respondents found it unfair if a
firm experiencing a recession and substantial unemploy-
ment decided to decrease wages by 7%, compared to 78%
who regarded it as acceptable that a firm in the same situ-
ation, where there was also inflation of 12%, decided to
increase salaries by only 5% that year. 72 While the real
income change is the same in both scenarios, the judg-
ments of fairness are almost diametrically different, as
"a wage cut is coded as a loss and consequently judged
unfair." 73
69 Vtrba11d Dmrscher Wet1erdir11S1/rister. ,. V., LG Hamburg, April 11, 2013, 408
HKO 36113. Note that the judgment was based bolh on the GWB Grselt grgt11
Wet1br•·erbsbeschrii11k1111gm (Act againsl Restraints of Competition) and lhe UWG
Gesetz gegen 1111lawere11 Wt1tbe1rtrb (Unfair Compelilion Act). See also Streetmap
v. Google, [20161 EWHC 253 (Ch),"( ... ) it is i11disp111abl, that the display of a 1h11ml>-
11ail map oil tht SERP ;,, rtspo11st to a geographic querJ' i11dttd e11Ju111cts the quality of tht
Googlt SERP''and this is"pr<H:ompttitii,"[§ 84).
70 D. Kahneman, et al., op. cil. note 65
71 Ibid.
72 Ibid .
73 Ibid.
10 Concurrences N"4-2017 I Article I Maurits Dolmans, Wanjie Lin I Fairness and competition law...
40. Another example is that auctions may be judged
unfair where they enable the firm to gain at the expense of
its bidders, even if an auction is the most efficient way to
allocate scarce goods. Thus, a toy store reserving its last
unit of a sold-out (and apparently desirable) Cabbage
Patch doll to the customer offering the highest price was
deemed unfair by 74% of respondents. This dropped
to 21% when the benefit to the firm was removed, for
example, ifit was also announced that the proceed would
be donated to charity. 74 A lottery was deemed fairer even
if it does not result in the most efficient outcome. In the
same way, small firms may be afforded more sympathetic
treatment compared to large firms, as they may not be
viewed as making a significant profit.
41. Finally, Kahneman found that "Li)udgments of
fairness are also susceptible to framing effects, in which
form appears to overwhelm substance." 75 Indeed, the
cognitive biases that could affect fairness assessments
are legion. 76 To mention but a few examples: "Biases in
computation cause people to prefer the stallls quo, and be
more averse to losses than they are desirous of gains. Status
quo biases affect the willingness of licensees and consumers
to switch to alternatives. Loss aversion may lead consumers
to show greater responsiveness to price increases than price
decreases. " 77
42. Kahneman's findings suggest that use of fairness as
a criterion to judge the legality of conduct could lead
regulators astray, by unknowingly importing personal
and received biases into their decision-making, however
much they strive for objectivity. 78 As Kahneman
concluded from his study, "many actions that are both
profitable in the short run and not obviously dishonest are
likely to be perceived as unfair exploitations of market
power. Such perceptions can have significant consequences
if they find expression in legislation or regulation. " 79
By avoiding the use of fairness as a criterion, we may
-: ~ ..
-:: ~- :>
t~~
G --. C
74 Ibid., p. 735.
75 Ibid., p. 731.
76 Cognith-e biases that may be particularly relevant for business and economic deci-
sion-making includc"anchoring"(thc lcndcnc}' lo focus loo heavily on a piece or infor-
mation, typically Lhe first acquired on a subjecl, when making deci.lions), "the denomi-
nation clTcct"(the tendency to spend more monc}' when it is denominated in small rather
lhan large amounts----<.g., coins as opposed to bills), the"endowment <fTect"(the ten-
dency of a person to demand more to gi'" up an object than they would pa}' to acquire
il) <1nd"the money illusion"(thc tendency to concentrate on the nominal ,·alue or money
rather than its ,·alue in terms or purchasing power).
77 D. Lim, Retooling the palent-antitrusl inteneetion: Insights from behavioral econom-
ics, Boy/or La,· Rtvie.- 124 (2017): 124-193, p . 129 (footnotes omitted) .
78 "Rtg11/ators may fall ~·ictim to the same biases as those H'hom thq reg11late, render-
ing all)' reg11/a1io11 i11effrctil'e." J. Klick and G. Mitchell, Govcrnmenl Regulalion of
lrralionality: Moral and Cogniti-, Hazards, 90 Minn . L. Rn 1620 (2006).
79 D. Kabneman el al., op. cil. note 65.
steer clear of these pitfalls. 80
43. In sum, fairness is not an appropriate criterion to
assess the permissibility of business conduct, because
it is subjective and prone to the flawed reasoning and
cognitive biases inherent in human psychology and
what Kahneman calls "naive accounting." There is,
moreover, no need to rely on the concept of fairness. We
explain below that the European Court of Justice and
the Commission in its decisional practice have developed
more precise, rational, and objective criteria. These are
more closely aligned with the goal of competition law to
maximise consumer welfare and the efficient allocation
of resources.
44. Competition on the merits. In Article 102 cases
concerning exclusionary abuses, there is no mean-
ingful reference to "fairness" as a benchmark. Instead,
a two-step approach is applied . In Hoff,nann-La Roche,
the ECJ held that an abuse is recognised first, on the basis
that it is conduct not qualifying as "normal" competi-
tion (i.e., competition on the merits), and second, from
the effect it has on competition and the structure of the
market: "The concept of abuse is an objective concept
relating to the behaviour of an undertaking in a dominant
position which is such as to influence the structure of a
market where, as a result of the very presence of the under-
taking in question, the degree of competition is weakened
and which, through recourse to methods different from
those which condition normal competition in products or
sel'l'ices on the basis of the [performance] 81 of commercial
operators, has the effect of hindering the maintenance of
80 The recent Google Shopping case might be an example ioOueoced by subjettive per-
ceptions or fairness as "equal Lrcatmcnt"Thc Commission found that Google had fa-
voured its own shopping services over those of rivals, which diverted traffic away
from those ri\·als and resulted in their foreclosure. The decision requires Google
to treat its rivals on the same basis n·cn though there is no suggestion that Google
is an essential facilil)', and no evidence 1hat competitors do not have other cr-
foctivc ways to access consumers. See K. Walker, The European Commission de-
cision on online shopping: the other side or the story, Google Blog, June 27,
2017, https://www.blog.google/1opics/google-europe/european-commis;ion-de-
cision-shopping-googlc-story; and Improving quality isn't anti-competitive,
Google Europe Blog, August 27, 2015, hltps://curope.googleblog.com/2015/08/
improl'ing-quality-isnt-anti-competitive.html. Sa also M. Dolmans, The Google
Shoppi11g case, DlD September 4, 2017, at hllps://youtu.beNjSwdjFEbl. For
a summary or the grounds of appeal , m Cose T-612/17, Google a11d Alphabt1 ,·.
Commissio11, Official Journal, October 30, 2017, hllp://eur-lex.europa.eu/legal-con-
teot/ENfI'XT/PDFf/uri=CELEX:620 ITIN0612&from=EN. Kahneman's finding
that change or divergence from reference lramaclions tends to be perceived as unfair
may also be relevant here. He found that imposition of a loss on a counterpart)' (as-
suming there is a loss, which is disputed as a matter of fact) is seen as unfair, whereas a
denial of a gain is accepted as fair even if the reason for the imposition of the loss and
denial of gain is the same and in itself a reasonable one. Thus, when price comparison
sites have become used to being shown for free in the ten blue links of a search results
page (which they ma)' perceive as"rcfcrencc traruactions"and an cntitlemcnl) 1 the)' may
as a result of "loss avcrsion"judgc the introduction of a product universal (or a shop-
ping unit) appearing abm-c the link to their own website as unfair (or"famuring"), cwn
ir the ranking of that product universal or shopping unit is held to and determined by
lhe same rele\"3ncc standard as the ranking of the blue links themsel\'es (or, in the case-
of shopping units, the tut ads that would otherwise ha1T appeared in that spa«). The
subjecti>< sense or unfair loss may be exacerbated by the thought that platform owner
benefits from the placement or those universals or uoits by"divenion or traflic"to the
platform owner (e,·en though in fact the}' link to merchants sites), because"a11 action hy
a firm is more /iktly to btjudgu/ unfair if it achims a gain to th,firm."D. Kaboeman et
al., op. cit. oote 65. And finally, although this was ool a finding of Kabnemao's study,
empathy with individuals may influence our asoes,ment of fairnes.s, in lhal a Jim of
market share can be seen as unfair to a market participant who works hard or is small,
even if it is the result of normal market forces such as a shift of user demand to large
rivals such Amazon or cBaJ who introduce new tcchnologies or new business models.
81 The English version says "transactions," bu1 that is an incorrect translation of the
German Wettbcwerbsleitung.
Concurrences N~4-2017 I Article I Maurits Dolmans, Wanjie Lin I Fairness and competition law...
the degree of competition still existing in the market or the
growth of that competition." 82
45. "Normal" compet1t1ve behaviour refers to
competition "on the merits. " 83 Firms are allowed, indeed
encouraged, to improve their products, lower prices and
expand choice, even if this pushes rivals out of the market.
Unless they are a state monopoly or an essential facility,
they have no obligation to help rivals or share assets even
if doing so might be considered "fair" or unselfish, and
their refusal eventually leads to the rival's elimination
from the market. 84 As the ECJ stated in Post Danmark
I: "It is in no way the purpose of Article [102 TFEU] to
prevent an undertaking from acquiring, on its own merits,
the dominant position on a market ( ... ) Nor does that
provision seek to ensure that competitors less efficient than
the undertaking with the dominant position should remain
on the market. Thus, not every exclusionary effect is neces-
sarily detrimental to competition( ... ) Competition 011 the
merits may, by definition, lead to the departure from the
market or the marginalisation of competitors that are less
efficient and so less attractive to consumers from the point
of view of, among other things, price, choice, quality or
innovation." 85
46. The concept of "competition on the merits" is
particularly important because EU competition law has
no closed set of abuses of dominance. Articles 101 and
102 TFEU give examples of conduct that is prohibited,
but the list is not exhaustive. 86 Where "fairness" would
leave us at sea, the notion of "competition on the merits"
allows us to distil some limiting principles for cases of
first impression (sui generis abuse cases, for which there
is no precedent).
47. Competition on the merits means, as we have seen,
competition based on quality, price, innovation and
functionality. Price competition falls within the scope
of competition on the merits if justified on the basis of
82 c.se 85/76, Hoffma1111-la Roehr.judgment of I) February 1979, ECLl:EU:C: 1979:36,
para. 91.
83 c.se C-280/08 P, De11rsclie Telekom, Judgment of
14 October 2010, EU:C:2010:603,
para. 177; C.SCC-209/10, Post lxmmark,judgmcnt of 27 March 2012, EU:C:20 t 2: 172,
para. 22, 25.
84 Case C-7197 Oscar Browier r. Mediaprilll ECLl:EU:C:1998:569.
85 Case C-209/10 Post Danmark AIS 1·. Ko11kurre,,ceradet, ECLl:EU:C:2012:172, para.
21 - 22. See also c.se C-413/14 P, Intel v. Commission, September 6, 2017, para. IJ3-
134. The Commission's Guidance Paper also expressly equates price with other param-
eters of competition, such as ionovalion aod quality (Article 82 Guidance Paper, para.
11 ). The same applies under US law. US courts view harm lo competitors as ao affirma-
tive good because that harm trantlates into consumer benefits. Sre, for example, ARCO
(U.S. 1990); Br1111swick (U.S. 1977); Ball Memorial Hosp., Inc. ,. Murual Hosp. Ins., 784
F.2d 1325, 1338 (7th Cir. 1986) ("Compttirion is a rurh/m proc,ss.A firm that r,duw
cosr and apands salts injum ri,als- sommmts farally. Th, firm that slashes costs th,
mosr captur,s tht grtatw ,ales and inflicts tht f't/JltSt injury. Th, dttptr tht injury to
riwtls, rht great tr rht potmtilJI bmtfit. Thtst injurits to rivals ar, byproducts of ,igorous
competitio11, a11d lhe 011lilmsl la H's are no/ balm for rhals' H'Ou11ds. The 011/itrust laws are
for th, bmt/it of comp,tilion, nor compttitor,") ,
86 R. Whish et al., op. cit. oote 54, p. 129 and 202 (w reference to Article 101(1)
aod Article I 03 respectively); Case C-333/94 P fora Pak ,: Commissio11
ECLl:EU:C:1996:436, para. 37 ("The lisr of abusil'e pracrim set our i11 rhr second
paragraph of Artie/, 82 of rh, TrroJy is nor ahausri1<"); and Cose T-286/09 Imel ,:
Commissio11 ECLl:EU:T:2014:547, para. 219 ("lijr is 1101 11orel i11 competirio11 law
that a practice ,rhich cfearly does 1101 come 1rithi11 competition 011 the merits is regard~
ed as ,mlawfuf').
II
 economic efficiency. Thus, rebate schemes are permissible
if the seller is passing on cost savings to customers, or if
the rebate is "based on a countervailing advantage which
may be economically justified or, in other words, if it
rewards an economy of scale made by the [dominant firm]
because of orders for large quantities." 87 That is not to say
that all price competition is legitimate. 88 Pricing below
variable costs,89 or granting payments to customers to
delay, cancel or restrict the marketing of a rival's prod-
ucts,90 is not competition on the merits, because it makes
no business sense lo make such profit sacrifices but for
the possible advantage of excluding rivals.
48. Product design is another interesting example. In
AKZO, the court specifically distinguished abusive
conduct from lawful "competition on the basis of quali-
ty ." 91 Design changes that represent a product improve-
ment are by definition competition "011 the merits," 92 even
if rivals cannot match them and as a result have to leave
the market. The only cases where product design changes
were found to be abusive all involved situations where
there was clear evidence the dominant supplier reduced
the quality or functionality of its product. 93 In Racal
Decca, for instance, the European Commission found
that Decca reduced the quality of its navigational system
and raised the total cost to users by making its signals
incompatible with third party receivers. 94 A rational
non-dominant or non-vertically integrated company
would not have done that. Decca sacrificed quality and
made a product change for which there was no business
explanation other than the desire to exclude rivals from
a neighbouring market (receivers) and take over their
market share.
87 Case T-203101 Michelin 1·. Commission ECLl:EU:T:2003:250, para. 98. See
also lhc European Commission contribution to the OECD Competi tion on the
Merits PoliCJ' Rou ndtable, March 30, 2006, pp. 22 1- 230, https:l/www.occd.org/
competition/abuse/359 I JO 17 .pdf (acces.s,d July 11, 2017).
88 Case C-209/10 Post DanmarkA IS r. Konk11rrenceradt1 ECLI :EU:C:20 12: 172, para. 25
("[NJot all competition by niram of price may be regarded as legitimate").
89 Ibid., para. 27 ("[TJhat prices belo,· the arrrogt q( 'mriab/e"cos/s (thosethat rary dtpt11d-
i11g 011 tht qualllilits produced) m11s1. in pri11ciplt, bt rtgardtd as abusiu, iuasnmch as, in
rhargi11g those prices, a domi,iam 1mdenaki11g ir dermrd to p11rs11r 110 rco11omic purpose
other than that of drfri,ig 0111 ifS competitors") .
90 Case T-286/09 Intel 1·. Cammissian ECLl:EU:T:2014:547, para . 219 (an-
nulled and remanded on other gro unds in Case C-413/14 P, Intel 1·. Commission
ECLl:EU:C:2017:632).
91 Case C-62/86, AKZO I'. Commissian, EU:C:1991 :286, para. 70.
92 Article 82 Guidance Paper, para. 6; Case T-228/97 Irish S11gar ECRJl-2969, para. l l l.
93 A possible exception is the recent decision in Googlt Shoppi11g, where lhc
Commis.sion fo und it was an abuse for Google to display product ads al the Lop
of its organic search n•ults, because this di,.rted traflic away from product ag-
gregator websites. Google argued this improved its search service by providing
users wi1h more relevant results. This case is curren tly under appeaJ. Su Eurof)'an
Commis.sion Press Release, !P/17/1784, June 27, 2017 , hllp://curopa.cu/rapid/
press-release_IP-17-J 784_en.hlm, and K. WaJJc,r, The European Commission derision
on online shopping: the other side of the story, Google Blog, June 27, 2017, hllps://
\\'\\"w.blog.google/topics/google-curope/european-rommiiiion-decision-shopping-goo-
gle-story. See also K. Walker, op. cit. nole 80.
94 Racal Decca was fou nd to hm abused iLS dominant position bJ' changi ng the signals
cmit 1ed by ils transmi tting stations so they no longer operated with ri\·al recc iYers. This
"•wit beyond normal competith·e beha11ior (,., )!which] 1ro11/d hare bee11 to compete H"ith
the newcomers i11 the markrt for commercial recrirers i11 terms of price, q11alif)' and af-
ter-so/ts smice"(Commission Decision of December 21, I988, in Case IV /30.979 Decca
NoriKotor SJ·Slem , O.J.L. 43/27, para. 99).
]2 Concurrences Ne 4-20 17 I Article I Maurits Oolmans, Wanjie Lin I Fairness and competition law...
49. The Microsoft Interoperability, Microsoft Media
Player and Microsoft Internet Explorer cases provide
additional useful reference points.95 In each of these
cases, consumers were harmed because the tie or denial
of interoperability reduced the attractiveness or quality
of Microsoft's Windows operating system: Windows
PC customers were forced to take complementary
Microsoft products (media player, browser) that were
demonstrably and even admittedly of inferior quality.96
Similarly, rendering a PC operating system less interop-
erable with non-Microsoft workgroup servers by with-
holding previously available interoperability protocol
information from rival server manufacturers diminished
the PC operating system's utility to customers. It would
not be a course of action that could be profitably
pursued by a non-dominant firm. A rational non-domi-
nant or non-vertically integrated OS supplier would have
welcomed complementary products of high quality, and
choice in complementary products, as this would have
made its product more attractive.97 The only rational
explanation for Microsoft's refusal to provide interoper-
ability information or its decision to bundle its browser
and media player was an intent to exclude rivals.98
50. A finding of abusive product design, in other words,
requires evidence that (a) the dominant firm hindered
rivals by creating barriers to entry or by limiting the
latters' production, markets or technical development (as
opposed to a refusal to offer assistance or share assets),
and (b) the dominant firm "deliver[s] less to consumers
in terms of prices, choice, quality, and innovation. " 99
Absent reduction of quality, product design changes
represent "competition on the merits." In addition, there
is no "anti-competitive" foreclosure (which we come to
below) because there is no "adverse effect on consumer
welfare."t 00 In summary, in the same way a profit sacri-
fice signals irrational and exclusionary pricing behaviour,
a sacrifice of quality might do so in product design cases.
The logic of the two is the same.
51. Effect on competition. Even if there is evidence of
competition not on the merits, a finding of abuse in
addition normally requires proof that the offensive
95 Case T-167/08 Microsoft v. Commission ECU:EU:T:2012:323; Case T-201/04 Microsoft
v. Commission ECll:EU:T:2007:289.
96 Commission decision of 24 March 2004 in Case AT.27792 Microsoft, para. 949-951:
Case T-20 1/04 Microsoft v. Commission ECLl:EU:T:2007:289, para. 971, 1057.
91 Note thal Ihere arc limits to this argument: It is pos.sible that mu time, market percep-
tions change and separate demand for two products fades if bundling creat~ genuine
benefits_If a 1ic san~ customcrssubstanlial costs- more than 1hc \'alue 1hey derhT from
choice and competition in the tie-d product- demand for the tied product on a s1and-
alone basis falls away, the components should h< regarded as a single product, and the
Lie should be allowed.
98 This was backed up by documentary evidence of intent to leverage Microson's dom-
inance against targeted competitors that olfered superior products. Case T-201/04
Microsoft v. Commission ECLl:EU:T:2007:289, para. 771 and 91 l.
99 Article 82 Guidance Paper, para. 6.
100 Ibid ., para. 19. Sa also V. Daskalova, op. cit. noteSO.
conduct "has the effect of hindering the maintenance of the concentration is fair to competitors, consumers,
the degree of competition still existing in the market or the employees or shareholders, but whether it would "signifi-
growth of that competition. " 101 cantly impede effective competition in the common market
or in a substantial part of it." 109 Thus, the Commission
52. The need to prove effects on compet1t1on was must analyse the impact of the merger on competition,
reinforced in the movement to remodel the EU taking into account various factors such as the structure
competition law framework on economic foundations. 102 of all the markets concerned, the position of the merging
It is an important requirement, because it is one that parties, relevant barriers to entry and the alternatives
distinguishes EU competition law from national laws on available to customers and suppliers. 110 In carrying out
"unfair trade practices," a body of law that has different this exercise, the Commission "compares the competi-
goals (such as the protection of consumers or trading tive conditions that would result from the notified merger
parties as opposed to consumer welfare), different with the conditions that would have prevailed without the
criteria, and involves different enforcement procedures. 103 merger." 111

53. An effects analysis requires clear and convincing 55. In past abuse of dominance cases, the ECJ has
evidence that an agreement or conduct is at least capable sometimes adopted a formalistic approach similar to
of restricting competition. 104 This can be avoided only in the "by object" classification under Article 101 TFEU,
the case of agreements which have as their "object" the and held that certain conduct may be assumed to give
prevention, restriction or distortion of competition in the rise to anti-competitive foreclosure without it being
internal market. This is unrelated to intent to exclude, 105 necessary to examine their likely effects in the specific
and unrelated to whether the conduct could be consid- context. 112 This "per se" or "by nature" approach has
ered "fair." The ECJ in Carles Bancaires explained that come under challenge in recent years and there has been
the "by object" classification is reserved for agreements renewed emphasis on the need to carry out an analysis
that on their face "reveal a sufficient degree of harm to of actual anti-competitive effects.113 Thus, in Microsoft
competition" that "it may be considered redundant ( ... ) Media Player, the Commission accepted (and the court
to prove that they have actual effects 011 the market." 106 endorsed) the need to demonstrate that there was actual
Moreover, this analysis of likely harm to competition foreclosure of competition, rather than assume that the
cannot be performed in the abstract, and "regard must tying of a media player to an operating system consti-
be had to the content of its provisions, its objectives and tuted conduct which by its very nature was liable to
the economic and legal context of which ii forms part ." 107 foreclose competition. 114 The Commission followed
The "by object" construct has also been described as a this approach also in its preliminary assessment in the
device of procedural economy, for prosecuting "conduct Microsoft Browser tying case. 11 5 More recently, the ECJ
whose harmful nature is proven and easily identifi.able, in held in Intel, that the Commission must engage with an
the light of experience and economics. " 108 undertaking's arguments that its exclusivity payments
were not capable of restricting competition, for example,
54. Similarly, an effects analysis is required when because of their limited scope or duration, before finding
assessing mergers. The central criterion is not whether such rebates to be an abuse. 116

56. In sum, the established criteria for determining the

JOI See, e.g., Case C-280108 P De111sche Telekom v. Commissio11 ECLl:EU:C:2010:603
Dt111sche Telekom ECLl:EU:C:2010:603, para. 174, and !he case Jaw cilcd therein.
102 See, e.g., Opinion of Advocate General Wahl in Case C-413114 P Imel,._Commiuion
ECLl:EU:C:2016:788, para. 41 43.
103 See also Ans,,., by Commi.<,ioner Vestager to Parliamentary question E-00282612017,
20 July 2017 (" The lerm 1air compttitio11'prowkes a 1111mber of differi11g i11terpretolio11s
as r,gards its exact application. Can the Commission provide a c/,ar d,jinilion of 'fair
competition' in the co11te:rt of the platform economy?'') . Answcr:"The competition rules
in the Tr,aty--Artic/,s JOI lo 109---prohibit anti-comptliti,e collusion and abum of
domi11at1ce and compelitio11-distorti11g State meas11res. The concept of 'fair' competitio11
is key to EU competition policy, in th, uns, thot competition gii,s al/firms a/air chana
to compele i11 the market, and competition girts consumers afair deal i11 terms of price,
q11alitJ\ qualltily of products, choice, a11d i111,oratio11 . ( ... )Separately, the term 'fair com-
pelitio,i' has bun med in the comext of rules against 'wifair trading practices'. These
are gtn,ra/ or stelor-sptcific that r,gu/att th, comm,rcia/ b,lw,iour of firms towards
each olher (for example rules abo/11 abuse of rconomic depmdence), or 10>rards co1uum-
ers (co11mmer protec1ion), or tm.-ards bolh ljor example misleadi11g adrertisi11g) . Unlike
comprtition la,•, Ihm rults apply imsptclii, of th, parition of the firm and of th, com-
ptlilfre impact of tht bthafiour."
104 Ca.!e C-413114 P, Intel v. Comminio11 ECLl :EU:C:2017:632, para. 138.
legality of conduct under competition law, whether for
the purposes of Article 101 or 102 TFEU, is not whether
conduct is "fair." The question is whether the practice
represents competition "on the merits" and, if it is not,
whether it effectively harms competition, and thereby
consumers. There is an exception to this: the category of
cases referred to as "exploitative abuses," which is briefly
discussed below.
109 Council Regulation (EC) No. 139/2004 or 20 January 2004 on the control of concen-
trations between underiakings,Articlos 2(2) and (3).
I 10 lbid.,Article2(1).
11 J Guidelines on the ass~ment or horizonlal mergers under the Council Regulation on
the control of concentralions between undertakings (200-4/C 31/03), para. 9.
112 See, e.g., Ctm T-203/01 Mich,lin • Commission ECU:EU:T:2003:250; Case T-155/06
Tamra,,_ Commission ECLl:EU:T:2010:370.

105 Joined-Cases C-395/96 P and C-396196 P Compag11ie Maritime Beige t I 3 See, e.g., Case C-280/08 P Dell/sch, Ttlekom r. Commission ECL!:EU:C:2010:603.
ECU:EU:C:2000: 132. Case C-52109 Ko11k11rrmsrerkt1 ,,. TeliaSonera ECLl:EU:C:2011:83 and
Case C-23114 Post Da11mark v. Ko11k11rre11ceriider ECL!:EU:C:2015:651 .
106 Case C-67113 P Gro11pemell/ des caries ba11caires
Commissio11ECU:EU:C:2014:2204, para . 49-52. 114 Microsoft Decision, para. 840-841; Microsoft Judgment, paras. 859, 866- 869.
107 Ibid., para . 53. 115 Commis.sion decision in Case COMPIC-3139.530 Microsoft /lj'i11g - Internet
fap/orer), para. 34.
I08 Opinion of Adl'ocatc General Wahl in Case C-6711 3 P Gro11peme11t des cams bancaires
r. Commission, ECLl:EU:C:2014:1958, para. 35 and 56. I I 6 Case C-413/14 P Imel,._ Commission ECU:EU:C:2017:632.

Concurrences Ne4-2017 I Article I Maurits Oolmans, Wanjie Un I Fairness and competition law. .. 13
 57. Exploitative abuses. While fairness plays no role in
exclusionary abuse analysis, it is explicitly mentioned in
Article 102(a) TFEU, which prohibits "directly or indi-
rectly imposing unfair purchase or selling prices or other
unfair trading conditions." 117 The "unfairness" represented
by this abuse stems from the economic inefficiency and
loss of consumer welfare caused by a natural monopolist
protected long-term by barriers to entry charging prices
above the efficient level, rather than any moralistic precept.
There are two parts to the analysis: "The first step in the
analysis is to determine whether there is an excess-that is a
significant difference-between the price actually charged by
the dominant undertaking in the relevant market and the price
which that undertaking would hypothetically have charged
had there been effective competition in the market. ( ... )
Once it has been ascertained ( ... ) that a significant difference
exists ( ... ), one must determi11e the extent to which that
actual price is unfair, either in itself, or when compared to
competing products. That second step in the analysis is lo
investigate whether the difference in price is merely !he result
of all abusive use of market power by the dominant under-
taki11g, or the consequence of other legitimate reasons." 118
58. The second part of the test is key, but remains vague.
Instead of seeking to establish the meaning of "fairness,"
the courts have developed alternative measures for
identifying "unfair" prices or trading conditions. These
measures are rooted in economic reasoning or facts-
the relationship of the price to economic value, 119 and a
comparison with terms imposed by other market partic-
ipants. 120 They therefore ensure an intellectual coherence
across this body of competition law, as well as conferring
a degree of objectivity and predictability, that is lacking
in the general concept of fairness.
59. A dominant firm may attempt to justify high prices,
but even the case law on justification does not rely on
"fairness" as a criterion. 121 The courts have referred to
117 There is no cquirnlcnt provision in US antitrusl law. l't,i.:011 Comm'11s Inc.~·- L,JH'
Offiw of Curti, V. Trinka, LLP, 540 U.S. 398, 407 (2004) ('" The mer, posm,io11 of
111011opol)'po•ftr. and tht co11comita111 chorgi11gof mo11opolypricts, is 1101 011/y 11011111/aM'-
fi,/; it is 011 imporlaUI eftmtlll of the fru-marktt J)'Sltm. The opporllmil)' to chorgt m~
nopofJ pricts------DI lrast for a short period-is "'hat anracls 'busintss arwnm' in thrfirst
place; it indw:n risk taki11gtha1 prod11Ces i111,oratio11 a11d eronomir groll'th.")
Il8 Opinion or Ad,oca\e General Wahl in Case C-177/16 Biedlfba ''.4111ortiesrb111111 kom11-
11iceSa11as kom11/l'dcij11 aH,entura - Latvijas A111oru ap~·ie11Tha"v. Ko11k11re11ces podome
ECLl:ElJ:C:2017:286, para. 17- 21. It is an appraisal or whether efficiencies are
passed on, nol a criterion to determine whether a particular conduct is"unfair"as such
and therefore illegal.
119 "'Unfair prices"for the purposes of Article 102(a) means"priw .-hich ore excessfre
because they hare 110 reaso1,ab/e relation to the economic rnlue of the serrice s11pplied."
See Case C-242195 GT-Li11k ,. De Do11,ke Statsba11er ECLl:ElJ:C:1997:376, para. 39,
and Case C-27/76 U11ited Bra11ds ,. Commissio11 ECLl:EU:C:1978:22. para. 250.
120 Case C-177/16 A111ortitslb11 1111 kom1wi~!a11a.s ko1a11ltai:ij11 ate111Uro - Latvijas
A11toru aprie11rba' ,: Ko11k11re11m podome ECLl:EU:C:2017:689, para. 38, where the
ECJ reallirmed the we of "a method based 011 a compari,011 of prices opptird i11 th,
Member State rot1cerned with those applied;,, other MemberStoteJ."
121 Case C-395/87 Mi11istire p11blic ,·. To11mier ECLl :ElJ:C:1989:319, para. 38, and
Case C-110/88 L11caua11 ,·. SACEM ECLl:EU :C: 1989:326, para. 25 ("Whe11 011 1111-
dertakit1g holdi11g a dominant position imposes scales of fees for its services H'hich are
appreciably higher 1ha11 thoJe charged in other Member States a11d ,rhere a rompariso11
of 1he fee lerels has hem made 011 a cousistetll basis, that difference 1111w be regarded
as i11dicatire of a11 abuse of a domi11a111 positio11 . /11 mch a case it is for 1he 1111dertak-
it1g i,i q11es1io11 to juslify the differwa by reference to objecthe dissimilarities betH'een
the silllalio,i i111he Member Stare co11cerned and 1he si111atio11 preraili11g in all rhe other
Member States").
14 Concurrences N"4-2017 I Articte I Maurits Oolmans, Wanjie Un I Fairness and competition law,.,
a number of possible justifications, relating either to
the costs of supplying the product, or their value to the
consumer. 122 In Parke, Davis and Co., the court held that
charging a higher price for a patented product compared
to an identical unpatented product was not necessarily
an abuse, as patents are intended to afford the holder
a means of recouping heavy research and develop-
ment costs. 123 In Scandlines, the Commission consid-
ered demand-side factors, and whether "customers [were]
willing to pay more for something specific attached to the
product/service that they consider valuable," such as the
fact that Helsingborg port offered the shortest sailing
distance between Sweden and Denmark and had excel-
lent road and rail connections. 124
60. FRAND. Finally, the notion of "fairness" also
appears in cases involving standard-essential patents,
where patent holders have promised to license their tech-
nology on fair, reasonable and non-discriminatory (or
"FRAND") terms, in exchange for their inclusion in the
standard. Standardisation brings numerous advantages
for innovation and product development. At the same
time, it creates the risk that patent holders obtain market
power as a result of the exclusion of technological alter-
natives not included in the standard. Anyone who owns
patents reading on the chosen technology would have the
ability and may have the incentive to "hold 4P" users after
the adoption of the standard "either by refi1sing to license
the necessary IPR or by extracting excess rents by way of
excessive royalty fees thereby preventing effective access to
the standard." 125 The purpose of rules encouraging such
patent owners to license on FRAND terms is therefore
"to secure a proper rewm·d for innovation whilst avoiding
~old-up. "' 126 In its Motorola decision, the European
Commission held that "FRAND terms and conditions
should be the outcome of commercial negotiations in which
a [standard-essential patent] holder should not be able to
exploit the market power it enjoys following the inclusion
of its patented technology in the standard." 127 It found
that Motorola had committed an abuse by imposing
terms that limited the licensee's ability to challenge the
validity of the patents and thus to influence the level of
122 Ste disc1J1Sion in Opinion of Advocate General Wahl in Case C-177/16 Biednba
'i1urortiesJb111111 kon11111ic!sa1ra.s konml11rij11 a£mrora - La1vijasA111oru ap~·ie11Tba"i·.
Ko11k11rmm padomr ECLl:ELl:C:2017:286, para. 125- 128.
123 Case C-24/67 Parke, Daris and Co. ECLI :EU:C: 1968: 11. Ste also Opinion or Advocate
General Mischo in Case C-53/87 CICRA ,. Rma11/t, ECU:EU:C:1988:330, para. 62.
124 Commission decision of 23 July 2004 in Case COMP/A.36.568/D3 - Sco11dli11es
Sl'trige AB r. Port of Helsi11gborg, para. 227 -234.
125 Guidelines on the applirability of Article IOI or the Treaty on the Functioning or the
European Union to horizontal co-operation agreements, OJ 12011] C 11/1, para, 269.
126 U11•·ired Pla11e1 \'. H11a-.i 120171 EWHC 711 (Pat), para. 92. Judge Birs.s notes tbal
thc,c principles ha,, been recognised in different forums, including the ECJ's decision
in H11a,·ei ,. ZTE (cited below). See olso Samsung Commitments (Commitments deci-
sion or April 29, 2014, in Case AT.39929 Samsung - Enforctment or UMTS stan-
datd-e.«enlial patents), and Motarolo case (Commission Decision or April 29, 2014,
in Case AT.39985 Motorola (Enforcemenl or GPRS slandard c,scntial patents) and
the Google/Motorola acquisilion (Case COMP/M.6381 Googlt!Motorola, Commission
dec~ion or 13 February 2012) and lhe Horizontal Guidelines (Guidelines on the ap-
plicability of Article IOI of the Treaty on the Functioning of the European Union lo
horizontal co-opl'ration agrcl'mcnls, Communication from the Commission, OJ 12011]
C-11/1).
127 Commis.sion Decision of April 29, 2014, in Case AT.39985 Motorola (Enforcement or
GPRS standard c,sential patents), para. 291.
royalties, although it based its reasoning on the fact that
such terms were capable of having exclusionary effects,
as opposed to any independent "FRAND" standard. 128
61. The European Court has confirmed that standard
setting creates obligations under competition law,
including a duty to grant a licence on fair and reasonable
terms to standard-essential patents, and, where the
parties disagree on what is required by FRAND, to
follow a reasonable process before seeking an injunction
or recalling products. 129 The court has not yet been called
upon to elaborate on the meaning of "fair" in FRAND,
although this has been explored in other cases. In Unwired
Planet v. Huawei, Judge Birss held that FRAND terms
and rates are those which would have been agreed "ex
ante," before the patented invention was adopted into the
standard. 130 He then proceeded to investigate whether the
proposed royalties were comparable to those in similar
licence agreement between other parties, 131 and whether
the rates resulting from that inquiry, if adopted by all
owners of standard-essential patents, would result in an
acceptable or a prohibitively high royalty stack. 132 This
jurisprudence demonstrates that competition law polices
FRAND undertakings to maintain market efficiency,
and to avoid distortion of competition or reduction
of output in downstream markets to the detriment of
consumers. The nature of FRAND obligations is shaped
by this market objective, as opposed to any distinct moral
standard.
62. To conclude this section, "fairness" has not acquired
acknowledged status as a means of distinguishing anti-
competitive behaviour. Indeed, the subjectivity and
inherent biases associated with fairness judgments
suggest it may be unsuitable for this role. EU law must
respect the principle of legal certainty. This requires in
particular that where an EU rule imposes or permits
the imposition of penalties, that rule must be clear and
precise, so that the persons who may be affected are able
to ascertain their rights and obligations unequivocally,
and act accordingly. 133 The cause of legal certainty would
not be advanced by introducing a new, nebulous overar-
ching concept such as "fairness." The criteria "economic
effects" and "competition on the merits," as imperfect as
they may be, are better yardsticks to measure the legality
or illegality of behaviour in the marketplace.
128 Ibid., para. 322([
129 Ca.se C-170/13 Huo•·ei ,c ZTE ECLI:EU:C:2015:477, para. 53-60. In its Motorola
decision. the Commission found that Motorola commilled an abuse in seeking an
injuncti~n against a willing licensee (Commi.s.sion Decision or April 29, 2014, in
Ca.se AI39985 Motorola (Enfon:ement or GPRS standard essential patents)). In
Unwired Planet v. HUJJ•·ei, Judge Birss echoed the ECJ in holding that FRAND is a
process, requiring both parties lo deal willingly and in good faith to reach an agree-
ment (Unwired Planet,. Hua•·ei 12017] EWHC 711 (Pal), para. 163).
I 30 Unwired Planet,. Huawei 12017] EWHC 711 (Pal), para. 97.
131 Case C-27/76 United Brands ECLl:EU:C: 1978:22. This comparali"' analysis is rem-
iniscent of Kabneman's finding that people use "reference lransactions"to determine
the fairness of market conduct.
132 Un•·ired Planet v. HUJJwei 12017] EWHC 711 (Pat), para. 267. This"top down"analysis
is reminiscent or the categorical imperatiR
133 See, for example, Case 137/85 Moiww [1987) ECR 4587, para. 14 and 15.
Concurrences Nc4-2017 I Article I Maurits Dolmans, Wanjie Lin I Fairness and competition law...
V. Fairness versus
proportionality
as a benchmark
for outcomes and
remedies
63. The European Commission's ability to impose
or accept a remedy or to levy a fine is constrained by
a variety of considerations, found in the treaty, EU
regulations, and general principles of EU law, the most
important of which are the principles of proportionality
and "useful effect." 134 "Fairness" is not a recognised
criterion in the determination of remedies, although few
would question that this is one of the goals in furtherance
of which these principles are applied.
64. Regulation 1/2003 provides that where the
Commission finds an infringement of Article 101
or Article 102 TFEU, it may require the companies
involved to bring the infringement to an end, including
through behavioural or structural remedies "which are
proportionate to the infringement committed and neces-
sary to bring the infringement effectively to an end." 135
The constituent elements of "proportionality" are
well-established in case law, and do not explicitly include
fairness as such: "The Court has consistently held that the
principle of proportionality is one of the general principles
of Community law. By virtue of that principle, the lawful-
ness of the prohibition of an economic activity is subject to
the condition that the prohibitory measures are appropriate
and necessary in order to achieve the objectives legitimately
pursued by the legislation in question when there is a choice
between several appropriate measures recourse must be had
to the least onerous, and the disadvantages caused must not
be disproportionate to the aims pursued. " 136
65. In assessing remedies or fines, the Commission should
therefore consider whether they meet the following four
criteria:
- they are intended to pursue a legitimate
objective;
134 The EC must also consider other principles, such as legal certainty, equal treat-
ment, ne bis in idem, and the duly to give reasons. See also C. Riller, How Far
Can the Commission Go When Imposing Remedies for Antitrust lnrringements',
JECLAP 2016.
135 Council Regulation (EC) No. 1/2003 or 16 December 2002 on the implementation
of the rules on competition laid down in Articles 81 and 82 or the 'freaty, Article 7,
and Recital 12. See also Council Regulation (EC) No. 139/2004 of January 20, 2004
on the control of concentrations between undertakings, Recital 30 (" Where the w1-
dmakings concrrntd modify a notifitd conuntration, in particular by offrring commit-
me111s with a vitH' lo rendering 1he conce11tration compatible with lhe common market, the
Commission should ht able to drclar, the concrntratian, as modifitd, compatible wilh th<
common market. Such commilmentJ should he proportionate to the competi1io11 problem
a11d eutirely eliminale it") .
136 Ca.se C-331/88, The Queen,. Minister of Agricull/lre, Fisheries and Food ond Secretary
of Stale for Health, a parte: Fedeso and others [l 990) ECR 1-4023, para. 13.
15
 - they are an appropriate (effective) means of
pursuing that objective;
- they are necessary to achieve that objective in
that no less restrictive measure can remedy the
problem; and
- the balance of interests tips in their favour: i.e.,
the measure will not lead to greater disadvantages
than the harm it is intended to address.
The application of these criteria is intended to lead to
antitrust remedies that "fit" the competition problem
they are intended to address, and are commensurate with
the anti-competitive conduct at issue. m
66. A core component of proportionality is "necessity":
a remedy should go no further than what is required to
bring that conduct "effectively to an end." Although the
EC has in the context of Article 102 TFEU sometimes
adopted remedies that go beyond terminating an abuse,
in an attempt to restore "effective competition," this is
exceptional. 138 A corollary of this principle is also that
where a number of different remedies exist that would
be equally appropriate and effective in bringing an
infringement to an end, the choice of remedy should be
in the hands of the infringing party rather than the EC. 139
This approach, while correct, can give rise to serious diffi-
culties, in cases where the Commission not only leaves
the defendant free to decide on the remedy, but fails to
give any guidance. That approach is arguably dispropor-
tionate in itself, since it leaves the company with a signif-
icant degree of unnecessary uncertainty, and subject to a
threat of daily fines of up to 5% of a company's worldwide
turnover for non-compliance. 140 The Microsoft case was
an example where the lack of guidance created problems
and led to high fines. 141 The reasonable solution would be
to give the company discretion over its remedies, but to
provide a clear albeit non-exhaustive indication of what
remedy would be acceptable.
137 See I. Lianos, Competition Law Remedies:ln Search of aTheory, CLES Working Paper
Series 312011 (April 201 I), ciliugT. 0. Barnett, Sec1iou 2 Remedies:What to do aner
catching the Tiger by the Tail 76Allli/mJ/ L.J. 31, 36 (2009) ("[]1he remedy 11eedJ
to be tied closely to tht a11ticompetitirt co11d11ct occasioning it. That mea11s that remedies
nwl lo be suffici<nt, but no/ ov,rbroad, and proportional lo 1h, offrnse"); G. J. Werden,
Remedies for Exclusionary Conduct Should Protect and Presem the Competiliw
Process, (2009) 76An1itr11SI l.J. 65, 65 (2009), "Remedies for aclmio11af)' co11d11c1
sho11/d arise 'orgo11icolly ou/ of the lheorJ' of lhe case"'(citing L.A. Sullivan, Handbook
of lhe Law of Anlilmsl 146 (1977)).
138 See, for example, Ca,e T-167/08, Microsoft Corp v. Europea11 CommiJsio11. upholding
Commission decision or February 27, 2008, in Case COMP/C-3/34.792 Microsof1.
139 CascT-24190, AUlomec Sri v. Commission of /he Europea11 Commu,1i1ies [1992] ECR II-
02223, para. 52 ("fflh, Commission undoub1ed/y hos 1h, power /ofmd Iha/ an infringt-
melll exists and to order the parties co11cemed to bring it to an e11d, hut it is not for the
Commission lo impose upon tht part its its own choice from among a/1 tht mrious poltn-
lial courses of action which are in conformity k'ith the Treaty") . This is analogous to the
position under the EU Merger Regulation, pur,uant to which the EC has no ability to
unilaterally impose remedies, and will only"""" and accept remedies proposed by the
parties once sa1isfied that these are both appropriate and n ~ to alleviate the sig-
nifican1 impediment to effective compe1ition i1 ha.s identified-albeit lhat by vinue of
the prospective, suspensor}' nature of merger reviews, the companies involved receive
a greater degree of legal certainty regarding the adequacy of the remedies proposed
than in an antitrust contcxl.
140 Council Regulation (EC) No. 112003 or 16 December 2002 on the implementation
of the rules on competition laid down in Articles 81 and 82 of theTualy,Article 24.
141 Case T-167/08 Microsofl v. Commissio11, ECLl:EU:T:2012:323.
16 Concurrences N° 4-2017 I Article I Maurits Dolmans, Wanjie Un I Fairness and competition law...
67. The European Commission also ensures the
implementation of EU competition law through its ability
to impose fines, ofup to 10% of a company's worldwide
turnover in the year preceding the infringement. 142 Since
Regulation 1/2003, the legal basis for this power, provides
limited additional guidance on how such fines should be
calculated (merely stating that "in fixing the amount of the
fine, regard shall be had to both the gravity and the duration
of the infringement"), the Commission has published
guidelines on the methodology it should follow. 143 These
do not invoke fairness, but suggest that any fine should be
based on a "basic amount" which represents up to 30%
(based on the gravity of the infringement) of the value
of sales of the products to which the infringement relates
in the EEA in the last full business year of the infringe-
ment. This is then multiplied by the years the infringe-
ment lasted, and can be increased further for deter-
rence. The EC should also consider the presence of other
aggravating factors (e.g., role as "ring leader") or miti-
gating circumstances (e.g., evidence that the infringe-
ment was committed negligently rather than intention-
ally). This methodology is at least in theory intended to
produce fines that are proportionate.
68. There is a problem in practice, though.
The Commission enjoys a significant degree of discretion
in setting fines, and the Fining Guidelines expressly
state that "the particularities of a given case or the need
to achieve deterrence in a particular case" may justify a
departure from the general methodology. 144 General and
special deterrence is an important objective of EC fining
policy-under the Fining Guidelines the Commission
is prompted to consider deterrence on multiple occa-
sions, both explicitly and implicitly: when setting the
gravity multiplier; when increasing the basic amount to
deter particularly egregious forms of conduct; and when
applying a specific increase (the "deterrence multiplier")
for companies which have particularly large turnovers or
which have made gains in excess of the fine that would
otherwise apply. Surely, once should be enough? Fines
should not be set to seek political visibility, if that is at a
level that goes beyond what is reasonably necessary effec-
tively to deter future infringements of the EU competi-
tion rules.
69. The Commission's discretion is constrained by the
overarching principle of proportionality, which applies
equally any uplift for deterrence. 145 Gary Becker, who
was awarded a Nobel Prize for Economics for his
economic analyses of social behaviour, theorised that a
fine constitutes an "effective" deterrent if it is equal to,
or exceeds, the gain derived or expected from the illegal
conduct divided by the chance of detection and successful
142 Ibid.,Article 23.
143 European Commiaion, Guidelines on the method of setting fines imposed pursuanl lo
Article 23(2)(a) of Regulation No. 1/2003, 2006/C210102 (the"Fining Guidelines").
144 Ibid.,Recital37.
145 See, e.g., Cas, 1'.72/09 Pilkington v. Commission ECLl:EU:T:2014:!094, para. 430-
432, and Case C-101/15 P Pilki11g1011 v. Commission ECLl:EU:C:2016:631, paras.
732-73.
prosecution. 146 The principle of proportionality would
therefore imply that (a) the fine should not exceed the
level of an effective fine, and (b) in setting the fine, the EC
should take into account reasonably foreseeable claims in
damage actions that may be brought by private litigants
in the wake of an infringement decision, as well as fines
already imposed, or expected, by other regulators. In this
light, record-setting fines which incorporate a deterrence
multiplier could be regarded as disproportionate if the
fine assessment did not take into account the incremental
profit derived or expected from the alleged abuse or any
consequent reduction in competition. Unfortunately,
the case law does not (yet) recognise either of these two
constraints, resulting in over-deterrence. 147
70. In sum, the principle of proportionality is the guiding
principle for the application of fines and remedies, and
represents an established, reasonably objective, and clear
framework that is designed to ensure that the outcome is
properly linked to the competition problem it is intended
to address. The proportionality test, properly applied, is
more likely to strike the right balance between addressing
the competition problem in question and not deterring
efficient conduct, than a woolly "fairness" test.
VI. Due process
and the rule of
law ensure faimess
in competition
enforcement
71. Procedural fairness, or due process, is a fundamental
pillar of any legal system. In the absence of any
substantive measure of "fairness" with which to evaluate
our law-making, a robust and balanced decision-making
process and critical analysis of evidence are our best
guarantee for ensuring a "fair" outcome. Due process
has particular import in an inquisitorial system such as
the EU competition law regime, in light of the quasi-
judicial role performed by the European Commission in
investigating and enforcing competition law.
72. There is a separate procedural principle which
underpins a "fair" legal system-the rule oflaw. The rule
of law embodies the principle that all persons are equal
before the law, and the law applies equally to all persons.
146 See G. S. Becker, Crime and Punishment: An Economic Approach (1968), Journal of
Political Econom)' 76, No. 2 ( 1968): 169-217, and Essays i11 th, Economics of
Crime and Punishm,111 (1974) ("Firms will maiimizt profits by comparing the money
they can eamfrom breaking th, law lo thefina they must pay and other costs if they gtl
caught.factoring in th, probabilil)' of gtlling caught"). Accordingly, "th, Commission
has the power to determine tht 1ml of fines with a view to rrinforcing thrir dtterrmt
effect( . .. ) on account af th, profit that certain of the undertakings concerned art ab/,
to derife from them": Cases T-202/98 and othm, Tate &Lyle and others v. Commission
ECLl:EU:T:2001:185, para. 134 ,
147 Case C-289/04/P Showa Denko v. Commissio11 (2006) ECR 1-5859, para. 61.
Concurrences Ne 4-2017 I Article I Maurits Dolmans, Wanjie Un I Fairness and competition law.. .
This principle is rooted in one of the oldest notions of
"fairness" as procedural justice: Aristotle's instruction
that all persons are entitled to equal rights and treatment
and none to receive preferential or discriminatory
treatment without proper justification. In more recent
times, it has been associated with human dignity and the
belief in the equality of all persons.
73. The application of competition law requires due process,
i.e., assessment by an impartial authority, following a
process that gives proper consideration to the arguments of
both sides. 148 In Menarini, the European Court of Human
Rights confirmed that the fundamental right to a fair
trial enshrined in Article 6(1) of the European Convention
of Human Rights applies to competition law, 149 as "it is
recognised as having a character similar to criminal law." 150
Although penalties may be imposed, in the first instance, by
an administrative or non-judicial body, Article 6 requires
that this be subject to review by "an unlimited judicial
body [with] the power to quash the decision taken by the
lower organ in all respects, in fact and in law." 151
74. While the Court of Human Rights has broadly
endorsed the inquisitorial model, the ECJ has developed
a substantial body of procedural principles to control
the Commission's discretion and ensure a balanced
and rigorous administrative process. These include the
principle of equality of arms and the right of access to
file, 152 the right to be heard, 153 and the right to a reasoned
decision. 154 The ECJ has articulated these principles
as a matter of natural justice and fundamental rights,
deriving them-not from any specific provision of the
treaties but-from "the general principles of law," "the
constitutional traditions common to the Member States,"
and "international treaties for the protection of human
rights." 155 In addition to securing individual rights, due
148 Article 6(1) of the European Com~ntion on Human Rights andArticles 41 and 47 of
the Charter of fundamental Rights of !he European Union.
149 A. Mmari11i Diagnostics s.r.l. v. Italy, No. 43509/08, ECHR 2011, para. 44.
J50 Opinion of Advocate General Kokott in Case C-681/11 Schmktr& Co AG a11d Others
ECLl:EU:C:2013:404, para , 40 ,
I 51 A. Mmarini Diag11ostics s.r.l. ,. flab•, No. 43509/08, ECHR 2011, para. 59.
152 See, e.g., Case C-199/11 Europese G,mwischap ,. Otis ECLl:EU:C:2012:684, para.
7J ("IT)he pri11cipleof equalil)' of arms, •'hich isa corollary of th, my concept of afair
hearing( .. . ) implies that each party must be afforded a reasonable opportu11iry• to presmt
his case, i11cl11ding his evidena, under co11ditio11s that do not place him at a substalllial
disadvantage vis-0-vis his opponwt") .
153 See, e.g., Case 17/74 Tra11socean Marin, Paint,. Commission ECLl:EU:C:1974:106,
para. 15 ("ITJhe gmeral rule that a perso11 whose interests are perceptibb• affected b)' a
decisio11 taken by a public authorily must be givtn the opportunity to make his point of
vieH' known").
J54 Set, e.g., Case T-340/04 France Telecom v. Commission ECLl:EU:T:2007:81, para. 48
("The purpose of the requiremelll to gire reasons for a particular decision, H'hich arises
gtn,ral/y under Artie/, 253 EC, is ta mablt th, Community judiumn, to atrcise its
poH'" to review the legality of the decision and to provide the perso,i concerned with s1if-
ficimt infarmalion to ascatain whtthtr or not th, decision is o,/1 founded or whtth,r it
is vitiated by an error giving rise to a right 10 contest its validity, while the scope of the
duty depends 011 the 11ature of the measure i,1 questio11 and on the co,ital in which it
wasadoptetf') .
155 See, e.g., Joined-Case C-204/00 P, etc. Aalborg Portla11d v. Commission
ECLl:EU:C:2004:6, para. 64. The exception being the duly to give reasons, which has
been a reature or the treaties since the Treaty or Rome ("Rtgulations, directfrts and de-
cisions of tht Council and of the Commissio11 shall state the reaso11s 011 which they are
based,"Arlicle 190).
17
 process at the administrative stage promotes quality deci-
sion-making and ensures effective enforcement, since the
competition regime would hardly be effective if few deci-
sions ultimately stood up to judicial scrutiny.
75. Successive commissioners, including Commissioner
Vestager, have been at pains to highlight the impor-
tance of a rigorous and impartial process that priori-
tises facts and evidence. 156 Commissioner Vestager has
reiterated the Commission's commitment to "the princi-
ples offairness, good administration, transparency and due
process" in enforcing competition law, stating: "[W]hen it
comes to the individual cases of competition enforcement,
independence remains non-negotiable. There, the role of
competition authorities is to enforce the law and serve the
common interest. ( ... )There is simply no room for political
interference. Our actions have to be solely based on impar-
tiality and rigor: On the facts, on the economics, and on
the law." 157
76. The inquisitorial regime in the EU presents special
challenges to implementing these high standards, as
decisions are made in the first instance by the European
Commission combining the functions of investigator,
prosecutor and adjudicator, and adopted by politicians
rather than independent judges.
77. First, there is the increased risk of confirmation bias
in an inquisitorial system, that is to say, a bias towards
evidence that confirms rather than challenges belief. 158 It
would not be entirely surprising, if an official, who has
spent months and even years investigating a case and
hearing complainants, tended to unconsciously selectivity
in their review and presentation of the evidence. This is
not an accusation against individuals, and certainly not
against the many highly intelligent, conscientious and
principled officials met in more than thirty years of
practice in this area. The concern is that confirmation
bias is hard to avoid in a system where the investigator
and prosecutor is also the judge. Confirmation bias can
have a serious impact on the outcome in complex cases,
where the analysis of foreclosure effects, or the existence
of an abuse or a restrictive agreement, might turn on a
finely balanced assessment of a large body of evidence.
78. Second, there is the risk of desirability bias, or an
enforcer's desire to show a high level of enforcement
activity for political reasons. In an attempt to improve
statistics of the number of decisions imposing fines
and the amounts of these fines, or to demonstrate the
relevance of policy, or the efficiency and success of their
organisation, commissioners may feel pressured to find
156 Almunia here (hl!p://echrblog.blog.,pot.co.uk/20101051eu-antitrust-lines-and-echr-
fair-trial.html) .
l 57 M. Vestager, My Competition Philosophy, July 20, 2015, Politico, available at hltps:I/
www.poJitico.eu/artic1e/competition-philosophy-vestager-commi~ion-amazon/. See
also M. Vestagcr, The Values or Competition Policy, October 13, 2015. Keynote speech
at CEPS Corporate breakfast.
158 See, e.g., R. S. Nickerson, Confirmation bias: A Ubiquitous Phenomenon in Many
Guises ( 1998) 2 Reviek' of General Ps1•chologJ' 175-220 ("lnh, seeking or interprtt-
i11g of tride11ce i11 •mJ'S that are partial to aisling beliefs, apectations, or a hypothe-
sis in ham/") .
18 Concurrences N"' 4-2017 I Article I Maurits Dolmans, Wanjie Un I Fairness and competition law...
antitrust violations even where there may be doubts. 159
Related to this, where enforcers have invested signifi-
cant (scarce) resources in a case, for example by issuing
a statement of objections, they may be motivated to
bring the case to "satisfactory" conclusion, rather than
conclude that there are not grounds for intervention.
This risk, combined with the risk of confirmation bias,
is mitigated by the Commission's obligation to provide
reasons for their decision, and by the judicial oversight of
the European Court of Justice. Vitally, the General Court
is mandated to undertake a "full" and "in depth" review
of the facts and law relied on by the Commission, 160 and
is able to "quash in all respects, on questions offact and of
law, the challenged decision." 161
79. All this said, the European Commission process
has continued to attract criticism, 162 and is vulnerable
to accusations of political influence. This is because the
decision to adopt a finding of infringement and fine a
company rests with a decision-maker-the College
of Commissioners-consisting of effectively political
appointees replaced every five years, and upon whom a
significant degree of political pressure is brought to bear,
particularly in highly visible cases, from Member States,
the European Parliament, and the media. Moreover, the
members of the College do not review the entire case file
or all (or even any) of the defendant's briefings, and do not
attend the oral hearing, which would give them an oppor-
tunity to hear the arguments and facts from different
perspectives. Not even the commissioner for competi-
tion herself attends the hearing, or reads the full file. She
relies instead on extracts of case documents to which the
defendant has no access, and that are prepared by the
case team, which is responsible not only for investigation
and prosecution, but also for the preparation of the deci-
sion. t63 As (now General Court judge) Ian Forrester said:
"No competition agency on earth takes decisions this way,
nor does any criminal instance in any democratic coun-
try. "164 The OECD warned, "[c]ombining the function of
investigation and decision in a single institution can save
costs but can also dampen internal critique." 165
80. Internal procedures, such as peer review panels and
devil's advocate teams, and review by hearing officers,
are useful and sincere efforts, but do not fully address
these issues. The legal service also reportedly exercises a
159 W. Wils, The Combination of the lnvesligati"1 and Prosecutorial Function and the
Adjudicative Function in EC Antitrust Enforcement: A Legal and Economic Analysis,
World Competition, Vol. 27, No. 2 (2004), pp. 18-19.
160 Case C-386/10 P Chalkor ,. Commission, para. 54 and 62.
161 A. Mer,arini Diagnostics s.r.l. v. /talj·, No. 43509/08, ECHR 2011.
162 See, e.g., L Forrester, Due Proce£S in European Competition Cases, European law
RevieH' (2009) 34, 817-843, and W. Wils, The Combination of the Investigative and
Prosecutorial Function and theAdjudicative Function in EC Antitrust Enforcement:A
Legal and Economic Anal),is, World Competition, Vol. 27, No. 2 (2004).
I 63 Se,, e.g., R ,. Gough [1993] UKHL I (Lord Goll) ("Butthereisalso thesimplefactthat
bias is such an insidious thing that, e~'tn though aperson may in goodfaith btlint that he
l\'as acting impartially, his mind ma)' u,icousciousfr be affected h)' bias") .
164 I. Forrester, op. cit. note 162.
165 OECD, Country Studies - Competition law and Policy in the European Union
(2005), p. 62, see also p. 61 and pp. 63-69, www.oecd.org/daf/compelition/
prosecutionandlawenforcement/35908641.pd[ (accessed July I 0.2017).
supervisory function, although the extent and degree of
their influence is, given the entirely internal nature of their
activities, not well understood. The Commission could
deal with the concerns by separating the investigative
team from the team that prepares the Commission
decision (and the commissioner for competition).
The decision-making team and the commissioner could,
in addition, review all of the Statement of Objections
and the Response, and attend the oral hearing, and act
as much as possible as an independent judicial body.
Meetings with complainants without the presence of
the defendant must be properly minuted. 166 As we expect
this from a judge, so we should from an administrative
decision-maker.
81. Procedural fairness and due process mandate not
only "subjective impartiality, in so far as no member of
the institution concerned who is responsible for the matter
may show bias or personal prejudice" but also "objective
impartiality, in so far as there must be sufficient guarantees
to exclude any legitimate doubt as to bias on the part of
the institution concerned. " 167 This means that a commis-
sioner for competition, particularly given the politically
charged nature of the role, should refrain from making
public statements pending the proceedings that appear to
prejudge the outcome of the case. Such accusations are
prejudicial when issued by a prosecutor, much more so by
an adjudicator. They are not only inconsistent with the
presumption of innocence, but also with the need to show
that impartial justice is being done. As the legitimacy of
an antitrust authority stands or falls by the quality of
its decisions, such statements are not only unnecessary
and improper; they cast a shadow over the soundness of
its rulings. As Director-General Laitenberger comments:
"Ultimately, fairness is important to maintain confidence
in the system. If a competition authority wants to maintain
credibility and trustworthiness-in the eyes of courts, coun-
terparts, businesses and consumers-it must help ensure
fairness and above all guarantee proceduralfairness." 168
82. Finally, due process requires effective judicial
review on appeal. The General Court should review the
Commission decision in depth, in both matters of fact
and law. The Commission is still afforded a margin of
discretion in complex economic assessments, 169 but
the courts have repeatedly stressed that this "marginal
review" "does not mean that the Courts of the European
Union must refrain from reviewing the Commission's inter-
pretation of information of an economic nature. Not only
must those courts establish, among other things, whether
the evidence relied on is factually accurate, reliable and
consistent but also whether that evidence contains all the
166 See also Case C-413/14 P, /111,/ v. Commission, ECLJ:EU:C:2017:632, para. 91;
see also Opinion of Advocale General Wahl in Case C-413/14 P hltd v. Commission
ECLl:EU:C:2016:788, para. 241.
167 Case C-439/11 P Ziegler v. Commission, EU:C:2013:513, para. 154-155; loined-
a,.., C-341/06 P and C-342/06 P Chronopost and La Postt v. UFEX and Others,
EU:C:2008:375, para. 54; and Case C-308/07 P Gorostiaga Atxalam/abaso v.
Parliam,111, EU:C:2009:103, para. 46.
168 J. Laitenberger, op. cil. note 63.
169 Case C-386/ 10 P Chalkorv. Commission ECU:EU:C:201 I :815, para. 62.
Concurrences N° 4-2017 I Article I Maurits Dolmans, Wanjie Lin I Fairness and competition law.. .
information which must be taken into account in order to
assess a complex situation and whether it is capable of
substantiating the conclusions drawn from it." 170 In Amann
& Sohne, the General Court repeated this statement,
noting that the Commission's margin of discretion is
therefore "never unlimited." 171
83. The thought that the court may leave a margin
of discretion to the Commission continues to raise
concerns of inadequate judicial oversight, 172 particu-
larly in Article 102 cases, where fundamental elements of
the analysis, ranging from the existence of a dominant
position to the potential exclusionary effect of a given
conduct, will typically involve complex economic
appraisals and significant bodies of evidence.
84. Marc Jaeger, the current president of the General
Court, has argued that such fears are unfounded, and
shown that the court's jurisprudence testifies to its
willingness to examine decisions intensely and annul
them, even on the basis of issues within the Commission's
margin of discretion. Thus, for example, the court struck
down the Commission's finding that GSK's general sales
conditions were not exempted under Article 101 (3) on
the grounds that the Commission had failed to carry
out a proper examination of GSK's arguments and the
requisite economic assessment. 173 He adds that the refer-
ence to "complex economic assessments" "should be
understood as situations where the Commission has to
make an economics-based choice of policy," but "there
should be no 'deference' as to [complex economic studies,
calculations or data] on which the Commission may rely
on in its decisions." This view of the court's obligations is
welcome, but so long as the Commission does not follow
an adversarial decision-making process, the court must
exercise full scrutiny of Commission decisions, to ensure
proper respect for the right to effective judicial protection.
85. Finally, where the General Court has fallen short, the
Court of Justice has also demonstrated a willingness to
enforce the required standard of review. Thus, in Carles
Bancaires, it criticised the General Court for failing to
carry out a "full and detailed examination of the argu-
ments of the appellant," and "simply reproducing on a
number of occasions ( ... ) the contents of the [Commission]
decision." 114 It is hoped this trend will continue.
170 Ibid., para. 54.
171 Case T-446/05 Amann & Sohn, v. Commission ECLJ:EU:T:2010:165, para.131 .
172 See, e.g., I. Fom,ster, The Luxuriant Growth of "Light Judicial Review" in C.-D.
Ehlermann and M. Marquis (eds.), Enropean Competition Law A111111a/ 2009:
Emluatio,i of faidmce a,id its Judicial RevieH' i,1 Competition Cases, Hart Publishing,
201 I, pp. 407-452.
I 73 Case T-168/01 GlaxoSmithKline v. Commission ECU:EU:T:2006:265, para. 303 .
("It follows from 1h, for,going Iha/ 1h, D,ci,ion is vitiaJed by a fai/ur, lo carry out a
proper aami,iation, as the Commission did 1101 rnlidlJ' take into account all the Jae Illa I
argumellts and the evidence perti,iently submilled by GSK, did not refute artai11 of those
argummr,""" though lh,y .,.,.. sufficiml/y r,/,w,n/ and substanlialed lo r,quir, a r,-
sponse, and did 1101 s11bsta11tiate to the req11isite legal standard its co11cfosio11 tluJt it was
not prowd,jirst, that para/I,/ trod, was apt to /,ad to a loss in ,jjici,ncy by appr,ciably
aiming GSK"r capacity for innovation and, s«ond, that Claus, 4 of th, G,nm,/ Salts
Condiiions was apt to tn11blt a gain in ,jjicimcy to btachitvtd by improving innovation").
174 CascC-6 7113 PGro11pementdescartes bancaires v. Commission ECLl:EU:C:2014:2204,
para . 89-92
19

VII. Conclusion
86. The current debate on "fairness" and "trust" is
inspiring. These values, when used in political debate,
speak to us not just as lawyers, economists, or officials,
but as human beings. Populists are challenging the
European project and existing political and economic
orders, and characterise large firms as one of the elitist
adversaries to be vanquished, if need be by bypassing
existing institutions or laws, and avoiding sound fact-
based economic and legal analysis. 175 In this moment of
growing insecurity, we need to be reminded of the ideals
we live by, and that these are the values that we seek to
achieve every day through our participation in competi-
tion law and the European project.
87. At the same time, let us also be clear that fairness is best
achieved, not by brandishing it about as a legal concept,
but through the workaday, methodical and painstaking
application of evidence-based and economics-driven
analysis, carried out through a rigorous, impartial and
balanced process, in a way we expect from a judge.
88. Fairness cannot be used as a substantive criterion
to determine outcomes in individual cases. We should
continue to rely on carefully honed criteria, such as
consumer welfare, competition on the merits, and effects-
based analysis. "Fairness" is too subjective and vague
a concept, meaning different things to different people
in different places at different times. It is hard to recon-
cile with the need for legal certainty. It could in certain
cases be counterproductive and restrict the very fairness
and human autonomy it seeks to preserve.176 Forcing a
company to treat rivals the same way it treats its own
business, in the name of fairness and equality, dimin-
ishes incentives to innovate and invest in new resources
and product improvements. Curbing or even breaking-up
online firms, or regulating them strictly, as some advocate
based on vague and emotionally appealing fairness
criteria in disregard of rigorous factual, economic, and
legal analysis, would slow down innovation and hamper
efficiencies from which consumers and citizens benefit.
89. Invoking moral concepts is unhelpful, too. For
example, in likening the profit motive to "greed," we
caricature ambition, this basic engine of competition and
invention, which motivates firms to behave in ways that
benefits consumers and society, and which competition
law exists to promote. Casting moral aspersions not
only undermines the legitimacy of Europe's free market
175 Ser B. Orbacb,Antilrust Populism (forthcoming in Ne•• York UnirrrsilJ' Jo11rnal of laH'
a11d B11si11ess) .
176 Cf. (in a dilferenl conlcxl) G. Mitchell , Libertarian Paternalism ls an Oxymoron, 99
NW U. L. Rer. 1245 (2005).
20 Concurrences N" 4-2017 I Artic'e I Maurits Dolmans, Wanjie Lin I Fairness and competition law...
economic model, but could also inadvertently feed
the "anti-elite" antagonism favoured by populists to
manipulate voters, fuel an anti-technology backlash,
undermine confidence in free market principles, and
lead to protectionism. In the end, that further erodes
economic progress and harms the most vulnerable.
90. Competition law can, and should, respond to the
problems of our time-but not at the expense of becoming
untethered from the established legal principles which
are fundamental to it. Competition law exists to correct
market problems, and if it were used for other goals, it
would lose its legitimacy as an institution. We should,
of course, address the root causes of populism, such as
economic inequality, the wealth gap, austerity, disrup-
tive effects of digital technology and globalisation on
employment and social cohesion , and climate change.
But this should be done through legislation, appropriate
policies (e.g., tax, welfare, education, privacy regulation,
education, environmental protection, consumer protec-
tion, and rules against hate speech and fake news) , and
encouraging market- and technology-based solutions. 177
Competition policy based on a "fairness" criterion is not
the right tool. 178
91. If the current debate on fairness should achieve
anything, in addition to inspiring us, it should be in two
ways: First, by objectively applying competition law,
to foster growth and innovation, antitrust authorities
should show that existing institutions and laws are
capable of pursuing consumer welfare based on rigorous
factual , economic and legal analysis without political
pressure. Let us continue to fine-tune our tools, to ensure
they protect what we most value. Consumer welfare need
not be measured solely in terms of price and quality.
Other elements to keep in mind could include innovation
and choice, as well as aspects that are often not
properly internalised in the price, such as environmental
protection, safety, privacy, and avoidance of over-
exploitation of unpriced resources to the detriment of
society as a whole. Second, authorities should ensure
due process in inquisitorial proceedings. There is still
much to be done in that respect: The Commission should
separate the prosecution and decision-making team
within the Commission and ensure transparency, and the
commissioner for competition should review the entirety
of the parties' pleadings, attend the oral hearing, and
lead the decision-making process on the merits. And the
European Courts should review Commission decisions
fully and carefully, on facts and law. •
177 M. Dolmans. Pandora's box of online ills: technology solutions, regulation, or
competition · law', Concurrences No. J-2017 (colloquium Pembroke College,
Oxford, 22 May 2017), available at http://www.rpicuropc.org/fatnts20l7/
Dolmans2.pdf.
178 M. Vcstager, Whal competition can do and what ii can't, Brussels, 25 October 2017,
available at https://cc.curopa .cu/commission/commissionm/2014-2019/vcstagcr/
announcrments/what-compctilion-can-do-and-what-it,ant_en .
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 L

Markets under siege.

Towards a fair economy

Paul De Grauwe
London School of Economics
 Wonders of Capitalism

• Capitalism (market system) only system that has been

capable of providing increasing material welfare for
large parts of population.

• Why?
• Freedom to produce and consume
• Markets with competition
• Free trade (globalisation)

• These three factors are responsible for innovation and

technical progress
• Lifting material welfare to unseen levels.
 Other systems have failed

• In particular communism has failed

• Why?

• Centralisation of all economic decisions led to two

problems:
• Intractable information problems
• Absence of incentives to work hard and to innovate
• Very little technological changes
- • Stagnation.
 Cyclical movements capitalism
• If all is so well with capitalism why has it
regularly been rejected, to be reinstated later?
• History of capitalism is one of cyclical
movements.
• Periods of strong growth of capitalism:
• Second half 19th century
• 1980-2008.
• Each time capitalism becomes victim of its own
success and hits its imits.

• Governments take over.

• This happened in the early 20th Century and
especially after Great Depression:
• Large parts of the world turned to Communism,
• Elsewhere governments took over command of
economy.
 marginale tarieven op hoogste inkomens
I-" N w ~ u, O'l
....., 00 I.O
I-"
0
0 0 0 0 0 0 0 0 0 0 0

OJ * * * * * * * * * * *
a
:::l
1900
1902
1904
'1J 1906
-· 1908
"
CD
::+
1910
1912
':< 1914
(') 1916
Q) 1918 :::c
"O 1920 0
;;::::;: 0
1922 O'Q
Q)
1924
,...
CII
tD
1926 ,...
:::l
,_.. 1928 .,DJ
::,- ;;;·
1930 <
CD 1932 tD
::::,
I\.) 1934 "C

-
...Ji. tD
(./J 1936 ""I
CII
1938 0
(') 1940 ::::,
CD tD
1942 ::::,
:::l
,_.. er
1944 tD
C 1946 DJ
'< 1948
CII
!:!'.
::::,
1950 O'Q
1952 tD
::::,
1954
1956
1958
1960
1962
1964
1966
I I I I
..,"Tl
QI
0
C
::, ;:;:
1968 " !!!..
2: QI
::,
1970 " a.
1972
1974
1976
1978
 Cyclical movements
• Cyclical movements do not end when
governments take over.

• These governments in turn hit their limits as

during the 1970s
• From 1980s triumphant return of markets
 Ho o ste tari even e rsonenbe astingen
100%

90%

80%

~ 70%

!' 60%
R
tC SO%

...
j!
40%
V .5.
1 30%
,.... .K .
~ 20%
ltsl.an.d

10%

0%
• Markets and governments seem to
permanently circle around each other,
• Ready to take over when the other fails
• to be pushed away by the other again.
 Questions I want to raise

• What are the limits that constrain the evolution

of the market and that make its success
temporary?

• And what are the limits of the state that each

time lead governments to retrench from the
economy?
• Are we condemned to repeat these cyclical
movements in the expansion and contractions
of markets and governments?
 Origin of the limits of the market
• Limits arise because individual rationality and
collective rationality are not in tune.
• In contrast with the "invisible hand" of Adam
Smith

• Distinction between
• External limits (environmental)
• Internal limits

I will only deal with the internal limits

 Internal limits
• Kahneman:
• System I: emotional dimension
• Love, hatred, fear, sense of justice (fairness)
• System 11: calculating and rational
• Computes costs and benefits of individual decisions
• System I is fast; system II slow and "lazy"
• Interaction between two systems (Damasio)
• Balance between two systems necessary to make us
happy.
• Market system calls upon rational and calculating
capacity of individuals (system 11).
• These react to financial incentives and competition.

• When market system expands rational capacities

gain in importance.

• They become the sole criterion of individual

success.
• Other individual characteristics of the emotional
System 1 are repressed.
• Many people who care about fairness in income and
· wealth distribution, who have intrinsic rather extrinsic
motivations and for whom cooperation matters
• are dissastified by a system that does not attach
importance to these motivations ..

• Market system produces a lot of material

welfare,
• but represses feelings that matter to make
individuals happy
 Competition and cooperation
• Many individuals find a lot of satisfaction and
happiness in cooperation.
• At the same time many individuals find satisfaction in
competition.
• The firm is marvelous invention that combines
cooperation (internally) with competition (externally) lJ, __
• But when the market system expands it breaks the
balance, when inside the firm competition takes over
from cooperation.
• This is often the result of financial markets with their
short-termism
 Individual and ollec!jye welfare

• All this can be summed up as follows: expansion

of market leads to widening gap between
individual and collective welfare

• Result: system is rejected; it is perceived as

unfair, cold and brutish.
• Social consensus that free market system needs
for its survival is undermined.
• Increasing income and wealth inequality makes
this outcome increasingly likely..
 Aandeel top 10% in totaal inkomen

50%

- v.s.
- v.K.
45%
- Duitsland

- Frankrijk

40%
C
CII
- zweden
E
0
.:.::
C

iii
"' 35%
....0
.!:
CII
CII
"tJ
C
"'"' 30%

25%

20%
1930 1940 1950 1960 1970 1980 1990 2000 2010

Bron: Piketty, Capital in 21 st Century

 Self-destroying success
• When market system hits its limits the state is
strengthened.

• Dynamics is created that shrinks the market,

• when market system leads to destruction of
environment
• when inequality becomes unacceptable.

• There is something self-defeating in market

system.
 Absence of self-regulations
• Capitalism is not capable of self-regulation that
will prevent hitting its limits.

• These regulatory systems can only be created

and maintained by governments ..
 How to marry individual and collective
rationality?
• Essence of the theory
• (Tax those who generate external c~s; this forces
them to internalize these costs.) ~·~ -\~> .
\faV\/VJ ~vv·\\ ~~
a )

• Redistribution of income and wealth ,,\ y e ~ ·

• Strenghten social security

• This is necessary to save capitalism

• Paradoxically those who oppose these policies
are the real enemies of capitalism.
 __)

Knowledge insufficient for action

• We know what should be done

• But will it be done?

• Not necessarily, because governments also hit

their own limits
• These make it difficult to impose th~collective good on
individuals who only care about their private welfare:

• Also in politics there is wide gap between collective

and individual rati · y. --------
 Limits to political system
• Individual interests fight governments that want
to promote collective welfare.
• This reduces the capacity of governments to act.
• And creates danger that governments are
instruments of individual interests.
 Democracy:
least bad system
• Challenge: bridge the gap between individual
and collective rationality.

• Difficult but chances of success greatest in

democratic systems.
• In these systems consensus building about what
should be done easiest.
• Allows for bottom-up pressure from the people
towards the politicians so as to force them to do
something about environment and inequality
• Autoritarian systems fail dismally
• Private interests infiltrate these political systems
much more than democratic systems.
• Result: discrepancy between private and
collective interests is much larger than in
democratic systems.
• Weak bottom-up pressure

• We must resist authoritarian systems

The will lead to destruction of free markets
 (J

Fairness as a Foundational
Concern in Competition
Law and Policy

Prof. Michal S. Gal

University of Haifa
President, ASCOLA
 (Un)Fair Trading Laws
"Unfair methods of competition,,
11
"Unfair prices
11
"unfair share
So why include it?
Legitimizing power
Compromise formula
Multi-jurisdictional context
Vagueness a virtue
 -
Procedural fairness

Usury
Just price
Competition on the merits
Sandel: coercion
Social contract
Market dynamics?
Regulatory limitations?
Decision-theory
Is it fair ENOUGH?
 Abuse of Dominance- Exploitative Abuses

MICHALS GAL•

in HANDBOOK ON EUROPEAN COMPETITION LAW

(Lianos and Geradin eds., Edward Elgar, 2013), Chapter 9, pp. 385-422.

I Introduction

Article 102 TFEU has been interpreted by the European Court of Justice (ECJ) as
prohibiting not only exclusionary abuses, but also exploitative ones. In particular, sub-
section (a), which prohibits 'directly or indirectly imposing unfair purchase or selling
prices' by a dominant firm, has been understood as proscribing not only unfair low
prices (predatory prices) but also unfair high prices per se, that is without need of proof
of anti-competitive conduct or intent. 1
The prohibition against excessive prices, as it has come to be known, is one of
the most intriguing competition law prohibitions. Its analysis involves a moral,
economic and sociological exploration, with long historical roots. Such regulation
encapsulates issues such as the goals and the underpinnings of competition law; the
equilibrium point which is adopted to balance between the forces of Darwinian
capitalism and those of social justice; the role of government regulation; the balance
between practical problems and theoretical principles; and the assumptions regarding
the relative administerability of various types of regulation. Monopoly pricing
regulation is thus, in many ways, a microcosm of competition law. 2 Accordingly, this
chapter analyzes the rationales of the prohibition as well as its ability to achieve them in
practice. It combines a doctrinal analysis with a critical one.
It is interesting to note that monopoly pricing is regulated differently on both
sides of the Atlantic, as in the U.S. it is not considered an abuse. These divergent
regulatory approaches enable us to better understand, by way of contrast, the ideological
underpinnings and assumptions about how markets operate on which the EU rule is
based. Indeed, such underpinnings and assumptions significantly differ. 3 The U.S. views
the unregulated economy as essentially competitive, once the creation of artificial

* Professor, Vice-Dean, and Director of the Forum for Law and Markets, University of Haifa School of
Law. Many thanks to Eran Fish for excellent comments, to Avita! Bruker for research assistance. The
research on fairness was supported by the Israeli Science Foundation (ISF) and the German-Israeli
Foundation (GIF).
1
This possibility was first acknowledged in Parke Davis. The ECJ indicated that a wide variation in
prices, not justified on objective grounds, would be a factor in determining whether a conduct was
abusive. Case 24/67 Parke, Davis and c. v Probe/, Reese, Beintema-Jnterpharm and Centrafarm [ 1968]
ECR 55 , [1968] CMLR 47 . This possibility was more clearly established in Case 40/70 Sirena v Eda
[1971] ECR 69 , [1971] CMLR 260.
2
Gal, Michal S. (2004), 'Monopoly pricing as an antitrust offense in the U.S. and the EC: Two systems of
belief about monopoly?', Antitrust Bulletin, 49, 343-384.
3 Id.
 2

barriers is prohibited. This approach places significant emphasis on the workings of the
market. It also reflects the limited role granted to government in regulating markets
directly and the social, moral and political values attributed to the process of
competition. As elaborated below, EU law reflects a lesser belief in the ability of market
forces to erode monopoly and a stronger belief in the ability of a regulator to intervene
efficiently in setting prices for firms operating in the market. It also reflects a stronger
emphasis on distributional justice.
While excessive pricing is the classic form of exploitative abuse, other forms
also exist. In SABAM the ECJ condemned as exploitative restrictions of a performing
right society that limited its members' rights that were not needed to further the goals of
the society. 4 Another interesting prohibition involves the exploitation of a strong
dominant position to enjoy a quiet life and act inefficiently. In Forti de Genoa the ECJ
found exploitation where the state-protected monopolist refused recourse to modem
technology that could have reduced costs. 5 Yet such applications of the prohibition are
extremely rare and thus will not be elaborated.
Notably, exclusionary and exploitative abuses are oftentimes coupled together.
A main example involves discriminatory pricing, where the price to the highest-paying
customers may be considered exploitative. In such cases exploitation allegations are
usually tagged-on to exclusionary ones. 6 Accordingly, the reader is referred to previous
chapters for their analysis. It is noteworthy that successful exclusionary conduct
ultimately leads to exploitation. Yet the question at the basis of this chapter is whether
exploitation, which is not a result of exclusionary conduct, is and should be a stand-
alone prohibition.
The chapter is structured as follows. Part I analyzes the rationales that stand at
the basis of the excessive pricing prohibition: economic, moral and political economy
rationales, as well as its historical roots. Part II analyzes the conceptual challenges that
it raises. Part III focuses on the elements of the prohibition as well as the methodologies
that were developed for applying it. Part IV challenges the prohibition on practical
grounds. A conclusion ensues.

II Possible Rationales of the Prohibition 7

4
Case 127 /73 Belgische Radio en Televisie v SV SABAM and NV Fonior [1974] ECR 51.
5
Case 179/90 Merci Convenzionali Porto di Genova SpA v Siderurgica Gabrielli [1991] ECR 1-5889.
6
Exploitation allegations might make it easier to reach exclusionary conduct by non-dominant firms,
which has led to dominance and to exploitation (sometimes referred to as gap cases). See, e.g. Press
Release, EU Comm'n, Commission Accepts Commitments from Rambus Lowering Memory Chip
Royalty Rates, December 9 2009 (deceptive conduct as part of patent ambush allegations). For an
interesting analysis of the case see Drexl, Josef(2012), 'Anti-Competitive Stumbling Stones on the Way
to a Cleaner World: Protecting Competition in Innovation without a Market', Journal of Competition Law
& Economics, 8, 507-542.
7
This Part is largely based on Gal, supra note 2, and on Gal, Michal S. (2007), 'Restrictive Agreements
and Unilateral Restraints', in Drexl, J., Laurence Idot and Joel Moneger (eds), Economic Theory and
Competition Law, Cheltenham, UK and Brookfield, US: Edward Elgar, pp. 176-190.
 3

The prohibition against 'unfair' prices could have been interpreted to include only low,
predatory prices. 8 Why, then, were excessive prices also prohibited? The ECJ's
objection to excessive pricing is that the monopolist is using his monopoly position to
'reap trading benefits that [he] would not have reaped if there had been normal and
sufficiently effective competition. ' 9 It follows that the monopolist bears special duties
not to fully exploit his monopoly power. But why is the monopolist not allowed to do
so? This Part explores possible rationales for the prohibition - economic, moral and
political economy ones. It also briefly reviews the historic and ideological roots that
shaped the concept of fairness.

A Possible Economic Rationales

In the textbook monopoly model, a firm constrained in its pricing and output decisions
only by the costs of production and the elasticity of demand, will raise its price until its
marginal revenue equals its marginal costs ('monopolistic price'). This price level is
much higher than that which would have been set under competitive conditions.
A static analysis 10 reveals that the increase in price creates a wealth transfer
from consumers to the monopolist. The more inelastic the demand and the higher the
entry barriers, the larger the monopolist's portion of the total welfare created by the
transaction and the smaller the consumer's. More importantly for social welfare,
monopoly pricing also creates a deadweight loss in societal resources due to the lost
sales to consumers that are willing to pay for additional products or services a price
below the monopolistic one but above the competitive one.
These costs of monopoly are independent of the manner in which the monopoly
position was acquired or maintained. Accordingly, under this static economic view,
monopoly pricing regulation reduces harm to consumers and to social welfare.
Moreover, it deals directly with harm to consumers, rather than with harm caused
indirectly through exclusionary practices.

B Moral Rationales: Historical underpinnings

The EU rule against excessive pricing is based on fairness, as indicated in the language
of the law. The question to be asked is unfair in what sense and to whom. To answer
this question one must focus on conceptions of fairness and how they apply to
monopoly pricing. Fairness is not a single-valued concept. Rather, it is a flexible one
that can incorporate different meanings, depending on the ideology and the goals that
are sought to be achieved. Fairness ties into deep notions of morality and justice, often
stemming from different religious, sociological and political concepts of how societal

8
While the authentic English text of the Treaty uses the word 'abuse,' other languages use ' abusive
exploitation,' which might be thought to forbid exploitative practices as well. Yet ' abusive exploitation'
applies to all forms of abuse enumerated in Article 82, which mostly relate to exclusionary conduct. Thus,
we cannot conclude that the language, by itself, mandates the prohibition of excessive pricing.
9
Case 27/7 6 Uni/ eel Brands Co mpany and United Brands Continentaal v Commission, [1978] ECR 207
10
A dynamic analysis follows.
 4

interactions should be conducted. For example, fairness can relate to distributive justice.
Alternatively, it might ensure a level playing field. Fairness is thus derived from the
perceived rules of the market game and may vary among cultures and time periods. It is
part of one's jurisculture. 11 The question is on what grounds excessive pricing breaches
notions of fairness. 12
Let us first explore the historical roots that influenced its adoption and
application. 13 An important source of influence is the German Ordoliberal concept of
economic constitution. 14 Ordoliberal ideology was developed by the Freiburg School of
German academics before and immediately after World War II. Against the backdrop of
economic and social chaos and amassed power, the Ordoliberals attempted to create a
tolerant and humane society that would protect human dignity and personal freedom
while creating a framework for the well-functioning of the market. The Ordoliberal
ideology stressed the need for an economic constitution that would limit the
convergence of private economic power in the interest of a free and fair political and
social order. Competition was regarded as a constituent element of the liberal order of
the community. Such an order includes the liberty to autonomously decide on economic
activity, to freely choose the partner to an economic transaction and to have the
discretion of making offers to those partners and entering into an agreement with them.
Cartels and monopolies were regarded as limiting these options. Thus, the Ordoliberals
posited the need to regulate the conduct of such firms. They also stressed the goal of
fairness, which was understood as protecting the individual's economic freedom of
action as a value in itself against any impairment of market power. It led some
Ordoliberals to suggest that dominant firms had to act 'as if' they were operating in a
competitive market. 15
The Ordoliberal school had a strong influence on German thinking in the 50's on
fairness in market relationships. It also influenced the wording and interpretation of the
Treaty of Rome ("the Treaty"). Germany was the only Member State that had a viable
competition law when the Treaty was signed. Although the German Competition Law
was only enacted a few months before the Treaty, 16 debates regarding the scope of its
legal prohibitions lasted quite a few years and were well known to the German delegates
that negotiated the Treaty. In fact, due to his relative understanding of competition law
issues, Mr. Hans von der Groeben, a German delegate who later became the first

11
Gal 2007, supra note 7.
12
See, for example, Gerber, David J. (2004), 'Fairness in competition law: European and U.S. experience'
presented at a conference on fairness and Asian competition laws, 5 March 2004, Kyoto, Japan.
13
Gal 2007, supra note 7.
14
See, for example, Peacock, A. and H. Willgerodt ( 1989), Germany's Social Market Economy: Origins
and Evolution, Basingstoke, UK: Macmillan; Peacock, A. and Willgerodt, H. (1989), German Neo-
Liberals and the Social Market Economy, Basingstoke, UK: Macmillan.
15
The 'as if principle was not shared by all thinkers of the Ordoliberal school, and was not included in the
final drafts of either the German Competition Law or the Treaty. Schweitzer, Heike (2007), 'Parallels and
differences in the attitudes towards single-firm conduct: What are the reasons? The history, interpretation
and underlying principles of section 2 Sherman Act and Article 82 EC', European University Institute
Working Papers, 32, 14-15.
16
Previous German competition laws were not much debated.
 5

Commissioner for Competition, was chosen to lead the negotiating team on the Treaty's
competition provisions. Indeed, the Germans suggested the inclusions of fairness
considerations in the Treaty, a suggestion that was accepted. 17
Yet the notion that a high price might be unfair is not a 20th century invention.
Rather, it has long historical and ideological roots. 18 Aristotle's theory of justice in
exchange established that to maintain stability and avoid uncontrolled re-distribution of
wealth in society, the transacting parties are to exchange goods of equal value. 19 A
relation between price and value also appears in the Roman Digest. An edict of Emperor
Diocletian establishes the principle known as laesio enormis, according to which if land
is 'sold for less than its value', the purchaser 'should pay you what is lacking of the just
price ... A price is considered too little if one half of the true value is not paid.' 20 The
rule's importance stems from assuming that there is an objective just price, which is not
necessarily equal to the price agreed upon by the parties, which is based on the market
price of the land. The principle of laesio remained in force as a legal norm throughout
the middle ages, and was extended to include additional goods and services.2 1
During medieval times the concepts of 'usury' and 'just price' emerged. The
prohibition against usury was based on the biblical prohibition not to take biting interest
from the defenseless poor. 22 It applied to situations in which the parties did not have
equal bargaining power and one side exploited the need, carelessness or inexperience of
another, in order to gain a pecuniary advantage which disproportionately exceeded the
value of the performance granted in return. Usury was perceived as dishonest conduct,
and therefore intrinsically unlawful. It limited the ability to achieve private gain based
on exploiting the economic weaknesses of others. 23
The doctrine of just price was based on exploitation of market conditions, which
was labeled morally wrong and abhorrent to the religious tenets of society. The concept
of just price was developed into a comprehensive theory in the middle ages, mainly
through the works of the scholastics. The scholastics' idea of a just price was not of a
fixed benchmark. Rather, they identified it with the ongoing market price, set by the
free interplay of supply and demand. 24 Having the just price determined by the common
market price meant that a seller was not allowed to take advantage of an individual

7
l Schulze, R. and T. Hoeren (eds) (1957), Dokumente zum Europaischen Recht, Vol. 3: Kartellrecht,
Berlin: Springer-Verlag, documents 54, 59, 64.
is For elaboration, see, for example, Fish, Eran and Michal S. Gal, 'The Ideological Roots of the
Excessive Pricing Prohibition' (on file with author).
19
Aristotle, Nicomachean Ethics, p. 1132b, lines 31-33.
2
21
°
C.4.44.2 (285 A.D).
See, for example, Langholm, Odd (1998), The Legacy ofScholasticism in Economic Thought,
Cambridge, UK: Cambridge University Press, 40.
22
For example, Nelson, Benjamin (1969), The Idea of Usury, From Tribal Brotherhood to Universal
Brotherhood, Chicago, US : University of Chicago Press; Noonan, John Thomas (1957), The Scholastic
Analysis of Usury, Cambridge, US : Harvard University Press.
23 Id.
24
See, for example, De Roover, R. (1958), 'The concept of the just price: Theory and economic policy',
The Journal of Economic History, 18, 418-434; Viner, J. (1960), 'The intellectual history of laissez Faire',
Journal ofLaw and Economics, 3, 53 .
 6

buyer's dire need, carelessness or inexperience. 25 In the absence of a system of supply

and demand curves, the market price was the result of a common estimation, taking into
account factors such as need, scarcity and costs of production. These concepts were
partly incorporated into the Corpus Juris Civilis which served as a basis for law and
legal education throughout much of Europe from the 11 th century until well into the 19th
century. 26 They helped set the stage for the modem prohibition of unfair monopoly
prices. It is noteworthy, however, that past prohibitions did not apply specifically to
monopolists.

C Moral Justifications: Modern Concepts of Fairness

Prohibiting excessive prices may also be grounded in more modem concepts of fairness.
Let us focus on consumers. Monopoly pricing creates a wealth transfer from the
consumer to the monopolist. One might argue that the consumer has a right to a large
share of the total welfare created by the trade. This argument assumes that the seller has
a right to profit only to a certain 'fair' limit. The question arises, what is the basis for
such a right, especially if the high price is a result of natural market forces rather than
exclusionary conduct.
One possible argument is that of an implied social contract between all market
players (including producers, consumers, and public authorities) regarding the 'rules of
the game' in the marketplace, which are set in accordance with societal values. One
such possible social contract is based on an agreement that every producer is allowed to
become a monopolist, but is not allowed to enjoy profits beyond some preset limit. On
what basis could such a social contract be justified? One possible basis is a conceptual
agreement between all relevant players prior to the beginning of the game and before
each player knows what role he would have in it. 27 To justify the excessive pricing rule
one must therefore assume that even a successful monopolist might have chosen to
prohibit unfair conduct, if asked before he knew whether he would be a producer, and if
so how successful. Yet it is not obvious that all would agree to the imposition of such a
limitation. Much depends on the level ofrisk-aversion of the parties. Also, as elaborated
below, such a rule must also be justified when taking into consideration long-term
dynamic effects on welfare, which result from limiting monopoly prices, and
institutional limitations.
The social contract may alternatively be based on the maximization of social
goals. The framers of the Treaty, as delegates of a democratic system, set market rules
that will further social welfare, even if not all market players might have agreed to them
25
Langholm, supra note 21, p. 88.
26
French Civil Code, Arts 1674 and 1131. The drafters of the German Civil Code chose to discard the
doctrine oflaesio enormis, yet the principle of equality in exchange remained relevant. See, for example,
Gordley, J. (2006), Foundations of Private Law, Oxford: Oxford University Press, 365.
27
This analysis partly applies the veil of ignorance methodology, proposed by Rawls. Rawls, John (1971),
A Theory ofJustice, Cambridge, US: Harvard University Press. Yet I do not apply the full Rawlsian
theory to the market. Rawls repeatedly wrote that his theory does not apply to fairness among individuals
and businesses: Rawls, J. (1977), 'The basic structure as subject', American Philosophical Quarterly, 14
(2), 159-165.
 7

if given a choice. One possibility is to attempt to justify the prohibition as maximizing

total social welfare. The same limiting considerations mentioned in the previous
paragraph are relevant here as well.
An alternative or cumulative goal focuses on distributive justice principles.
Indeed, the prohibition enables more consumers to enjoy the goods offered in the
market. Yet a simple prohibition of excessive prices is a crude tool for achieving
distributional goals. In some cases, distributive justice may be better served by applying
a pricing policy which corresponds to differences of income and elasticity of demand,
rather than a uniform excessive pricing rule. At present, a monopolist setting high prices
for luxury cars and low prices for regular ones and one setting high prices for regular
cars are treated similarly. Also, distributive goals may rather justify a policy that
maximizes aggregate welfare, to be redistributed by other means, such as tax policy. Yet
it might be argued that in many cases the prohibition does achieve the distributive goal,
albeit crudely, and it might also create a stronger perception of distributive justice in the
eyes of consumers than other tools do and overcome obstacles such as political
economy influences to the application of alternative distributive tools.
The prohibition may alternatively be justified by the concern with the social
conditions for moral, political, and economic autonomy. According to this view, the
concentration of extensive and largely unregulated private property rights in the hands
of a minority might deprive many individuals of the prerequisites for the realization of
an autonomous life: a basic income, education, etc. Regulation is thus justified if
excessive pricing would be harmful to the basic purpose of society, perceived as the
moral autonomy of the individual, gained through self-realization. The problem with
such a justification is that monopoly pricing rarely produces such extreme results. It
also does not differentiate between those whose basic rights would be affected by
monopoly pricing and those who would not, and thus the prohibition is not necessarily
an efficient tool for achieving this goal.
Finally, one might argue that the prohibition can be based on communitarian
notions of fairness, such as those advocated by Sandel. 28 Similar to other notions of
fairness, this approach rejects utilitarianism as the basis of social, or public justice.
Under this approach a constitutive conception of community describes a framework that
is distinguishable from, and in some sense prior to, the dispositions of individuals
within it. Enabling all members of the community to purchase similar goods or services
is then regarded as part of the communitarian ethos. Of course, equal opportunity
depends on much more than regulating excessive prices, but it is a step in the right
direction.

28
Sandel, Michael J. (1982), Liberalism and the Limits ofJustice, Cambridge: Cambridge University
Press.
 8

D Additional Underpinnings of the Prohibition

Several additional motivations for prohibiting excessive pricing may be relevant. The
signatories of the Treaty recognized that the emerging common market needed
companies of bigger size than those prevailing, to achieve optimal scales once barriers
to trade between Member States were reduced. 29 Yet they were less confident than their
U.S. counterparts that high prices will attract sufficient entrants to lead to lower prices.
Accordingly, price regulation was seen as necessary to protect customers until
competition develops more fully. This need was strengthened by the fact that the Treaty
did not directly apply to the acquisition of a dominant position by way of internal
expansion, 30 thereby justifying a stricter policy towards the consequences of market
power, once achieved. In addition, the rampant inflation after World War II experienced
by many European countries naturally led to a strong interest in an economic policy that
ensured lower prices. The fact that many dominant firms were created, controlled or
protected by national governments might also have played a role, as such monopolies
were not likely to be eliminated by market forces.
But more fundamentally, we should attempt to understand the prohibition in
light of the basic aim of the EU, to open markets all across the Community and create a
common market. The driving paradigm behind the Treaty was the substitution of age-
old rivalries with the merging of essential interests, to create a basis for a broader and
deeper understanding among Members. 31 Accordingly, the Treaty sought to achieve not
only economic efficiency and a free market economy, but also broader social and
political goals, most notably the creation of a single, integrated European market. 32 The
prohibition should thus be explored in light of these goals.
At first blush, the prohibition seems contrary to establishing an integrated
market. Regulation of price levels, as such, does not reduce barriers to trade. On the
contrary: it might slow down the natural self-correcting tendency of market forces if
incentives to enter new markets and gain profits are weakened. Yet it might be
understood as advancing the goal of a 'harmonious development of economic activities'
by reducing significant price disparities among consumers in different Member States.
It might be argued that it furthers the goal of integration by artificially creating
relatively similar conditions in all Member States: It prevents a dominant firm in one
market from charging prices significantly different from those charged by other firms
for comparable goods or services in other markets. The prohibition thereby broadens the
goal of non-discrimination to markets which are not in direct competition, to ensure that

29
Hawk, Barry. E. (1993), United States, Common Market and International Antitrust, Clifton, NJ, US:
Prentice Hall Law & Business, 829-830.
30
It only became clear in 1973 that such acquisitions come under the Treaty.
31
Preamble, Treaty Establishing the European Coal and Steel Community, April 18, 1951. See also
Gerber, David J. (1994), 'The transformation of European Community competition law?', Harvard
International Law Journal, 35 (1), 101-103.
32
Treaty, supra note 31, Art. 2 and Preamble; see also Brittan, Leon (1992), European Competition
Policy: Keeping the Playing-Field Level, London, UK: Brassey's, 3.
 9

all consumers are equally served. This consideration is echoed by the Advocate General
in Deutsche Post, defining fairness as guaranteeing equal living conditions to all EU
citizens. 33 Yet this possible reasoning does not explain the potential breadth of the
prohibition, which does not differentiate between firms that supply comparable goods or
services to those supplied elsewhere in the Community and those which do not. Such an
interpretation is also limited by the Treaty's requirement that the conduct must affect
trade between Member States.

E Political Economy Considerations34

It was with those different and sometimes conflicting notions of fairness that the
framers of the Treaty came to the negotiating table. Yet, even if they did not share the
exact concept of fairness in market relationship, fairness played an important role in
framing the Treaty.
Fairness is a highly flexible notion. Apart from a few core cases in which all
would agree that the conduct was 'unfair', it does not tie its enforcer to one concept of
market relations. Accordingly, it enabled the framers to create a general framework, to
be filled with different context as the law evolved. Indeed, the documents surrounding
the negotiations of the Treaty were not publicized for many years, as to not tie the
Commission and the Courts to the views of the negotiating teams.
In addition, fairness has legitimizing power- who would object to fairness in
market relationships? Thus, from a political economy point of view, it was much easier
to pass a law which promotes fairness. Furthermore, fairness is even more important in
a supra-national relationship than in a national one. Countries may be more willing to
concede their power to a central institution if it is perceived as operating under fair
procedures and applying fair rules. Fairness reduces fears of exploitation and abuse by
foreign companies. Moreover, whereas in a domestic context fears of abuse can be at
least partly addressed by redistribution through the tax system and by national
champion arguments, such arguments have less relevance in a supra-national context.
Fairness thus becomes much more important when one moves beyond an organic unity.
To sum, the prohibition has deep historical roots and may be based on different
ideologies, that lead to divergent standards for unfairness. Part III thus explores its
application in practice. But before doing so, conceptual challenges to the prohibition are
analyzed.

III Conceptual Challenges

The prohibition against excessive pricing has generated much criticism. Three main
conceptual challenges can be identified: markets are self-correcting; the prohibition is

33
Joined Cases C-147/97 and C-148/97 Deutsche Post AG v Gesellschaftfilr Zahlungssysteme mbH
(GZS) [2001] ECR 1-825, para. 26.
34
Gal 2007, supra note 7.
 10

unfair to the monopolist as it is tantamount to prohibiting monopoly; exploitative

practices serve an important dynamic role, thereby increasing welfare. 35
The first conceptual challenge rests on the market's self-correcting forces. Under
this view, competition is a dynamic process which sometimes enables firms to enjoy
significant market power, only to be eroded by market forces. High prices play an
important role in this process, as they signal to other market players that the market is
lucrative. The higher the price, the higher the incentive of rival firms to enter the
market. Such new entry, or the fear of it, constrains the monopolist's power to raise
prices. Competition is thus regarded as a dynamic process that may sometimes contain
the seeds of its own short-termed destruction but also for the revival of competition in
the long run.
The strength of this argument is connected to the potency of market forces.
When such forces are strong, the self-correcting forces of the marketplace will generally
prevent the long-term attainment and maintenance of monopoly power so long as the
erection of artificial entry barriers is prohibited. Yet when such forces are weak, the
market cannot be relied upon to correct itself swiftly. Accordingly, the belief in the
market's invisible hand alone cannot explain a strong rule of non-intervention. It is clear
that the market alone cannot prevent all forms of monopoly and some firms succeed in
gaining size and power without resorting to exclusionary techniques, due to market
failure or, alternatively, to significant comparative advantages over potential rivals.
Asymmetric information, network effects, scale economies and strategic behavior are
only some of the factors that may retard entry or expansion of competitors. At most, the
argument that the market will take care of itself is based on average tendencies:
Although the market can correct dominance in most cases, aberrations can and do
appear, and the implied time horizon for self-policing to be efficient may be
unacceptably long. Furthermore, even when barriers to entry are low, high prices might
not be effective in attracting new entries. When deciding whether to enter the market,
potential entrants will consider expected post-entry prices, rather than the high pre-entry
ones. As Lyons and Ezrachi and Gilo observe, post-entry the dominant firm is likely to
cut its prices, making new entry less profitable. 36 The self-correction argument against
excessive pricing regulation, standing alone, is therefore weak. Nonetheless, self-
correction considerations may limit the scope of the prohibition. Indeed, there seems to
be a growing consensus among commentators for such limitations. The Commission's
practice and statements might also be understood as recognizing the value of non-
intervention when the market can correct itself. 37

35
See, for example, Lowe, Philip (2004), 'DG competition's review of the policy on abuse of dominance',
Fordham Corporate Institute Speech, 23-24.
36
Lyons, Bruce (2007), 'The paradox of the exclusion of exploitative abuse', in Swedish Competition
Authority (ed), The Pros and Cons of High Prices, Sweden: Lenanders Grafiska, pp. 65-87; Ezrachi,
Ariel and David Gilo (2009), 'Are excessive prices really self-correcting?', Journal of Competition Law &
Economics, 5 (2), 249-268.
37
Lowe, supra note 35.
 11

The second argument raised against the prohibition relates to fairness. Since the
law prohibits 'unfair' prices, if excessive prices are not unfair, they should not be
prohibited. 38 Such fairness arguments relate to producers rather than to consumers. 39
Under this argument, once we view competition as a process in which firms are urged to
take part and compete, regulation of monopoly pricing constitutes an unfair denial of
earned rewards. Assuming that exclusionary conduct is prohibited, monopoly is a result
of the market mechanism. The law should thus not condemn the 'natural behavior of the
monopoly.' 40 This is strengthened by the fact that excessive pricing is treated as an
abuse.
Let us consider this argument more carefully. Considering that the monopoly
has a property right over its assets, which were gained legally, does it follow that it has
the right over the fruits of these assets, that is, monopoly profits? Alternatively, can we
base this right on the freedom to trade- the right to profit from one's position, which
was gained or maintained without resort to exclusionary conduct? The answer must be
negative. These rights do not stand on their own. Rather, they must be balanced against
the harm to consumers. It is thus doubtful that the prohibition can be expla~ned by a
simplistic property or freedom of trade argument, as it would lead to an outright
annulment of the competition laws. Moreover, the social contract argument explored
above includes the provision of property rights by governments, but not at any price.
The third argument, which points to the importance of monopoly pricing for the
dynamics of the market mechanism, is the strongest of all. This argument is based on
the well accepted premise that a static analysis does not reveal all potential economic
effects of monopoly pricing on social welfare, as it analyzes it at a given point in time
and disregards the dynamics that led to that situation or are created by it. Dynamic
analysis reveals the important role monopoly pricing plays in increasing welfare: it fuels
incentives to invest in cost-reducing or welfare-enhancing products, services or
processes that might enable firms to gain a comparative advantage and achieve a
monopoly position and enjoy its fruits. Limiting the profitability of monopolists that
achieved their position solely by fair competition distorts the incentives of firms to
become more efficient and innovative, although such efforts might sometimes be
wasteful. 41 The effect might be impaired innovative performances, lower levels of
research and development, and productive inefficiency. To use the U.S . Supreme
Court's famous dicta in Trinko: 42

38
The ALCOA case stands for the proposition that 'the Act does not mean to condemn the resultant of
those very forces which it is its prime object to foster: finis opus coronal. The successful competitor,
having been urged to compete, must not be turned upon when he wins.' United States v. ALCOA, 148 F.
2d 416 (2d Cir. 1945).
39
Ayal, Adi (2012), "Fairness in Antitrust: Protecting the Monopolist and Balancing Among Competing
Claims" forthcoming, Journal of Competition Law & Economics.
40 Id.
41
Posner, A. Richard (2001), Antitrust Law, Chicago, US: University of Chicago Press, 13-14.
42
Verizon Co11111111nications Inc. v Law Offices of C urtis V Trinka, LLP, 540 U.S. 398 (2004).
 12

Mere acqms1t10n of monopoly power, and the concomitant charging of

monopoly prices, is not only not unlawful; it is an important element of the
free market system. The opportunity to charge monopoly prices- at least for a
short period- is what attracts 'business acumen' in the first place; it induces
risk taking that produces innovation and economic growth.

This argument is essentially one of over-deterrence: Regulation will harm

markets in the long run, since firms fearing liability will not invest in risky but highly
profitable dynamic ventures, thereby chilling the competitive zeal. Welfare will be
harmed, since the market will not correct for over-deterrence, because a legal obstacle
in the form of excessive pricing regulation has been erected.
The question is, of course, how significant this disincentive effect is likely to be.
An important factor is whether a conduct is likely to lead to a dominant position. In
many investment decisions there is a low probability of achieving a dominant position
or securing it. Also, the disincentive should be balanced against counter-incentives, in
particular the risk that reduction of research and development efforts might increase the
danger of loss in market position. 43
Furthermore, the strength of the argument depends on the characteristics of each
specific industry and the width of the rule. For example, should the rule not prohibit
monopoly prices that result from dynamic efficiency, or those needed to create
incentives which offset static inefficiency concerns, the disincentive effect would be
reduced. Indeed, even a dynamic analysis of the market game might still justify
monopoly pricing regulation where the monopoly position was not achieved due to
comparative efficiencies or where it has been achieved in such a way but profits have
far exceeded those which were needed to create incentives to invest. To be sure,
economics recognizes that there are additional reasons, other than superior performance,
for the persistence of market power. Resultantly, dominance does not necessarily imply
prior or existing superiority on any absolute scale. While such cases might be relatively
rare, they may exist for long periods of time and enable the monopolist to reap
significant profits. 44
Accordingly, this challenge does not necessarily lead to the abolishment of the
prohibition, but rather might limit its scope in cases in which harm to dynamic
efficiency is not offset by static efficiency gains. It is noteworthy that the South African
Court of Appeals, which followed almost verbatim the United Brands test, added
another prong to it: 'is the charging of the excessive price to the detriment of the

43
Areeda, Phillip and Herbert Hovnkamp (2002), Fundamentals ofAntitrust Law, New York, US: Aspen
Law & Business, 58-62.
44
For exposition of cases where dynamic efficiency may not be harmed see, for example, Motta,
Massimo and Alexandre de Streel (2007), 'Excessive pricing in competition law: Never say never?' in
Swedish Competition Authority (ed.), The Pros and Cons ofHigh Prices, Stockholm: Konkurrensverket,
pp. 14-46; Roller, Lars-Hendrik (2007), 'Exploitative abuses', in Claus-Dieter Ehlermann & Mel Marquis
(eds), European Competition Annual; A Reformed Approach To Article 82 EC ,Oxford: Hait Publishing,
pp. 525-532, 528; Fletcher, Amelia & Alina Jardine (2007), 'Towards an appropriate policy for excessive
pricing', European Competition Annual, id, pp. 533-546.
 13

consumers?' 45 This requirement, if applied over the long run, limits harm to dynamic
efficiency.
To sum, a rule against excessive pricing may be supported on theoretical
grounds, at least one that is applied selectively. The question remains whether the EU
rule achieves its goals and, more fundamentally, whether abuse of a dominant position
is the appropriate instrument for achieving such goals. Part III below thus explores the
rules that have been developed, followed by Part IV which focuses on the practical
challenges that arise.

IV The Legal Rule- Excessive Prices as Abuse 46

Once established that monopoly pricing can amount to an abuse, the challenge is to
differentiate between pricing that is 'unfair' and that which is not. This Part analyzes
the legal tests adopted and applied by EU courts and the Commission, 47 as well as by
some national competition authorities and courts.

A Foundational Cases

Monopoly pricing was first squarely considered by the ECJ in General Motors (GM). 48
Belgian authorities delegated to automobile manufacturers the duty to inspect and issue
certificates of conformity to vehicles of their respective trademarks entering the country.
GM charged a high fee for this service to parallel importers of its cars into Belgium.
The fee was 2,400 percent (!) higher than the fee charged for such certificates for cars
sold by GM itself in the EU. The Commission found that the high fee constituted an
abuse. GM sued for annulment. The Court recognized that an abuse could include 'the
imposition of a price which is excessive in relation to the economic value of the service
provided. ' 49 This has become the standard for abuse by way of unfair high prices.
Interestingly, the German translation of Article 82(a) relates to 'unfitting' (in the sense
of disproportional) rather than to 'unfair' prices. This laconic statement, however, does
not give any indications as to benchmark for establishing a reasonable difference
between economic value and price.
United Brands 50 was the first case in which the ECJ provided some insights into the
character of the prohibition and the methodology for its application. The case focused
on prices charged by United Brands for Chiquita brand bananas in several EU countries.
The Commission alleged an abuse inter alia by way of excessive pricing. It reached its
45
Case 70/CAC/Apr07, Mittal Steel South Africa Limited and Others v Harmony Gold Mining Company
Limited and Another [2009] ZACAC 1.
46
Largely based on Gal 2004, supra note 2.
47
For a list of all eighteen Court and Commission decisions dealing with excessive prices up to 2008 see
Furse, Mark (2008), 'Excessive prices, unfair prices, and economic value: The law of excessive pricing
under A1ticle 82 EC and the Chapter II prohibition', European Competition Journal, 4 (1), pp. 59, 61.
48
Case 26/75 General Motors v Commission [1975] ECR 1367, [1976] I CML R 95.
49
Id. , para 12.
50
United Brands, supra note 9.
 14

decision by comparing the prices United Brands charged in Ireland to those charged in
other states, which were considerably higher. Its reasoning was that the price in Ireland
could be used as a reference point, since it could be assumed that United Brands would
not sell at a loss. The Court annulled the Commission's decision. While it recognized
that excessive prices can amount to an abuse, it found that the Commission did not meet
the burden of proof, as it did not consider all objective justifications for price
differentials between different markets. Nevertheless, it laid down the standard for
finding excessive pricing as follows: 51

Charging a price which is excessive because it has no reasonable relation to the

economic value of the product supplied would be such an abuse ... The questions ...
to be determined are whether the difference between the costs actually incurred
and the price actually charged is excessive, and, if the answer to this question is
in the affirmative, whether a price has been imposed which is either unfair in
itself or when compared to competing products.

United Brands thus further expands GMs standard that to be abusive a price should
have no reasonable relation to the economic value of the product supplied, by
introducing a two-pronged test:
1. The cost/price difference must be excessive;
2. The price must either be unfair in itself or when compared to competing
products.

The first prong can be understood as setting a benchmark against which the actual
price can be compared. The second introduces a methodology for assessing whether the
gap between the actual price and the benchmark is unfair. It emphasizes that to be
abusive, price must be proven not only to be excessive, but also unfair. As the analysis
below demonstrates, however, the ECJ did not always clearly differentiate the test's two
prongs.
The decision, while leaving the door open to other methodologies, endorsed a
comprehensive cost-price test as a first step towards finding abuse. Such a test requires
that a comparison be made between the sale price of the product and its production and
distribution costs. Yet the court acknowledged the difficulties in determining cost-price
differences. Production costs are especially difficult to determine when long-term
investments are made, risk-factors should be assessed, costs of complex corporate
structures with a wide product range or multinational production facilities must be
apportioned, or when intellectual property is involved. 52 Also, such a comparison might
reduce incentives for efficient cost savings.

51
Id., paras 250-2.
52
See, for example, Case C-298/83 CJCCE v Commission [1985] ECR 1105.
 15

United Brand also stands for the proposition that the burden of proof is on the
alleger to prove abuse, based on cogent evidence. 53 There, the Court found that the basis
for the calculation adopted by the Commission was open to criticism, and that any doubt
must benefit the alleged infringer.
United Brands, like other decisions that follow, provides no clear guidance as to
the permissive scope for profits. It is unclear where to draw the line between high and
excessive price, and what margin of profit a dominant firm should be allowed to charge.
The next case to reach the ECJ was British Leyland, which used a comparison of
prices of almost identical products sold by the monopolist to find abuse. 54 The case
involved prices charged for the issuance of type-approval certificates for cars, much
alike General Motors. 55 The ECJ affirmed the Commission's finding of abuse. The
Court used an intra-firm comparison as proof of abuse: importers of left-hand-driven
cars had to pay six times the amount paid by right-hand-driven cars, despite the fact that
certificates for conformity cost the same. The discriminatory nature of the charge
emphasized its unfairness, as it was charged in order to make intra-brand competition
between British Leyland suppliers difficult.
An alternative or cumulative test used by the ECJ to determine price excessiveness
or unfairness is the comparative market test, which compares the performance of one
undertaking with that of another operating in a different geographic market, where a
suitable comparator can be found. The test was first specifically applied in SACEM. 56
There, the operators of French discotheques complained that SACEM, the French
Copyright collecting society, was charging more for licenses of performing rights than
were similar collecting societies located in other Member States. The cases were
referred to the ECJ for a preliminary ruling on whether the prices charged qualified as
'unfair trading conditions' if 'that rate is manifestly higher than that by identical
copyright societies in other Member States.' The Court answered this question in the
affirmative, stating that: 57

'When an undertaking holding a dominant position imposes scales of fees for its
services which are appreciably higher than those charged in other member states
and where a comparison of the fee levels has been made on a consistent basis,
that difference must be regarded as indicative of an abuse of dominant position.
In such a case it is for the undertaking in question to justify the difference in
reference to objective dissimilarities between the situation in the Member State
concerned and the situation prevailing in all the other Member States.'

53
United Brands, supra note 9.
54
Case 226/84 British Leyland Pie. v Commission [1986] ECR 3263. The market definition suffered from
the sa me naw as in General !Vlotors, supra note 48.
55
General Mo/ors, supra note 48.
56
Case 395/87 J\l/inistere Public v Tournier [ 1989] ECR 2521; See also Joined cases 110, 241 and 242/88
l11 cazea11 v. SACEM ('SAC EM II') [1989] ECR 281.
57
SACEM I!, supra note 56, para. 25.
 16

Accordingly, an objective comparison of price levels between comparable markets

may serve as a basis for reviewing price excessiveness.
The case also stands for the proposition that when a dominant firm's charges are
appreciably higher than corresponding charges in other Member States, and where a
cost comparison has been made on a consistent basis, that difference will be regarded as
indicative evidence of abusive conduct, thereby reversing the burden of proof. 58 This
rule qualifies the one applied in United Brands: Once the plaintiff proves significant
profit margin differences, based on a 'consistent comparison', the burden of proof shifts
to the defendant.
SACEM is also interesting for its treatment of inefficiencies. The ECJ stated that if a
dominant firm's costs were higher than those of firms providing the same service
elsewhere, prices might be excessive, even if profits were not. Notably, the Court
rejected an argument that differences are justified because of higher operating expenses.
It stated that the possibility cannot be ruled out 'that it is precisely the lack of
competition on the market in question that accounts for... the high level of royalties.' 59 It
follows that an investigation into excessive prices may sometimes extend to a critical
analysis of the underlying cost structure of the dominant firm, in order to verify whether
prices may be attributed to excessive costs. Such an analysis may increase incentives for
dominant firms to reduce inefficiencies. How wide this inquiry should be - whether, for
example, it should include costs incurred in order to preserve or create government-
made barriers to entry that protect a monopolistic position- and whether courts can
indeed perform such an analysis, are yet to be addressed.
The comparative market method to determine price excessiveness was also
recognized in Bodson, 60 which involved allegations of excessive prices by French
providers of funeral services. The ECJ, in a preliminary ruling, pointed to the
comparative market test as a possible method for determining excessiveness. Bodson
seems to signal a more fundamental departure from the cost-price approach than
SACEM, since although in SACEM it was not possible to perform the cost-price
analysis, this is not necessarily true of funeral services. 61 Notably, the price comparison
test might be preferable to the cost-price comparison if the goal of the prohibition is
furthering integration.
While the sparse case law has established some methodological tools for
determining cost-price differences, it remains vague and unclear with regard to the tests
for appraising when an excessive price becomes unfair. In fact, only in British Leyland
the ECJ found an actual abuse by way of excessive pricing. Most additional cases in
which it acknowledged the possibility that such an abuse could be found - including

58
Id, para. 38. See also Case 78/70 Deutsch Grammophon v Metrosb-Grossmarkte GmbH and Co. [1971]
CMLR 631.
59
SACEM II, supra note 56, para. 42
6
°
61
Case 30/87 Bodson v Pompes Funebres [1988] ECR 2479.
Hordijk, Erik Pijnacker (2002), 'Excessive pricing under EC competition law: An update in light of
Dutch developments' in Barry Hawk (ed.), International Antitrust Law and Policy, New York: Juris
Publishing Inc.
 17

SACEM, Bodson, Ahmed Saeed52and GT-Link63 - were preliminary ruling cases in which
the ECJ was not required to set the price that would be deemed unfair. Accordingly,
there is still no sufficiently predictable and concrete definition of what constitutes an
unfair price.

B Commission Decisions: From Unfair Competition to Free Competition?

1 General

The Commission played an important role in many of the formative cases analyzed
above. Yet, it recognized the formidable difficulties in applying the prohibition. It
recognized difficulties in ascertaining the costs of a dominant firm. It also recognized
that there exist 'numerous obstacles to the establishment of a valid comparison between
companies,' 64 as a comparison would have to 'involve the same products with similar
quality and functionality, in the same volumes, and subject to the same terms and
conditions,' conditions which can rarely be proven. 65 Indeed, as Furse notes, there is no
published decision that was not overturned, in which the Commission found an abuse
based on a comparative method. 66 The Commission also recognized that applying the
prohibition would require it to act as price regulator with the task of setting the 'fair'
price level and monitoring compliance, tasks for which it is not fit. 67
The acknowledgement of such difficulties has led it to adopt a cautionary and
largely non-interventionist approach towards the application of the prohibition. 68 An
overview of the Commission's practice reveals that allegations and findings of
excessive prices were confined to those situations in which prices were grossly
exorbitant when compared to underlying costs or to price levels prevailing in
comparable markets. Only margins in the range of 100 percent or more have given rise
to interventions, and considerable margins were still allowed to exist even after the

62
Case 66/86 Ahmed Sa eed Flugreisen et al. v Zentrale zur Bekdmpfung [1989] ECR 803.
63
Case C-242/95 GT-Link v. DSB [ 1997] CMLR 60 I.
64
Furse, supra note 47, p. 66.
65
Case COMP C-2/37/76 1 Euromax/ IMAX, EC decision of25 March 2004.
66
Furse, supra note 47, p. 66.
67
See, e.g. Paulis, Emil (2007), 'Article 82 EC and exploitative conduct' in European Competition
Annual, supra note 44, pp. 515-524, at 515-517.
68
See, for example, European Commission (1975), Fifth Report on Competition Policy, point 3
('measures to halt the abuse of dominant positions cannot be converted into systematic monitoring of
prices.); see also European Commission (1994), XXIVth Report of on Competition Policy, point 207 ('The
Commission in its decision-making practice does not normally control or condemn the high level of
prices as such'); and European Commission (1997), XXVllth Report on Competition Policy, point 77. In
its response to the OECD roundtable on excessive prices, the Commission noted that 'addressing
excessive prices is an area of antitrust where limited and very cautious intervention is warranted,' and that
[t]he enforcement practice indicates that generally only cases concerning large deviations from
competitive levels are pursued. In view of the complexity of excessive pricing cases this is arguably a
wise use of enforcement resources. OECD Roundtable on Excessive Pricing, OAF/COMP (2011) 18, p.
317,321.
 18

Commission's intervention. 69 Furthermore, the Commission has been reticent about

taking decisions on unfair prices per se. In a period of more than forty years, it has only
reached six formal decisions on excessive pricing, most of which were essentially of
exclusionary rather than of exploitative nature. 70 In accordance with this approach, the
Commission focused primarily on facilitating market entry rather than on regulating
'unfair' prices per se. Emphasis has thus shifted from 'fair' competition to free
competition.
The case of Naloo 71 serves as an interesting example. There, the Commission
decided not to bring suit on grounds of excessive pricing against British Coal
Corporation (BCC), which enjoyed a statutory monopoly over the extraction and the
licensing of the extraction of unworked coal in the UK. The test for excessiveness
adopted by the Commission was that 'the royalty will not prevent efficient companies
[downstream] from making a profit [or] impose a significant competitive disadvantage.'
This test focuses on the effects on competition and competitiveness downstream, rather
than on the profits of the dominant firm. It is essentially similar to that adopted for
access to essential facilities, which focuses on non-discrimination rather than on
excessiveness.
It should be emphasised, however, that the reasons provided for the
Commission's approach are of a pragmatic rather than a fundamental nature. That is, if
there existed precision in the legal criteria for an unfair price, there would still be
justification for applying the prohibition more determinedly.
One major exception exist. The Commission initiated investigations over
excessive prices in cases of natural or statutory monopolies or in recently liberalized
economic sectors. 72 Most involved access and pricing issues that significantly affected
trade among Member States (e.g. cross-border mail charges or international roaming
services). In most cases the market was also monitored by national regulators that were
empowered to control prices. These investigations often resulted in informal settlements
and/or price adjustment by national regulators.

69
Hordijk, supra note 61.
70
General Motors and British Leyland focused on limitations to parallel imports; United Brands focused
on discriminatory pricing; Deutsche Post centered on limiting entry of competitors. Only the two Port of
Helsingborg decisions did not involve exclusionary conduct allegations. See Motta and de Streel, supra
note 44, p. 30.
71
Case T-89/98 Naloo v Commission [2001] ECR II 515. Although Naloo was not based on Article 82 of
the Treaty, but rather on similar prohibitions in the European Coal and Steel Community Treaty, it is
indicative of the Co mmission's approach
72
For examp le, Deutsche Telekom (1997), in XXVII Commission Report on Competition Policy, point 7;
Chalmers, Damian, Christos Hadjiemmanuil, Giorgio Monti & Adam Tomkins (2006), European Union
Law, Cambridge, UK: Cambridge University Press, p. 148; Vodafone and 02 in the UK, Press release
IP/04/994 (Jul. 26, 2004); T-Mobile and Vodafone in Germany, Press release IP/05/161 (Feb.IO, 2005);
Press Release, EU Comm'n, Commission Confirms Sending Statement of Objections to Standard &
Poor's 19 November 2009).
 19

2 Port of Helsingborg Decisions 73

In 2004 two important decisions were issued by the Commission in response to private
complaints by two fe1Ty operators that the Port of Helsingborg ('the Port'), which is one
of the biggest ports in Sweden and enjoys an exceptional location, imposed excessive
charges for port services. These decisions signal a more economics-based application of
the prohibition, in line with general developments in EU competition law.
The Commission's decision applies GMs foundational standard that in order to be
abusive the price should have no relation to the economic value, and United Brands
two-pronged methodology, which requires that the price be both excessive and unfair.
Importantly, the Commission rejected the argument that where a reasonable margin of
difference between prices and costs was exceeded, prices would be axiomatically unfair,
stating that: 74

'the Court made a clear distinction between, on the one hand, the question
whether the difference between the price and the production cost- the profit
margin- is 'excessive' and, on the other hand, the question whether the price is
unfair. Had it been otherwise, there would have been no reason for the Court,
once the first question has been answered in the affirmative, to proceed to the
question whether the price is unfair in itself or when compared to the price of
competing products.'
Accordingly, a 'comparison of prices and costs ... may serve as a first step in the
analysis (if at all possible to calculate). This in itself cannot be conclusive as regards the
existence of abuse.' 75 Rather, 'a distinction must be made between the assessment of the
difference between ... the profit margin and the assessment of whether the price is
unfair. ' 76
In determining whether the price was unfair when compared to other products, the
Commission recognized that the best comparison is with substitutable products
provided by competitors in the same market. 77 When such information does not exist or
cannot be reached, the Commission recognized two alternative methods. The first
involves comparing prices with those charged by the dominant firm for the same
product in another market. Such a method was applied, for example, in General Motors
and in United Brands. In the present case such a comparison actually showed that the
complainants enjoyed an advantageous contract. 78

73
Case COMP/A.36.750/D3 Scandlines Sverige AB v Port of Helsingborg [2006] 4 CMLR 22
(Scandlines); Case COMP/A.36.568/D3 Sundbusserne v Port ofHelsingborg [2006] 4 CMLR 23
(Sundbusserne).
74
Sundbusserne, supra note 73 , para. 127.
75
Sundbusserne, s upra note 73 , paras 128, 192; Scandlines, supra note 73, para. 214.
76
Scandlines, supra note 73 , para. 2 15.
77
'Yet if the firm s are genuinely competitors, why do consumers not substitute away from the allegedly
overpriced product?' Williams, Mark (2007) 'Excessive Pricing', in The Pros and Cons of High Prices,
supra note 44, p. 148.
78
Sundbrusserne, supra note 73, para. 155.
 20

The second method compared prices to those charged by other firms providing
similar products in comparable markets, as was applied in Bodson and SACEM. 79 The
Commission emphasized that a comparison of the prices requires that (a) the
products/services provided are comparable; and (b) the charging systems must allow a
meaningful comparison. 80 Yet it recognized the problems inherent in such comparisons,
given that 'the problem is to assure that the comparison is valid and that the result of the
comparison is meaningful. ' 81 While in some cases it might be possible to find a
substitute product or service provided by competitors on the same relevant market, this
was not possible in the case at hand. This was because, inter alia, 'each port differs
substantially from the others in terms of its activities, the size of its assets and
investments, the level of its revenues and the costs of each activity.' 82 These practical
problems of comparison led to the conclusion that it was not possible to draw any
conclusions from comparisons with other ports. 83
The Commission then analyzed whether the price is unfair in itself, recognizing
that the case law as well as the decisional practice of the Commission provide little
guidance on how to determine the 'economic value' of the product/service and its
reasonable relation to price.
Importantly, the Commission rejected a simple cost-plus approach, according to
which the fair price should be calculated by adding to production costs a profit
calculated as a percentage of production costs. 84 Nonetheless, it did not exclude the
possibility that a more sophisticated cost-plus approach may be used. Yet such an
approach would have to also relate to the economic value of the product, and not just its
production costs and should take into account, inter alia, the uncertainties involved in
determining production costs, and the cost of capital. 85
The Commission emphasized that the analysis must also take into account non-
cost factors, 'especially as regards the demand-side aspects of the product/service
concerned.' 86 This part of the analysis resulted from an inherent difficulty in the 'cost-
plus approach': it only takes into account the conditions of supply of the good, whereas
the determination of the economic value should also take account of other non-cost
related factors, especially as regards the demand-side aspects of the product/service
concerned. As the Commission explained, '[t]he demand-side is relevant mainly because
customers are notably willing to pay more for something specific attached to the
product/service that they consider valuable. This specific feature does not necessarily
imply higher production costs for the provider. However, it is valuable for the customer
and also for the provider, and thereby increases the economic value of the

79
Id., pp. 145-7.
80
Id., p. 149.
81 Id.
82
Id., p. 140.
83
Id., p.141.
84
Id., p. 197; Scandlines, supra note 73, para. 220.
85
Sundbrusserne, supra note 73 , paras 199-2; Scandlines supra note 73, paras 221-4.
86
Sundbrusserne, supra note 73 , para. 253.
 21

product/service. ' 87 It thus follows logically that even if the profit margin is high, the
conclusion should not necessarily be drawn that the price is unfair, provided that this
price has a reasonable relation to the economic value of the product/service supplied. 88
In applying such non-cost factors, the Commission found that ferry-operators
benefitted from the fact that the location of the Port met their needs perfectly. It
emphasized that 'the location of the port does not necessarily imply higher production
costs ... However, it is valuable for the customer and also to the provider, and thereby
increases the economic value of the product/service.' 89
In light of the above, the Commission considered that there is insufficient evidence
to conclude that the Port charges would have 'no reasonable relation to the economic
value' of the services ... provided to ferry-operators, when all the relevant (economic)
factors for the determination of this economic value are taken into account.' 90 Hence
port charges were not found to be unfair.
It is noteworthy that the KAN AL 5 decision of the ECJ of December 2008 also
considers the profits of the buyer, which are based on consumer demand, to be relevant
in the analysis of excessive prices. There the Court considered the question of whether a
remuneration model for music used in broadcasted shows, which was based on the
revenues of the broadcasters from such shows, constituted abusive exploitation. Its
answer was negative based, inter alia, on the fact that the royalties paid were based on
the value of the music for the broadcasts: "royalties ... must, in particular, be analysed
with respect to the value of that use in trade. In that connection, in so far as such
royalties are calculated on the basis of the revenue of the television broadcasting
societies, they are, in principle, reasonable in relation to the economic value of the
service provided. "91 A few comments on the economic value of the product. First,
although the Commission focused on it in the second part of the unfairness test (whether
'price is unfair in itself), it is also relevant to the first part (unfairness in relation to
competing products). Indeed, the General Motors' standard, which focuses on whether
the price is excessive in relation to economic value, is applicable to both parts of the test.
Accordingly, non-cost considerations are relevant to all cases. Second, unfortunately the
decision does not clarify what weight should be given to cost and non-cost factors in
determining the 'economic value' of the product. Indeed, while it takes seriously the
tests set by the ECJ, it increases uncertainty with regard to what constitutes an unfair
pnce.

87
undbrusserne, supra note 73, para . 205; Scand li nes, supra note 73, paras 226-7 .
88
Scandlin es, supra note 73, paras 228-23 1.
89
Sundbrusserne, supra note 73, para. 2 16.
90
Scandlines, supra note 73, para . 246.
91
Case 52/07 KANA L 5 Ltd el al v. Foreningen Svenska Tonsattares lnternationella Musikbyra (STIM)
upa [2008] ECR I-9275. The ECJ also required that such royalties be proportionate overall to the quantity
of musical works protected by copyright actually broadcast or likely to be broadcast, and that no other
method enables the use of those works and the audience to be identified more precisely without however
resulting in a disproportionate increase in the costs incurred for the managem ent of contracts and the
supervision of the use of those works .
 22

Third, and most importantly, a fundamental question is whose economic value is

measured. The difficulties that arise can be exemplified by the two following examples.
If measured subjectively, the fact that the product was bought indicates that the price did
not exceed the individual buyer's economic value. If taken to its logical conclusion, this
would suggest that axiomatically any price paid in a voluntary transaction is equal or
even lower than the product's economic value to the buyer, and thus no price is ever
abusive in itself. Yet this conclusion is correct only with regard to those who bought the
product, and not to those excluded from buying it because of the monopolistic price.
Alternatively, economic value can be measured objectively, as the value to most
consumers. The market price can serve as a valuable tool for determining this
benchmark. Yet in monopolistic settings without price discrimination it provides little
guidance. Also, it requires determination of what weight should be given to specific
circumstances, such as extreme changes in demand due to unforeseen events. Other
options for determining economic value also exist. Yet they all suffer from the basic
problem that we have no simple way of measuring value except by reference to the very
price we consider.

C Application of the Prohibition by National Authorities: A Revival?

While the Commission has been reluctant to apply the excessive pricing prohibition and
has adopted a narrow interpretation of the standard for it, not all national authorities
followed the same path. As a result, the rule against excessive pricing is sometimes
awakened from its dormant state. The Dutch in particular seem to largely reject the self-
restraint practiced by the Commission, adopting tools and practices usually used by
direct regulators. The British experience is also interesting in that it attempts to create
clearer guidelines for the prohibition, yet different courts have gone down different
paths. We briefly explore both.

1 The Dutch Approach

The Dutch Competition Authority has taken an interventionist stance in various cases
and has set several detailed principles for the determination of whether prices were
excessive or not. These principles go beyond those set by the Commission or the ECJ.
Pijnacker Hordijk argues that Dutch case law stands for the proposition that dominant
firms should generally offer their products on the basis of costs plus a modest markup
for profits. 92 In KLM, 93 for example, the Dutch authority introduced a 'normative'
framework to assess price levels: the normative weighted average costs of capital
(W ACC). The WACC represents the return of investment private investors may require
given their appraisal of the risks inherent in the business concerned. To calculate the
applicable WACC for use of internal capital, the authority used the capital asset pricing

92
Hordijk, supra note 61, p. 23.
93
Cases 273 and 906, Vereniging Vrije Vogel v KLM and Stewart v KLM (8 November 2000).
 23

model, which quantifies the risks relevant to a shareholder. For the purposes of the
investigation, the normative rate of return was calculated by setting a market risk
premium and a non-systematic rate for the industry.
This approach was further developed in Schiphol, 94 where it was stated that in
principle tariffs should be based on the 'total economic costs that an (efficient)
undertaking may attribute to the provision of its services. Economic costs are defined as
the sum of capital costs, depreciation, operational costs and taxation. This means that a
reasonable rate of return on invested capital may be included in the cost price. ' 95 The
reasonable rate of return consisted of a base rate plus a risk mark up. The base rate was
set equal to the interest on long-term state issued bonds. The risk markup depended on
the degree of risk of the specific business activity. Similar principles were applied in
several additional cases. 96
The approach adopted by the Dutch competition authority is thus much less self-
restrained that the EU approach. It resembles direct price regulation more than
competition law and has come under criticism, inter alia, for limiting incentives of firms
to invest. 97

2 The British Approach

In 1999 the UK Office of Fair Trading ('OFT') issued guidelines for the application of
the excessive pricing prohibition. 98 The guidelines state that 'perhaps the most obvious
form of abuse is where a dominant undertaking charges prices higher than it would do if
it faces effective competition.' 99 At the same time, it is recognized that 100

There may ... be many objective justifications for prices that are apparently
excessively high. First, in competitive markets prices and costs vary over time
and there are likely to be periods when high profits can be earned. This is an
impo1iant part of the competitive process since it can encourage increased output
or entry to a market. Secondly, undertakings in competitive markets might be
able to sustain high profits for a period of time if they are more efficient than
their competitors. This might occur if an undertaking has developed lower-cost
techniques of production, supplies higher quality products or is more effective at

94
The inquiry into Schiphol airport's costs was prompted by a request of the Ministry of Transportation,
with a view to the intended privatization of the airport. The Dutch Competition Authority was requested
to assess Schiphol ' s tariffs under the provisions of the Competition Act. Rep ort on Schiphol 's Tariffs,
2001.
95 Id.
96
There are at least ten cases dealing with excessi ve pricing issues. Other major cases include Case 130,
Essers/NV Telekabel (I 3 April 1999) on the pric ing of cable T V services; Case l 3, PTT Post ( l l
November 1998) on the pricing of postbox services.
97
See, fo r example, Horclijk, supra note 61.
9
k OfT ( 1999), Guid elin es in Relation to Chapter lJ Prohibition Under the UK Competition Act.
99
/cl., paras 4 .7.
100 Id.
 24

identifying market opportunities .... To be an abuse, prices would have to be

persistently excessive without stimulating new entry or innovation.
The UK approach thus attempts to inject the excessive pricing prohibition with a
dynamic economic analysis and leaves a relatively small scope for the application of the
prohibition. Yet it is noteworthy that it seems that the dynamic considerations relate
only to the specific market, and not to other, affected markets.
To date, the OFT has only brought one case of excessive pricing, the NAPP case,
which involved both exclusionary and exploitative behavior. 101 An excessive price was
defined as a price 'above that which would exist in a competitive market and where it is
clear that high profits will not stimulate successful new entry within a reasonable
period.' 102 It also recognized that any assessment must take into account ex ante
certainty. The methods for determining whether prices were above competitive levels
were price comparisons between the price charged by NAPP to that charged by its
competitors and a price comparison between prices charged by NAPP to different
consumer groups. The decision was upheld by the Competition Appeals Tribunal. 103
Yet in Attheraces the Court of Appeals took a more limited path. 104 The case
involved a private suit regarding the price for the sale of pre-race data collected by the
British Horseracing Board (BHB), which held a monopoly over horse races in the UK,
to a broadcaster that used such data to derive profits from betting. The decision
resembles, in many ways, the EU Commission's Port of Helsingborg decisions.
The lower court found that BHB charged an excessive price. It reached its
conclusion by defining the economic value of the product as equal to its competitive
price. 105 This approach was rejected by The Court of Appeals, noting that it 'begs a
fundamental question: what constitutes economic value?' 106 The Court emphasized that
'exceeding cost + is a necessary, but in no way sufficient, test of abuse.' 107 Rather,
demand-side considerations must be added to the equation: More weight should be
given to the 'relevance of the value of the pre-race data to [the consumer] in
determining the economic value of the pre-race data.' It cited with approval an earlier
decision, in which it commented that '[i]n determining whether a price is unfair it is
necessary to consider the impact on the end consumer and all of the market conditions.
In a case where unfair pricing is alleged, assessment of the value of the asset both to the
vendor and to the purchaser must be a crucial part of the assessment.' 108

101
Case 1001-1/1/01 Napp Pharmaceutical Holdings Ltd. v. Director General of Fair Trading, UK
Competition Commission Appeals Tribunal (15 January 2002). For criticism of this case see, for example,
Evans, S.D. and A. Jorge Padilla (2005), 'Excessive prices: Using economics to define administrable legal
rules', Journal of Competition Law and Economics, 1 (1), 97-122.
102
Napp, supra note 100, para. 203.
103 Id.
104
Attheraces Ltd. v. British Horseracing Board Ltd et al. [2007) UKCLR 309.
10s Id.
106
Id., para. 204.
107
Id., para. 209.
108
Id., para. 208; BHB Enterprises pie v Victor Chandler (International) Ltd. [2005) UKCLR 787, para.
56.
 25

Given that both parties to the dispute were private firms, the question stripped
down to its essentials involved the mere distribution of profits between the parties. As
the Court observed, 'the case is about who is going to get their hands on ATR's
revenues from overseas bookmakers.' 109 Given that 'the principal object of [Article 82
EU] is the protection of consumers ... not of business competitors', to find an abuse it
was necessary to show that competition in the market was being distorted by the
dominant firm's pricing scheme. Since such an effect could not be shown, the Court
rejected the excessive pricing argument. Observe that this justification is a competition-
based one and limits the scope of the prohibition significantly.
The Court also emphasized institutional limitations in deciding excessive pricing
cases, noting that such cases 'present the Court with a range of factual and legal
problems of a kind which even specialist lawyers and economists regard as very
difficult', which are exacerbated in light of 'the adversarial procedures of an ordinary
private law action, the limited scope of expertise in the ordinary courts and the
restricted scope of legal remedies available.' 110
It is interesting to note that in its recent response to an OECD roundtable on
excessive pricing, the OFT concluded that '[i]n order to reduce deterrence, firms should
not face fines for excessive pricing, and should not face the risk of private damages
actions in respect of such behaviour.' Rather, [c]ompetition authorities should seek
alternative remedies to price regulation, which are designed to address demand side
problems and so activate competition in the market.' 111

To sum, while the ECJ has set general principles for the application of the
prohibition, it is still unclear when exactly a price becomes unfair. Resultantly, different
decision makers have gone down different paths.

V A Critical Analysis of the Prohibition

APractical Challenges

In designing socially optimal legal rules, not only conceptual obstacles but also practical
limitations in the decision-making process should be taken into account. Accordingly,
an optimal legal rule is not necessarily one that would lead to a hypothetically efficient
outcome, but rather one which maximizes social welfare under realistic assumptions of
enforcement, to ensure that its benefits outweigh its costs of application in practice.
Decision theory performs such a balance. 112 For every type of conduct, the
question is asked which legal rule likely maximizes welfare, based on the balance

109
Allheraces, supra note 103, para. 214.
110
Id., paras 3-7.
111
UK response to OECD questionnaire on excessive pricing, discussed supra, note 68, p. 296 .
112
See, for example, Beckner, C. Frederick and Steven C. Salop (1999), 'Decision theory and antitrust
rules', Antitrust Law Journal, 67, 41, 43-45; Popofsky, S. Mark (2006), 'Defining exclusionary conduct',
Antitrust Law Journal, 73, 435-482; Popofsky, S. Mark (2008), 'Section 2, safe harbors, and the rule of
reason', George Mason Law Review, 15 (5), 1265-1296.
 26

113
between benefits from its application and legal process and error costs. The
assessment is performed at a systemic level, to ensure that the rule is optimal overall. 114
If the expected net harm of false condemnation exceeds the expected net harm of false
acquittal, then the liability standard should tilt against a finding of liability, and vice
versa.
Legal process costs include, inter alia, the costs of gathering factual data (e.g.
whether a certain conduct has occurred) and economic data (e.g. the effects of such
conduct on social welfare). Error costs arise from imperfect information or its erroneous
analysis. Errors fall into two categories: false positives, which arise when the rule is
applied too widely and captures conduct which does not harm social welfare; and false
negatives, when the rule is applied too narrowly and does not capture those types of
conduct which harm social welfare. Each type of error creates two types of costs: error
costs in the particular case and, often more importantly, an effect on future behaviour by
chilling beneficial conduct or opening the (legal) door for harmful conduct. 115
The probability of error is affected, inter alia, by the decision makers'
characteristics, especially their ability to analyze and understand the information before
them. In their seminal article, Ehrlich and Posner noted that rules are directed to two
main groups of decision makers: regulatory institutions and market players. 116 In
competition law, the relevant regulators are the competition authorities and the courts.
The legal rule should thus be designed to take into account their institutional
characteristics, which affect their decision-making process. The second group, market
players, make their decisions based, inter alia, on their understanding of the relevant
legal rules and their applicability to their circumstances. In designing the legal rule, its
foreseeable effects on both groups should be taken into account.
Let us apply this decision-theoretic methodology to the prohibition of excessive
pricing. The potential benefits of the prohibition, at least in its truncated form, have
been elaborated above. The analysis below attempts to perform a realistic assessment of
its costs. The main issue is whether decision makers can distinguish fair from unfair
prices, and what are the costs involved.
Let us first focus on the information costs involved. The higher the cost of
information required and the more difficult it is to gather ex ante, the lower the
justification for the prohibition. Costly information increases the direct costs of
applying the rule. But more importantly, the costlier the information and the more
difficult it is to obtain, the higher the potential harm to dynamic efficiency, since it
becomes costlier and more uncertain for potential investors to ensure that the fruits of
their investment would not be regarded as abusive.

113
Carlton, Dennis and Michael Salinger (2007), 'Economic analysis of competition practices in the EU
and the U.S.: A view from chief economists', Competition Policy International, 3 (5). Beckner and Salop,
supra note 111, p. 45.
114
Popofsky 2006, supra note 111, p. 437.
115
Beckner and Salop, supra note 111, p. 45
116
Ehrlich, Isaac and Richard A. Posner (1974), 'An economic analysis of legal rulemaking', Journal of
Legal Studies, 3, 257- 286.
 27

To apply the prohibition, one needs to determine, inter alia, (1) the profit
margin: the difference between the prices of the dominant firm and its costs; (2) the
threshold above which the price will be deemed to be unfair, since it bears no
reasonable relation to its economic value.
While it is usually easy and inexpensive to determine the prices charged by the
dominant firm, 117 determining its costs and profitability often requires a complex, fact-
specific, in-depth inquiry. 118 As noted above, it necessitates, inter alia, apportioning
costs which are shared over several products/services/markets, 119 valuation of assets and
research and development expenditures, and assessing the appropriate cost of capital. 120
Alternatively, it requires an in-depth comparison to a relatively similar supplier. Such
an analysis requires multi-factored and often costly data of the conditions of the two
suppliers. As the Commission stated, the comparison should include 'the individual cost
structure of the companies (possible economies of scope and scale, existence of cost
efficiencies), the level of their investments, how these are financed as well as internal
decisions as regards the remuneration of the shareholders.' 121 Gathering information
regarding cost is also subject to information asymmetry problems. The fact that the
regulator is one step removed from the operations of the productive entity necessarily
limits his access to the required information and his ability to evaluate such information.
The second prong first requires determination of the economic value of the
good, taking into account supply and demand factors, including the unique
characteristics of the asset for the consumer. As noted, assessing economic value is no
easy task, as even its definition is unclear.
But the most difficult task is determining the fair ratio between price and
economic value. This raises a host of conceptual issues, which involve a value judgment
based on the socio-economic ideology one holds. Should the law be based on
distributional issues? should it take into account effects on dynamic efficiency, and if so-
to what extent? Should it focus on creating a level playing field in the market? As
elaborated above, the case law has so far been highly ambiguous, a fact which creates
· 'fi1cant uncertamty.
s1gm · 122

Even if we could ascertain the correct ratio, applying it in practice might be

extremely difficult. For example, if the goal is to further distributional justice while
ensuring that dynamic efficiency is not negatively affected, determining the effect of the

117
Difficu !ties might nonetheless arise when the price of several products or services is coupled.
118 See also OECD, supra, note 68, p. 63-71.
119
See, for example, United Brands, supra note 9, para 254. In some situations, in which a significant
change in market conditions introducing competition has occurred, such an analysis might be relatively
easy. Ezrachi, Ariel and David Gilo (2009), 'The darker side of the moon: Assessment of excessive
pricing and proposal for a post-entry price-cut benchmark,' in Ariel Ezrachi (ed.) Reflections on Its Recent
Evolution, Article 82 EC, Oxford, UK: Hart Publishing. Yet such situations are rare.
120
See, for example, Evans and Padilla, supra note 100; United Brands, supra note 9; OFT Guidelines,
2. I 4. The evaluation should cover not only marginal costs but also fixed costs of production, to ensure
that the firm is not operating at a loss.
121
Sundbusserne, supra note 73, paras 155 and 157; for additional problems see, for example, Williams,
supra note 77, p. 150.
122
Evans and Padilla, supra note 100.
 28

maximum price allowed to a monopolist in a specific market on the dynamic incentives

of firms in other markets is costly and highly fact-specific. The costs of administering a
rule that attempts to seriously evaluate such effects are extremely high due to the
specialist knowledge and the steep learning-curve needed to regulate pricing of each
specific firm or industry. As O'Donogue and Padilla note: 123

Any definition of what constitutes a reasonable profit margin must take into
account a whole range of factors, including, e.g. economies of scale, sunk
costs and risk. Profit margins differ among industries, and high profit
margins may reflect the required compensation for the risk associated with
large upfront costs or research and development expenditure .. .in many
industries, there will simply be no reliable way of approximating a 'reliable'
profit, in particular if this involves an analysis of items such as the
intangible value of assets and any relevant opportunity cost.
These difficulties translate into error risks. The more difficult it is to obtain and
analyze the information, and the less clear it is what kind of information is needed, the
higher the probability of errors. Indeed, given that the prohibition is not based on a
manageable, understandable, and reasonably administrable set of rules, uncertainty and
the resultant risk of error are likely to be high for both false positives and false
negatives.
The high risk of false positives translates into high error costs. Most importantly,
the cost of chilling dynamic efficiency is equal to the loss in consumer welfare resulting
from non-introduction of valuable goods and services for which there is potential
demand. As Evans and Padilla note, such costs are likely to be large in dynamic
industries where firms compete for the market by launching new products and services,
in emerging industries where firms are contemplating whether to start up, and in mature
industries where firms may upgrade their services. The cost is bound to be highest in
industries where trial and error is common, in which the cost of experimentation is high,
but the return to success is potentially huge. 124
The price of false positive errors may well be higher than false negatives. 125 This
is because, as the theoretical and empirical literature suggests, many high prices benefit
welfare. This implies that the social costs associated with false positives are significant.
Mistaken inferences and the resulting false condemnations 'are especially costly,
because they chill the very conduct the antitrust laws are designed to protect.' 126
Furthermore, the possibility of false positives harms dynamic efficiency across
123
O'Donoghue, John and Jorge Padilla (2006), The Law and Economics ofArticle 82, Oxford, UK; Hart
Publishing, p. 615, emphasis added.
124 Id.
125
This argument was strongly made by Easterbrook in his seminal article: Easterbrook, Frank (1984),
'The limits of antitrust', Texas Law Review 63, 1. Yet even if Easterbrook overstated the case, leading
scholars have recognized a weaker assumption. See, for example, Evans and Padilla, supra note 100, p.
83; Motta and de Streel, supra note 44, p. 20. See also OECD (2011), Competition Committee, Excessive
Prices: Background Paper, DAF/COMP/WP2, p. 7.
126
Trinka, supra note 42, p. 414.
 29

industries and markets due to their chilling effect, whereas false negatives affect only
the specific market and can often be corrected, in the long-run, by market forces.
Together, these observations suggest that monopoly pricing ought to be governed
by substantive rules that give firms significant pricing discretion without fear of
liability.127 Indeed, the height of error and information costs relative to the benefits of
the prohibition have led many leading scholars to the conclusion that monopoly pricing
should not be prohibited as an abuse. Evans and Padilla argue that a per se legality rule
should be applied, except in rare cases. 128 Popofsky has reached a similar conclusion: 129

[T]he costs of false positives associated with condemning monopoly

pricing under any test other than per se legality would be massive. Courts
are ill-equipped to regulate price, and firms likely would have little
guidance as to what price is ' reasonable.' Consumers obviously are harmed
in the short term by the charging of monopoly prices. But the law tolerates
potential 'false negatives' here ...because the costs of correcting such
'enors' including deterring other firms from innovating, are just too high.
Whish similarly argues that'[t]here are persuasive arguments against direct control
of prices under competition law.' 130 His conclusion rests on dynamic considerations as
well as the formidable difficulties of translating the prohibition into sufficiently realistic
legal test which would enable a firm to know on which side of legality it stands. 131
Korah finds the prohibition ' disturbing.' 132
Even scholars that do not argue for a no liability rule recognize its enforcement
problems. Bellamy and Child recognize 'the considerable difficulties of establishing this
abuse. ' 133 Faull and Nickpay acknowledge that 'it has proved to be a notoriously
difficult abuse to prosecute.' 134 Monti argues that 'there is no workable policy to
identify and penalize excessive pricing.' 135 Akrnan and Garrod argue that the current
rule is not well defined, suffers from ex ante certainty and harms welfare. 136 Ezrachi and
Gila recognize that the prohibition needs 'to be assessed on a case-by-case basis to
determine the merit in intervention' . 137 Indeed, as Furse notes, '[i]t is difficult to find
any unequivocal support of the policy of dealing with excessive pricing under
121 Id.
128
Evans and Padilla, supra note I 00.
129
Popofsky 2006 , supra note 11 I , p. 451.
130
Whi sh, Ri chard (200 I), Co mpetition Law, Oxford: Oxford University Press, p. 709.
131 Id.
132
Korah, Valentine (2007), An Introductory Guide To EC Competition Law And Practice , Oxford, UK;
Hart Publishing, pp. 202-203.
133
Bellamy, Christopher and Graham D. Child (2008), European Community Law of Competition,
Oxford: Oxford University Press, 10-104 to 10-110.
134
Faull, Jonathan and Ali Nickpay (eds) (2007), EC Law of Competition, Oxford: Oxford University
Press, 4.365.
135
Monti , Giorgio (2007), EC Competition L m11, Cambridge, UK: Cambridge University Press, p. 219 .
136
Akman, Pinar and Luke Garrod (2011), 'Wh en are excessive prices unfair?', Journal of Competition
Law & Economics, 7(2), 403-426.
137
Ezrachi , Ari el and David Gilo (2010), 'Excessive pricing, entry, assessment, and Investment: Lessons
from the Mittal litigation', Antitrust Law Journal, 76 (3), 873-899.
 30

competition law in the literature.' 138 This is also the situation around the world. Indeed,
the OECD in its report on excessive pricing has concluded that 'interventions by
competition authorities to deal with [excessive prices] directly are considered
controversial at best.' 139
To sum, a policy that could identify and punish high prices that harm social
welfare without error would increase social welfare unambiguously. Unfortunately,
under the current case law it is unclear what the appropriate benchmark is in most
circumstances. Moreover, even if an appropriate benchmark for such a price could be
defined, it would still remain unclear how one could, on the basis of the information
typically available to policy makers and industry analysts, determine with precision
whether prices are above, at, or below the competitive benchmark in practice. 140
Furthermore, decisions are likely to be inconsistent and thus unfair.
Yet, while the existing rule suffers from the limitations elaborated above, it does
not close the door on a more efficient rule, should one be available. 141 Several leading
scholars have, in fact, suggested carefully calibrated rules which apply limiting
principles to ensure that the prohibition is enforced only where strictly necessary. Such
suggestions generally add the following conditions to the prohibition: (a)market
protected by high and non-transient entry barriers; (b) one firm enjoys considerable
market power (super-dominance); (c) investment and innovation play a minor role in
profitability. 142 The efficacy of such a rule depends on information and resultant error
costs. Should it be difficult for firms to determine a-priori whether their conduct will
come under the rule (especially since in many cases market power may result from a
combination of factors), the chilling effect would still remain.

B Institutional Considerations
Assume that the rule that identifies excessive pricing is capable of drawing a bright line
between fair and unfair monopoly pricing. The question still arises whether it is optimal
to enforce it through the abuse of dominance prohibition. Legal rules must be sensitive
to the attributes of the institutions that enforce them, the information and analytical
capabilities these institutions possess, the uncertainties they must confront in the
diagnosis and mitigation of anticompetitive behavior and market structures, and the

138
Furse, supra note 4 7.
139
OECD, supra note 123, p. 4.
140
Evans and Padilla, supra note 100.
141
See, for example, Akman and Garrod, supra note 134.
142
See, for example, O'Donoghue and Padilla, supra note 121, p. 638; Motta and de Streel, supra note 44.
(intervention should be limited to cases characterised by (a) high and non-transitory barriers to entry; (b)
monopoly or near monopoly resulting from exclusive or special rights; (c) no effective way to eliminate
entry barriers; (d) no sector specific regulators); Roller, supra note 44 ((I) high entry barriers; (2) the
market is unlikely to self-correct; (3) dominant position due to exclusionary abuse or government actions;
(4) there is no regulator or there is a regulatory failure, and (5) no (structural) remedy is available). For
more lenient proposals see, for example, Paulis, supra note 67. For an overview of such proposals see, for
example, OECD, supra note 123, pp. 28-34.
 31

associated costs of errors implied by alternative legal rules and remedies. 143 Several
concerns can be raised in this respect.
Determining whether monopoly prices are unfair involves the regulator in an on-
going and complicated direct price regulation function. Competition agencies may be
ill-equipped to perform the regulation through the abuse of dominance prohibition.144
Such agencies mainly focus on the competitive process and not in directly determining
its outcomes. They therefore lack the skills and adequate industry-specific expertise to
engage in in-depth and on-going price regulation. This concern is exacerbated where the
final decision is subject to non-specialized courts. 145
But more importantly, the abuse prohibition applies ex post rather than ex ante,
thereby significantly increasing the risk of a would-be dominant firm that the fruits of
his success could be taken away. As the OECD report states, ' [a]ny legal rule that seeks
to prohibit excessive prices should be reasonably capable of ex ante application by a
dominant firm at the time it formulates its pricing policy. Clearly this is much more a
concern for interventions based on competition aw than for regulatory approaches.' 146
Where the line that separates fair from unfair prices is unclear, firms must bear the risk
that their price will be regarded ex post as unfair, thereby distorting market conduct.
Yet the biggest institutional risk involves the possibility that excessive pricing
would become a basis for private damage suits. 147 This risk rests on two interconnected
facts. First, that courts do not possess the institutional capabilities for performing the
in-depth market-specific analysis needed to determine whether a price is unfair. Second,
and most importantly, courts would have to determine at which exact point along the
price curve the line between fair and unfair prices is crossed. This is needed because
damages are calculated based on the difference between the 'fair' price and price
actually charged. Determining such a bright line is much different from determining
whether the price charged has, at some point, crossed such an invisible line, as courts
and agencies have so far been required to determine. This regulatory task is much more
prone to error and thus cautions against the application of the prohibition in such
settings.

VI Conclusion
The excessive pricing prohibition is one of the most interesting yet controversial
competition law prohibitions. It is unique in that it deals with the direct effects of
significant market power rather than with the competitive process. As shown, the
prohibition has strong and long historical and ideological roots.

143
Joskow, P. L. (2002), 'Transaction Cost Economics, Antitrust Rules, and Rem edies', Journal of Law,
Economics, and Organization, 18 (1 ), 95-116.
144
See, for examp le, Fur e, supra note 47 ; OECD, supra note 123 , pp. 22-6 (also raising potential
legitim acy prob lems when the task is performed by the competition authority) and sources cited therein.
145
OEC D, supra note 123 , p. 25 .
146
id., p, 22 .
147
See also Fletcher and Jardine, supra note 44.
 32

This chapter attempted to provide both a descriptive and a critical analysis of the
prohibition. In particular, in focused on three sets of issues: conceptual challenges
regarding the ideological roots of the prohibition which define unfairness; practical
issues with regard to the suitability of the test chosen in light of the ideological roots, in
particular what determines 'economic value' and whether it bears a 'reasonable relation'
to prices; and institutional issues- is the abuse prohibition the right regulatory vehicle
for applying it, especially given planned changes in the remedial toolbox by adding
private actions.
 The Social Contract at the Basis of Competition Law:
Should we Recalibrate Competition Law to Limit Inequality?

Michal S. Gal 1

Forthcoming, Competition Policy: between Equity and Efficiency

(Lianos and Gerard eds., Cambridge University Press, 2017)

"The third law of nature is also a source of justice for society, in that
covenants and contracts between people must be honored if a stable
system of government is to be established". 2

Thomas Hobbes, Leviathan

Abstract
Competition law constitutes an important part of the social contract that stands at the basis of
market economies, which conceptualizes the relationship between the state and its citizens, as
well as among citizens, and legitimizes state action. This article seeks to unveil the social contract
that stands at the basis of competition laws by shedding light on the assumptions at its basis. It
then explores whether these assumptions indeed further the goals of the social contract, namely
total and individual welfare. In particular, in light of recent challenges to the welfare effects of
market economies, this short article seeks to determine whether equality and inclusive growth
goals should play a more pronounced role in the competition laws of developed jurisdictions, and
if so, by what means.

Table of content
I. Introduction
II. The Social Contract and Inequality
Ill. Competition law and Inequality: The basic dilemma
IV. Furthering equality in developing jurisdictions
V. The Dilemma : Inclusive Growth Goals in Developed Jurisdictions
A. Equality of Opportunity
B. The market will reduce most instances of inequality in the long run
C. Inequality is inherent to competition
D. Competition law is not the correct tool
VI. The Role of Competition Law in Limiting Inequality

1 ProfessorandDirectorofthe Forum for Law and Markets, University of Haifa Facultyoflaw. Many thanks to Bill
Kava ci c, as wel I as participants atthe Symposium in honor of El ea nor Fox in Brussels, for most helpful discussions
on the subject, and many thanks to loannis Lianosforexcellentcomments on an earlier draft.All omissions and
errors remain the author's.
2 Thomas Hobbes, Leviathan (first published 1651, Penguin 1985).

1
 A. When Fine-tuning might be required
B. Some Suggestions
VII. Conclusions

I. Introduction

The social contract is a voluntary agreement among individuals by which organized society comes
into being and is vested with its rights. While the social contract is a metaphor, the idea at its
basis has great value, as it serves to conceptualize the relationship between the state and its
citizens, as well as among citizens, and it creates the basis for the legitimacy of state action.
Indeed, this enormously influential metaphor has served as the basis for one of the most
dominant theories of moral and political theory of modern history.

The idea of a social contract appears in the writings of Socrates, and was developed in the modern
era by philosophers such as Thomas Hobbes, John Locke, Jean-Jacques Rousseau, John Rawls,
David Gauthier and others. 3 While each philosopher suggested a somewhat different basis for
the social contract, their theories all share several common traits: men voluntarily choose to
submit to the authority of a state; they do so in order to be able to live in a civil society, which is
conducive to their own interests; the state, once formed, is directed towards the common good,
understood and agreed to collectively. Most philosophers also agree that mutual security and
the protection of social and individual welfare stand at the basis of the social contract.

Competition law, like any other form of governmental regulation, is part of the social contract.
In market-based economies it constitutes an important element of the socio-economic portion
of this contract, which is focused on increasing total and individual welfare. It does so by ensuring
that, where possible, privately erected artificial barriers to competition are prohibited. To be
sure, the conceptions of total and individual welfare may differ even among market economies.
For example, jurisdictions may give different weight to total over individual welfare in the short
run, or they may value dynamic efficiency more than allocative efficiency. They may also give
more value to considerations of equal access into markets over lower prices. 4 Yet such economies
all share a core assumption that the total and individual welfare of members of society (rather
than, for example, a dictator), stands at the basis of the socia I contract.

Accordingly, for the social contract to work well, at a minimum its conditions should ensure that
total welfare will be increased, at least in the long-run. Indeed, competition law is based on the
assumption that competition can reduce prices and increase all types of efficiency, including
allocative, productive and dynamic efficiency. The protection of competition also serves non-

3
See, e.g., Celeste Fri end, 'Socia I Contract,' INTERNET ENCYCLOPEDIA OF PHI LO SOPHY
http://www.iep.utm.edu/soc-cont/
4 See, e.g., Dina L. Waked, 'Antitrust Goa Is in Developing Countries: Pol icy Alternatives and Normative Choices'

(2014) 38 SEATTLE U. L. REV. 945; Ariel Ezra chi, 'Sponge', 5(1) JOURNAL OF ANTITRUST ENFORCEMENT 49 (2017) .

2
economic goals such as dispersing power and opportunity, reducing socially harmful political
effects, and supporting democracy and freedom of speech. 5

Furthermore, the social contract should ensure that individual welfare is also increased, at least
in the long-run. It is assumed that competition law does so in several cumulative ways. Most
basically, consumers enjoy better and cheaper products and services, thereby increasing their
ability to better fulfill their individual preferences. 6 Of no less importance, Competition can
positively affect social mobility and equality of opportunity of members of society. By lowering
artificial barriers to entry, potential competitors will be able to enter or expand in the market,
compete on merit, enjoy (at least partially) the fruits of their success . Indeed, social mobility is a
likely and expected outcome of competition. This is due to the fact that people with good ideas
or good managerial skills do not necessarily come from any particular part of society. Moreover,
those from lower socio-economic classes often have a stronger motivation to succeed
economically and climb up the ladder, thereby leading them to invest more effort in the market
game than those who treat their economic benefits as natural.

Of course, competition is not a panacea; it does not work well where significant market failures
exist, such as information asymmetries, natural monopolies, negative externalities, free riding or
collective action problems. Furthermore, competition does not attempt to solve all welfare
issues . Rather, it is part of a broader set of governmental instruments designed-at least in theory-
to collectively meet the goals of the social contract. To give one example, education and
retraining programs, that increase entry and mobility in the market, are essential parts of a social
contract aimed at increasing total and individual welfare in the long-run.

Unfortunately, it seems that at least in some economies the socio-economic social contract is not
working well in practice. Recent years have envisaged an increased rate of dissatisfaction with
market economies. A growing number of citizens believe that the promises of the competition-
based market system, which form an important part of the implicit social contract, are not
fulfilled and that capitalistic markets are no longer working in their favor. Indeed, statistics
indicate that social mobility is low; that wealth is aggregated disproportionately in the hands of
the already well-off;7 that wealth inequality keeps rising; 8 that several large firms dominate the
digital economy, thereby blocking at least some of the promises that technological changes were

5
A vastliteratureexists on the goals of competition law. For a good analysisofthe different goals adopted by
competition law see, e.g., Waked, ibid; Daniel Zimmer ed., The Goofs of Competition Law (Edgar Elgar 2012).
6 Observe, however, the consumers' preferences may change with the change of options in the market, and the

a bi I ity of their reference group to consumes i mi la r products, thereby not necessarily significantly increasing their
feeling of wel I-bei ng for a I ong ti me.
7
See, e.g., Anthony B. Atkinson, Thomas Pi ketty & Emmanuel Saez., 'Top lncorres in the Long Run of History' (2011)
49 J. ECON. LITERATURE 3, 8 (focusing on US markets); ORG. FOR ECON. CO-OPERATION & DEV., ARE WE
GROWING UNEQUAL? (2008) 7, http ://www.oecd .org/dataoecd/48/56/41494435 .pdf; Thomas Piketty, Capital in
the Twenty-First Century (Harvard University Press 2014) .
8
ORG. FOR ECON. CO-OPERATION & DEV., Divided We Stnnd: Why Inequality Keeps Rising
(2011),www.oecd.org/el s/soci a I pol i ci esa nddata /49170253.pdf.

3
thought to bring about; that technological changes such as robotics create significant disruption
effects and have negative implications on the labor market; or that education and social security
do not create viable solutions for workers in order to ensure that wide geographic areas or
demographic groups are not significantly and irreparably harmed. In the U.S. and the European
Union, for example, the economic prospects of young people are, for the first time in several
decades, grimmer than those of their parents.

This, in turn, creates social unrest and a degree of distrust in the market system which, in turn,
reduces the ability of markets and societies to function well. 9 This unrest has led, inter alia, to
social protests, such as the Israeli so-called "Cottage Protest", referring to the increase in price
of Cottage cheese, and the U.S. movement "We are the 99%," whose name indicates the fact
that a large part of the wealth is concentrated in the hands of the few, pointing to the significant
and growing inequality in the distribution of economic resources. 10 The Arab spring was also, at
least partially, based on the upheaval of the under-privileged against inequality in sharing the
gains from trade. The recent elections in the U.S. have also brought to the forefront questions of
whether capitalism and liberalism, the way they are currently practiced, indeed further the
interests all members of society, or whether they serve only some parts of society. All these
protests share a common belief that the dogma of open markets and free trade is, in practice,
working well for the elites, but not for the masses. 11

These developments require us to examine the social contract from which state regulation
acquires its legitimacy and determine whether its instruments should be changed, to meet these
new challenges. In particular, this short article focuses on whether equality and inclusive growth
goals should play a more pronounced role in competition law. Some leading scholars,
spearheaded by Eleanor Fox, argue for the inclusion of such goals in developing countries. This
article explores whether these goals should also be given more weight in developed jurisdictions
as well, and if so- how. As noted, competition law is only part of the regulatory toolbox which
affects socio-economic conditions. Yet because it is the basic instrument that regulates
competition in most markets, the time is ripe to ask whether its current form indeed serves the
social contract.

To do so, I first explore the connection between the social contract and inequality. I then explore
the interrelation between competition law and inequality, exposing the duality and the dilemma
which it creates, which go to the basis of competition law. I also analyze the assumptions that
competition law is based upon, and the way they are met in the real world. The last part suggests

9
See, e.g., Joseph Stigl itz, The Price of Inequality: How Today's Divided Society Endangers Our Future (W.W. Norton
& Company 2012).
10
See statistics cited in Jonathan B. Baker & Steve Sa lop, 'Antitrust, Competition Policy,and Inequality,' 104GEO.
L. J. ONLINE 1 (2015).
11
For a si mi la rconcl us ion on the globa I sea le see, e.g. Dani Rodrick, The Globalization Paradox: Democracy and the
Future of the World Economy (W.W. Norton and Company 2011).

4
some ways in which competition law can incorporate some measures designed to reduce
inequality, without significantly changing its focus .

II. The Social Contract and lnequality 12

Is equality part of the social contract, and if so- what weight should be given to it when it clashes
with other values? Interestingly, equality plays different roles in the writings of social contract
theorists. According to Rousseau, inequality stood at the basis of the formation of the social
contract: The invention of property strengthened the initial conditions of inequality in the state
of nature. It therefore was in the interest of those who had property to create a state that would
protect them from those who did not possess property but might have been able to acquire it by
force . So, while the social contract purported to guarantee equality and protection for all, its true
purpose was to fossilize the very inequalities that private property has produced . Rousseau then
argued for a normative social contract, which is meant to respond and remedy these social and
moral ills, and determine how we ought to live. 13 It is this normative social contract that I wish to
focus upon.

With regard to the content of a normative (hypothetical) social contract, all modern philosophers
assume that the state is formed when free and equal persons come together and agree to create
a new collective body, directed to the good of all. As such, it should not serve the interests of one
group over another. Therefore, inherent inequality could not form part of the social contract.
Otherwise, those suffe ring from such inequality would not have agreed to join the collective .

This idea is embodied, in its most famous form, in Rawls' A Theory of Justice,14 in which he argues
that the moral and political content of the social contract is discovered via impartiality. He
suggests the use of a symbolic veil of ignorance, behind which each person is denied any
particular knowledge of one's circumstances, such as one's gender, race, particular talents or
disabilities, social status, or preferences . Persons are also assumed to be rational and
disinterested in one another's well-being . These are the conditions under which, Rawls argues,
one can choose principles for a just society, on which the social contract can be based. Because
no one has any parti cular knowledge that could be used to develop principles that favor his or
her own particular circumstances, the principles chosen from such a perspective are necessarily
just.

Rawls argues for two principles of justice that would emerge in such a situation, which determine
the distribution of both civil liberties and social and economic goods . The first principle states
that each person in a society is to have as much basic liberty as possible, as long as everyone is

12 This pa rt is partly based on Fri end (n 3 ). Other contractua I ist perspectives on i nequa I ity a I so exist. See, e.g., T.M .
Scanlon, What we Owe to Each Other (Harvard University Press 1998) .
13
Jean-Jacques Rousseau, The Basic Political Writings. (Trans . Donald A. Cress, Hackett Publishing Company 1987).
14
John Rawls, A Theory of Justice (Harvard University Press 1971, revised ed., 2000).

5
granted the same liberties. The second principle (known as the Difference Principle or the
Maximin Principle) states that while social and economic inequalities can be just, such
inequalities must be to the advantage of everyone. This means, in Rawls' view, that economic
inequalities are only justified when the least advantaged member of society is better off than she
would be under alternative arrangements. Rawls also emphasizes that a just distribution should
be based on real fair equality of opportunity, and that this principle has precedence over the
maxi min principle. Observe that these principles do not necessarily lead to a situation in which
citizens are equal, either in each point in time or in the end state. Rather, short-term inequality
might be justified in order to serve long-term justice. 15 Nonetheless, distributional effects are
put under a magnifying lens: it matters not only which general groups benefit from the action,
but rather if weaker individuals also benefit.

Rawls' conception of a just social contract can, however, be questioned. 16 Some have argued
that the rules chosen behind a veil of ignorance depend on the level of risk aversion of the
individuals determining the contract, and the rules by which the contract is set. Should most
individuals be risk neutral or have a low level of risk aversion, and the gains to the total welfare
pie would be large as a result of inequality, we might envisage a social contract which does not
necessarily embody the Maxi min principle in its strictest form, but rather embodies a rule which
maximizes the average welfare while ensuring some minimum standard of welfare to all. Also,
much depends on the normative values at the basis of each society. Furthermore, Rawls does
not look at the conditions which have led to a situation in which the individual is less well off. Yet
we may wish to treat differently one who was born with a low income and one who lost his
wealth due to laziness. Other theorists question the incentives which the Rawlsean contract
create: whether it creates incentives for individuals to contribute to society in a way which will
maximize the total welfare pie, so that it could then be distributed among members of society.

Of course, the Rawlsean ideal of a just society is not the only one possible. Others put more
emphasis on different values at the basis for the legitimacy of the state. One such theory is
libertarianism, which gives liberty precedence over other values, including equality.17 Robert
Nozick, a leading scholar in this school of thought, views the role of the state as one respecting
citizens' individual liberties, mainly property rights, rather than ensuring a just distribution of
means. Accordingly, such liberties should not be sacrificed, without the individuals' consent, in
order to achieve broader social goals, including distributive justice. This night-watchman state,
which completely disregards distribution concerns as such, was not adopted by any state in this
strict form. Criticisms of this view focus, inter alia, on the fact that it is assumed that current

15 Ibid 122-3.
16
For some of the criticism on Rawls'work see e.g., the sources cited in the following discussion as well as Gerald
A. Cohen, If You're an Egalitarian, How Come You're So Rich? (Harvard University Press 2000).
17
See, e.g., Robert Nozick, Anarchy, State and Utopia (Basic Books, 1971).

6
property rights are based on a just distribution, and that it fails to recognize the fact that property
rights, in themselves, limit the liberties of others. 18

Other leading theories of justice include, inter alia, utilitarianism 19 and the capabilities
approach. 20 Utilitarianism emphasizes the maximization of utility, regardless of its distribution
among individuals. Inequality should be remedied only if it harms overall utility. The capabilities
approach is based on two core normative claims: the freedom to achieve well-being is of primary
moral importance, and freedom to achieve well-being is to be understood in terms of people's
capabilities, that is, their real opportunities to do and be what they have reason to value. To
enable every person to enjoy his right to well-being, at least at a minimum level, distribution
should relate not only to the resource which is redistributed {as suggested by liberals such as
Rawls}, but also to each individual's basic capabilities to use this resource to further his goals.
Nobel laureate Amartya Sen emphasizes that this focus is the only way to ensure real equality
between individuals to achieve their goals. 21 Martha Nussbaum argues that the capabilities
approach remedies a basic flaw in many modern conceptions of a social contract, which envisage
a negotiation between rational and physically and mentally sound individuals, not taking into
account those that do not belong to this group. Critics of the capabilities approach emphasize,
inter alia, the difficulties in comparing the capabilities of different individuals. 22

Despite this plethora of theories relating to the goals of the social contract at the basis of the
state, it can be argued that, at least in most Western societies, equality should serve as a basic
guiding principle of the social contract. 23 At a minimum, inequality should only be accepted if its
benefits to the common good significantly outweigh the harm it causes to (some) individuals, and
even those individuals enjoy benefits from the overall regulatory scheme, to make their position
Pareto-optimal in the long run, relative to a different set of rules governing and regulating
society. The following analysis takes this minimum as a basis for the analysis.

Inequality in the marketplace has two main facets: inequality of opportunity to enter and expand
in the market (suppliers), to take advantage of what it can offer (consumers); and inequality of
wealth, which affects the ability to act both as suppliers and as consumers . Inequality of
opportunity may clash with the social contract in at least three ways. First, it does not justly

18 For criticism of Ii berta ria nism see, e.g., Jeffrey Paul (ed .) Reading Nozick: Essays on Anarchy, State and Utopia
(Rowman and Littlefield 1981); Wi 11 Kyml icka, Contemporary Political Philosophy-An Introduction (Oxford
University Press 2000); Gerald A. Cohen, 'Ca pita I ism, Freedom and the Pro I eta ri at,' in David Mi Iler (ed .), Liberty
(Oxford University Press 1991).
19
See, e.g., Jeremy Bentham, An Introduction to the Principles of Morals and Legislation (Clarendon Press 1907).
20Arna rtya Sen, Choice, Welfare and Measurement (Basi I Blackwel 11982); Development as Freedom (Knopf 1999);
The Idea of Justice (Harvard University Press 2009); Martha Nus sbaum, Women and Human Development: The
Capabilities Approach (Cambridge University Press 2000); Frontiers of Justice: Disability, Nationality, Species
Membership (Harvard University Press 2006 ).
21 Ibid .
22
See, e.g., Martha Nussbaum and Amartya Sen (eds .), The Quality of Life (Clarendon Press 1993).
23 For a similarargumentsee Piketty (n 1) 571 (unchecked and growing inequality is "potentiallythreateningto

democratic societies and to the va I ues of soci a I justice on which they a re based") ; Baker and Sa I op (n 10) 24 .

7
disperse the opportunities for participating in and enjoying the benefits of the marketplace, as it
allows some to enjoy a comparative advantage over others. Put differently, it severs or weakens
the connection between one's contribution to the marketplace and one's reward. Second, it may
clash with the economic goal of increasing the total welfare pie, for the benefit of all, which could
then be distributed among members of society. As economic studies have shown, inequality
reduces overall economic growth by preventing or limiting the ability of some parts of society to
contribute to the marketplace. Third, and relatedly, inequality of opportunity has not only
economic consequences but also psychological ones. As psychologists and others have shown,
one's satisfaction and motivation to take part in an action is based not only on what one has in
absolute terms, but, even more importantly- on the opportunities others have relative to himself.
Indeed, we do not live as separate individuals but rather interactions and comparisons form an
integral part of our well-being. Accordingly, inequality of opportunity further harms the economic
goal of individual and societal welfare by creating social unrest which can shake the foundations
of society.

Observe, however, that while equality of opportunity in the long-run can be viewed as a
foundational legitimizing principle of many Western societies, this does not imply a complete
equality of opportunity at any point in time. Rather, much depends on the conditions which have
led to such inequality. To illustrate, a comparative advantage which is a result of hard work and
effort, as such, should not be viewed as a manifestation of unequal opportunity.

Inequality of wealth raises more difficult questions. When it results from inequality of
opportunity, it is deemed to be unjust and unjustified. Yet inequality of wealth can also result
from other factors, such as talent and motivation. Their acceptance as a basis for inequality of
wealth depends, inter alia, on the normative concepts and assumptions at the basis of the social
contract. In communist economies inequality of wealth is generally unacceptable, while in
market economies it is treated, at least to some extent, as an inherent and even important part
of the social contract, as elaborated below.

Of course, reality is much more complicated than this idealized conceptualization of a contract
struck between members of society. The idea that citizens are free to choose a society which
adheres to their normative values, by moving between states, can easily be questioned. So can
the idea that the state is a benevolent actor, which strives to fulfill its goals for the welfare of all,
free of political influences that serve specific groups at the expense of the general public.
Therefore, the social contract is an abstract notion, not to be found in the real world in its pure
form. Yet the legitimacy of state action is dependent, in many citizens' eyes, on such action
serving at least some basic normative principles that further the common and individual good. In
such an environment, extreme and long-term inequality can have a significantdestabilizingforce.
Accordingly, this article suggests examining the current application of competition law in light of
this social contract.

Ill. Competition law and Inequality: The basic dilemma

8
I now turn to examine the role inequality plays in competition law. This requires us to go to the
heart of the goals and values atthe basis of this regulatory tool. As elaborated below, competition
law has an intricate and dual relationship with inequality, which creates a basic tension. 24

In most jurisdictions competition law is applied in a manner in which inequality considerations

are dealt with only indirectly. Nonetheless, competition law's inherent characteristics reduce
inequality- of both opportunity and wealth- in several ways . First, by lowering artificial entry
barriers into the market, competition law increases equality of opportunity by way of allowing
more people to enter the market and compete or expand in it based on merit. Second, by
lowering prices and increasing quality, it enables more consumers to enjoy the benefits that the
market can bring and it reduces inequality of wealth. Third, by reducing the ability of market
players to enjoy non-merit based market power, both types of inequalities are reduced. This is
because market power might have been translated into political power and influence, thereby
creating political economy effects that enable strong groups to enjoy a disproportional part of
the welfare pie .

At the same time, competition law naturally furthers inequality of wealth, at least in the short
run. The very concept of competition encapsulates the idea of winners and losers; of Darwinian
forces that shape the marketplace based on consumers' preferences and technological abilities,
regardless of the effort invested by each supplier or his non -market-rewarded traits. In extreme
cases, just like in the Abba song, "[t]he winner takes it all." Accordingly, competition naturally
results is an inherent inequality of wealth between suppliers. Should the winning suppliers enjoy
significant market power, this can also lead to wealth inequalities between suppliers and
consumers .

Yet this resulting wealth inequality, it is believed, is what drives competition in the first place. It
is part of the engine and driver behind competition . The U.S. Supreme Court's famous dictum in
Trinka emphasizes this point: "[t]he opportunity to charge monopoly prices- at least for a short
period- is what attracts 'business acumen' in the first place; it induces risk taking that produces
innovation and economic growth ." 25 Add to it the fact that people's motivation to invest time
and effort are often driven by their comparison to their peers, and it becomes clear that
inequality plays an important role in bringing about the benefits that competition has to offer.
Furthermore, where equality of opportunity exists and entry barriers into the market are low,
inequality of wealth is deemed to reflect the comparative efforts of individuals. This is because
success in the market game is affected, inter alia, by the motivations of individual to use their
comparative advantages in order to create better products and services. Accordingly, inequality
of wealth is often treated as an inherent and even important aspect of competition, which, while
creating harmful static short-run effects, is necessary to create the more important long-term

24
See also Pradeep Mehta, 'Preface' in Pradeep Mehta and Tai moon Stewart (eds.) Should Competition Policy and
Law be Blind to Equity: The Debate (CUTS, 2013).
25 Verizon Communications Inc. v. Law Offices of Curtis V. Trinka, LLP, 540 U.S. 398,407 (2004).

9
dynamic effects that, as Nobel laureate Robert Solow and others have shown, are the main
drivers of welfare in Western societies. 26 It is an "inherent bad" of market societies.

Inequality of wealth, however, is assumed to be short-term with regard to each and every
supplier. Competition is seen as a dynamic process, in which those that currently possess market
power can be replaced by newcomers into the market. Therefore, most competition laws do not
place significant weight on issues of the short-term distribution of the benefits from trade. 27
Moreover, it is generally believed that most markets will be competitive once artificial entry
barriers are eliminated, and thus inequality will be minimized by the market's invisible hand. The
common view that inequality of better addressed by other regulatory tools also contributes to
this policy. 28

The increased reliance on the market's invisible hand, which does not deal directly with inequality
issues, also follows libertarian ideals: Reducing regulatory interference in the market to the
minimum necessary, and allowing private forces to take their course. Inequality of wealth which
results from competition on the merit can also be justified, at least to some extent, by other
theories as well, including utilitarianism and some libertarian approaches. The question then
becomes at what point does inequality of wealth stop furthering the social contract that lies at
their basis.

IV. Furthering equality in developing jurisdictions

The goal of inclusive growth- reducing inequality in the distribution of benefits created in the
marketplace through competition law- has been advocated for developing jurisdictions.
Professor Eleanor Fox has been a leading voice in arguing that fighting long-term and entrenched
inequality should be one of the main goals of competition law in developing countries. According
to her thoughtful and thought-provoking scholarship, the goal of maximizing welfare should be
understood as "inclusive welfare:" building a ladder of mobility from the lowest rung up in order
to enable mobility, incentivize entrepreneurship, and stimulate innovation. 29 In our joint paper
on competition law for developing jurisdictions, Professor Fox and I have argued for sensitiveness
with regard to where the benefits from trade fall. 30

What are the reasons that lie at the basis of such suggestions? First, it satisfies a need for
legitimacy. The safeguarding of economic opportunity and the distribution of benefits may be so

26
Robert M. Solow, 'A Contribution to the Theory of Economic Growth' (1956) 70 Q. J. ECON. 65; Robert M. Solow,
'Technical Change and Aggregate Production Function' (1957) 39 REV. ECON. & STAT. 312.
27 For a discuss ion of such considerations in the context of developi ngj u ri sdi cti ans see, e.g., Mi cha I S. Ga I and
Eleanor Fox, 'Drafting Competition Law for Developing Jurisdictions: Learning From Experience' in Ga I et a I. (eds.)
Competition Law for Developing Jurisdictions (Edgar Elgar 2014}.
28 See discussion in section V.D. below.

29
Eleanor M. Fox, 'Economic Development, Poverty, and Antitrust: The Other Path' (2007} 13 SW. J. L. & TRADE IN
THE AMERICAS 211,220; Eleanor M. Fox, 'Equa I ity, Discrimination and Competition Law: Lessons from and for
South Africa and Indonesia' (2000) 41 HARV. I NT'L L. J. 579, 593. For a discussion of such goa Is see a Isa Waked (n
4).
30 Gal and Fox {n 27).

10
important to legitimacy that a distribution-blind law may not take root. This is especially
important in those developing economies in which a distribution-blind welfare approach might
prevent societal acceptance and disintegrate the social fabric because it would strengthen or
maintain existing wealth disparities, especially where it parallels a racial divide. As Chua has
argued, the overlapping of class and ethnicity characteristics, which characterize many
developing economies, mandate that the distributional effects of a market economy be taken
into account. Otherwise, this may create instability, which could convert into an engine of
potentially catastrophic ethno-national ism.31 Indeed, in a recent OECD roundtable on
competition and poverty reduction, delegates of competition authorities in developing
jurisdictions argued that "the political credibility of the competition policy authorities depends
to a large extent on how they are seen as contributing to poverty reduction and employment
creation. It would be risky for them to state that their only target is combating harm to
competition by producers, and that the impact of their efforts on poverty or inequality is
irrelevant." 32

Second, opportunity only to the already powerful means that the country is not making efficient
use of the talents and potential contributions of large segments of its population. 33 Indeed, the
current literature on development and growth stresses the importance of inclusive growth. 34 It
suggests that developing countries need to give weight not just to efficiency defined as increased
aggregate wealth- but efficiency defined also in terms of enabling the masses of people to
participate on their merits in the economic enterprise. Observe that this goal also requires that
consumer welfare be taken apart, to determine which classes of consumers are benefitting from
the economy.

Third, Fox argues, "antitrust for developing countries must be seen in a larger context. The canvas
includes the dire economic conditions of developing countries .. .Developing countries often see
free-market rhetoric and aggregate wealth or welfare goals as inappropriate to their context
because of the tendency of free-market policies to disproportionately advantage the already
advantaged in every game played ." 35

The importance of inclusive growth was also recognized by the Spence (World Bank) Growth
Report, which concluded that "not only does growth critically matter, but inclusive growth

31
AL Chua, 'Markets, Democracy and Ethnicity: Towards a New Paradigm for Law and Development' {1998) 108 YALE
L J 1; AL Chua, 'The Pa rad ox of Free Market Democracy: Rethinking Development Pol icy' {2000) 41 HARVARD I NT'L
L. J. 287 .
32 OECD {n 5) 7.

33 Equality{n 25) 114.

34
See e.g., World Bank, Growth Report: Strategies for Sustained Growth and Inclusive Development {2008),
http://web.wo r l dbank.o rg/W BS I TE/EXTER NAL/FXT ABOUTUS/ORGANIZA Tl ON/EXTP REM N ET/0 •• con ten tM DK:23225
680~pagePK:64159605~piPK:6 4157667"1:heSitePK:489961.00.html. See also Daron Acemoglu and James A.
Robinson, Why Nations Fail: The Origins of Power, Prosperity ond Poverty {Crown Pub I is hers 2010).
35 Equa I ity {n 29) .

11
critically matters. Distribution counts. And distribution of wealth and, more important for our
purposes, of opportunity and chance for mobility was [and is] deeply skewed. 36

V. The Dilemma: Inclusive Growth Goals in Developed Jurisdictions

Let us now explore the limits- rather than the limitations- of the suggestion for inclusive growth
as part of competition law. In particular, should its justifications be taken one step further and
apply to at least some developed jurisdictions. The time is ripe for such an exploration, given
global dissatisfaction with at least some aspects of capitalism and market liberalism.

To answer this question, we need to look deeper into the assumptions that generally lead
developed countries not to include reduction of inequality and inclusive growth as a direct goal
of competition law, but rather to treat them as indirect -yet important- results of competition.
Accordingly, this chapter sheds light on four basic assumptions that, I believe, stand and the basis
of the existing status-quo of many competition laws in developed economies:

1. All market players have relatively equal opportunity to enter and to expand in the market,
to be used based on their personal skills and motivations;
2. Once we deal effectively with artificial entry barriers, the market's invisible hand will
reduce most instances of inequality;
3. The remaining inequality is an inherent and important part of the competitive process
that serves to increase the total welfare pie;
4. Even if equality is an important goal that should be given priority over total welfare in at
least in some circumstances, competition law is not the correct tool to limit it.

Below we analyze each of these assumptions .

A. Equality of Opportunity

With regard to equality of opportunity, the assumption on which competition law is based in
developed jurisdictions is that people have relatively equal opportunities for access and
expansion in the market. While it is acknowledged that people possess different skills and
resources, it is assumed that the state's efforts in creating and maintaining a reasonable
educatory system, and an environment with well-functioning market institutions and due
process, create an enabling environment for at least most people to take advantage of market
opportunities. For example, a well-functioning market can provide sufficient funding
opportunities for good ideas for those potential entrants that do not possess personal funds.

Why is this assumption important? Because it supposes that participation and success in the
market are dependent, mostly, on the motivations of people to invest in the market game. It also
supposes that all citizens are given a relatively equal shot at the market game. Moreover, it
supports at least one form of social justice: those who contribute most to society because they

36
See Comm'n On Growth And Dev., The Growth Report: Strategies for Sustained Growth and Inclusive
Development (2008) http://cgd.s3.a ma zonaws .com/Growth ReportCompl ete.pd f.

12
create new and better widgets, get a larger share of the welfare pie, which indicates their
contribution to overall welfare .

But is there real equality of opportunity in developed jurisdictions? As the statistics cited above
indicate, at least in some economies the answer is negative. Successful entrepreneurship in many
markets- even more pronounced in today's technologically advanced world- requires inputs that
the market does not or cannot easily provide to all potential entrants, and that states often fail
to provide at an adequate level. These include, inter alia, high levels of education (which provide
necessary skills for the marketplace including adaptability to new environments) and social
connections to other, successful, market players. Inequality in such inputs can lead to large
discrepancies in access and expansion opportunities.

Another challenge to equality of opportunity it created by competition itself. In some markets

fierce competition exists over entry spots, which creates advantages to those with existing funds.
For example, competition has led to a situation in which in some markets interns work for free.
Accordingly, only people with funds can afford to work as interns, and without the experience
you will generally not be hired . So the ability to enter the profession is dependent on more than
skill .

Add to this political economy influences : in many developed economies policies backed by
captured politicians and regulators sometimes benefit the few which have a strong-hold on the
market.37 In such an environment, even investments in costly higher education do not provide
the key to unlocking the door of success.

Indeed, statistics show that social mobility in many developing economies is low. If the market
system truly created equality of opportunity, then social mobility should have been at a much
higher level. So even according to the free market paradigm, something has gone wrong and the
current system cannot be assumed to provide equal opportunity to all market participants.

B. The market will reduce most instances of inequality in the long run

The second assumption is that once we deal effectively with artificial entry barriers, the market's
invisible hand will reduce most instances of inequality, at least in the long run .

Undoubtedly, limiting artificial entry barriers into markets- the main task that competition law
seeks to perform- can increase equality. However, as elaborated above, 38 inequality of wealth is
an integral part of the market system, at least in the short and medium run.

Furthermore, while the above assumption may be true in a jurisdiction in which all, or most,
markets enjoy conditions of perfect or at least workable competition, it is not true once market
failures are taken into account. Rather, market failures such as asymmetric information,
collective action problems, or political economy influences may create conditions of significant

37 Fox provides such an example, see Equality (n 29) 112-3.

38 Section 11 infra.

13
inequality that may not be easily eroded. In such instances, competition law is a limited tool.
Moreover, one of the major tools that competition law has to offer- merger law- generally applies
only to firms that already possess significant market power or are likely to possess such power as
a result of the merger. When the door to proving such market power is based solely on turnover
rates, merger law does not capture under its wings instances in which transactions can create
significant market power in new markets, power that might not be easily eroded afterwards. 39

Exogenous factors have further increased inequality of wealth on both national as well as
international level. The main factor is globalization and the internationalization of trade, which
strengthen competition over the locus of businesses, based on their relative comparative
advantages. This is due, in part, to the lowering of transportation and transaction costs that
enable distant producers to become potential suppliers. Another exogenous factor involves
technological changes such as the increased use of robotics and computerized systems to
perform many actions, thereby reducing the need for many kinds of human interventions in
production or supply processes. This factor also increases the difficulty involved in supplying a
safety net in the form of retraining, especially where the need for middle-class workers is
significantly shrinking and the education system is not designed to enable most workers to
perform technologically advanced jobs. The combined effect of these factors has led to a
troubling situation in which it is much more difficult nowadays to be gainfully employed. Indeed,
studies show that the current generation is not likely to be better off economically than its
parents. Jobless citizens are subject to a myriad of negative effects. These include adverse
economic, psychological and health-related effects, mistrust in the capitalistic market system,
and lower buying power that directly affects the level of dynamic efficiency in markets. Often the
harm is not limited to individuals, but also affects local communities that have lost their
comparative advantages. Observe that while most developed jurisdictions do not suffer from
large economic discrepancies between different ethnic groups, social unrest can be created
based on inequality between different socio-economic groups (e.g., blue collarvs. white-collar),
which are exacerbated as a result of globalization and technological changes. When the market
does not offer viable alternatives for such workers, a sole focus on lower prices or higher quality
products may seem to some to be misguided.

Inequality of wealth can be further increased by discrepancies between consumers, which are
not equally equipped to take advantage of potential market opportunities. To make optimal
decisions, consumers need to be able to compare options and choose the one which best serves
them. Digital literacy is an important factor, as is access to information and comparison tools
(such as telecommunication networks and computers) that enable better comparisons, and
transportation infrastructure (such as roads and trains) that enlarge the scope of potential
suppliers. Inequality of opportunity of consumers to take advantage of market opportunities is
especially pronounced when these consumers are also suppliers.

39
Some ju ri sdi cti ans have started to I oak into such issues.

14
 C. Inequality is inherent to competition

Indeed, there can be no doubt that inequality of wealth is an inherent and important part of the
competitive process that serves to increase the total welfare pie. Yet it is a matter of degree and
of causes. If inequality results from unequal opportunities to participate in the market or take
advantage of its offers, then it might be viewed as unjust. Furthermore, much depends on the
degree of inequality created by market interactions.

D. Competition law is not the correct tool

The fourth assumption on which competition law is based is that even if equality should take
precedence in some cases, competition law is not the correct tool to further it. More efficient
tools might include, inter alia, tax, social security, support of small and medium businesses,
education, requirements for foreign direct investment and creating a better infrastructure for
commerce. 40 These tools can, at least theoretically, rebalance the social contract by augmenting
and complementing competition law.

While these tools are important, most have inherent limitations that should be recognized .
Education, for example, is very long-term; Social security suffers from psychological limitations,
because its recipients might feel that they are left out of the market and are dependent on the
government instead than on their own efforts; and political effects shape at least some of these
tools so that they are not applied efficiently. Furthermore, as elaborated in the next chapter,
competition law can be shaped, at least in its margins, to take distributive and inequality concerns
into account.

It is noteworthy that an important difference exists between artificial entry barriers (such as
those that result from political economy effects) and natural barriers (such as those that result
from lower labor or transportation costs elsewhere) that affect comparative advantages. While
the first may potentially be reduced by competition or competition law (but not always), the
second cannot. In fact, some types of natural entry barriers are taken as a given in all
governmental policies .

These assumptions, taken together, challenge the way that the free market and libertarian ideals
are currently applied. One of the main arguments is that the social contract is not working well.
It promised equal opportunity for all to participate in markets; it promised that if people invest
in doing their best (e.g., spend time and resources on higher education), then most will have a
good chance to recover their investment and lead a comfortable life; and that the combined
efforts of individuals who act in such a way will further public welfare. These promises have not

4
°For an argument for the superiority of these tools for distributive goals see, e.g., Louis Ka pl ow, 'On the Choice of
WelfareStandards in Competition Law' 2 http://papers.ssrn.com/sol3/papers.cfm7abstractid=1873432; Lia nos,
loa nnis, 'Some Reflections on the Question of the Goa ls of EU Competition Law' in Handbook on European
Competition Law (loa nnis Lia nos and Damian Geradi n eds., Edgar Elgar 2013) 1.

15
been fulfilled, at least for some segments of the population. The increased disbelief in the market
system as it is currently applied is troubling, because for the market system to operate, people
must believe in its mechanism. Such trust, in turn, legitimizes the economic system and creates
stability. Cynicism, on the other hand, creates unrest and might disintegrate the social fabric of
societies. It also reduces the number of people who can and are willing to contribute to the
market game.

Accordingly, the next section suggests examining the current application of the competition law
in light of this failure of the social contract. This point of view emphasizes the links between
efficiency and distribution as well as between profitability and sustainability, which can reinforce
each other. 41

VI. The Role of Competition Law in Limiting Inequality

While education and infrastructure might be more important tools in increasing equality in the
long run, some changes in competition law might also be justified as part of an overall societal
effort to reinstate a stable social contract which is based on a belief in the market as a source of
welfare. While these changes need not be extreme, they can nonetheless play a significant part
in meeting the goals of the social contract.

A. When fine-tuning might be required

Before we delve into some suggestions, it is important to observe that competition law in
developed jurisdictions already includes some focus on distributive effects. Most importantly,
most competition laws further the goal of consumer welfare, rather than supplier or total
welfare. 42 Even Canada has moved from a pure total welfare approach towards a more nuanced
one, which looks at where the benefits from the trade fall. The EU has gone a bit further, requiring
that restrictive agreements be allowed only if consumers enjoy a "fair share" of the benefits from
the joint venture; and that monopolists not be allowed to charge "excessive prices," even if they
result from competition on the merit. 43 Yet all these laws aggregate consumers into one group,
not attempting to look further at the effects on different classes or types of consumers that are
affected by the conduct or the transaction. As Farrell and Katz have observed, "rich and poor
consumers may be differentially affected by an antitrust decision; distributional concerns would
suggest weighing the impact on the poor more heavily, but a consumer surplus standard insists
that they count equally." 44

41
See also Maurice EStucke, 'Occupy Wa 11 Street and Antitrust' (2012) 85 SOUTHERN CALIFORNIA L REV
POSTSCRIPT 33, 50; Michael E. Porter & Mark R. Kramer, 'Creating Shared Va I ue: How to Reinvent Ca pita I ism and
Unleash a Wave of Innovation and Growth' (2011) HARV BUS REV 77.
42
See, e.g., K J (seres, 'The Controversies of the Consumer Wei fa re Standard' (2007) THE COMPETITION LAW REV
121, 122.
43
Articles 101-2 of the Treaty for the Functioningofthe European Union.
44 Joseph Farrell & Michael L. Katz, 'The Economics of WelfareStandards in Antitrust' (2006) COMPETITION POL'Y
I NT'L. 1.

16
To strengthen the belief in the social contract at the basis of competition law, a fine-tuning of the
system might be required: giving more thought and weight to where profits accrue. Not only
whether consumers or producers, as two distinct groups, are affected, but also which sub-groups
are affected, and the importance of the transaction to their welfare as well as to total welfare.
This requires going beyond simple legal assumptions, taking the position that differences
between sub-groups should not be ignored, and accommodating the special characteristics and
needs of some sub-group over others. 45 Recognizing such differences can create an opportunity
for correcting some of the ills of the current system. Yet it must be done carefully, to ensure that
the social contract is indeed fulfilled.

Let me give four examples of cases where the above suggestion may be relevant. I do not argue
that these examples should necessarily affect the content and application of competition law. To
determine whether such a change is justified, we need to engage in a deeper analysis which is
beyond the scope of this short paper. Such an analysis must take into account, inter alia, the
effects of more complicated and nuanced rules on enforcement costs and on the conduct of
market players and enforcers. Such an analysis will also need to determine whether the
competition authority is the right locus to engage in more nuanced social analysis, in light of the
tools at its disposal as well as its democratic mandate and its level of susceptibility to political
influences. Nonetheless, the examples illustrate instances in which in it worth considering
performing such an analysis.

The first example involves a case in which the relevant transaction makes all consumers 46 and
suppliers better off or at least does not harm their welfare with regard to the specific transaction,
so that the condition of Pareto Optimality is met, that is, no other distribution of benefits from
the transaction could make at least one person better off without making someone else worse
off. On its face, this transaction should be allowed and indeed will be allowed in most- if not all-
developed jurisdictions around the world. Yet this analysis disregards existing discrepancies in
society and treats all consumers as equal. Let us assume that indeed all consumers are better off,
but some- the more wealthy ones- are much better off than the poor ones . Such a transaction
will increase existing wealth discrepancies in society, thereby potentially making the overall
position of the weaker members of society worse off. Observe that this example does not fulfill
the Maxi min principle suggested by Rawls as a basis for a just social contract.

The second example adds additional sets of considerations, such as the agency's limited
resources. Consider, for example, a case which is Pareto Optimal to all consumers when focusing
only on the effects of the specific transaction. Yet this time only a dis ti net sub-group of consumers
benefit from the transaction. Other sub groups of consumers are not affected by it because they
do not consume the relevant product or service. This can be illustrated by two extreme examples :

45
It should not be automatica I ly assumed that competition law offenses necessarily ha rm the poor and enrich the
rich. For such an exposition see Daniel A. Crane, 'Antitrust and Wealth Inequality', 101 CORNELL L. REV. (2015).
46
For simplicity, I refer to consumers. Yet in some cases the relevant group might be workers or even sha rehol ders
such as pens ion funds of middle-class workers. Whether pol icy makers wish to capture and differentiate such
groups is a policy questions ubjectto the same dee is ion-theory considerations noted above.

17
lowering the costs of luxury cars would only affect the wealthier members of society; and
lowering the costs of cheap furniture would mainly affect the weaker members of society. Once
we look more carefully at which sub-group of consumers is affected, it is clear that in a world of
scarce enforcement resources, the second case may serve societal needs and the social contract
better. 47 Indeed, in choosing between the two cases, using scarce enforcement resources to
follow the second one may be Pareto Optimal to all members of society in the long-run.

The third example involves a case in which not all consumers are better off. Rather, some sub-
group(s) of consumers are better off, and some are worse-off. Under the competition laws of
most developed jurisdictions, such a transaction would not be allowed. Yet despite the fact that
the condition of Pareto Optimality is not met in the specific transaction, it might be met in the
long run, if the transaction significantly benefits the weaker members of society while only
marginally harming the wealthy ones. It might also serve Kaldor-Hicks efficiency, whereby overall
welfare is increased. Kaldor-Hicks requires that the overall benefits to those that are made better
off could in theory compensate those that are made worse off.

So far we have disregarded suppliers. Indeed, the competition laws of most developed
jurisdictions generally use consumer welfare as a proxy for total welfare, thereby disregarding
effects on suppliers. Moreover, even when such a focus is added, as in Canada, the analysis does
not take apart the effects of suppliers on other groups in society, most importantly the suppliers'
workers or the workers of other market players which interact with them. As noted above, this
is partly based on two assumptions: (a) that while the supplier might need to leave the market,
most of its workers will not leave the job market since they could relatively easily switch jobs;
and (b) even if they cannot finds job easily on their own, other governmental instruments, such
as retraining programs, provide relatively efficient instruments designed to assist workers in
finding new jobs. As elaborated above, in reality these assumptions are often problematic, and
several factors combine to make the realization of these goals much more difficult than in
previous decades. Such an environment crystalizes issues of inclusive growth and significant
economic inequality in the gains from trade. Accordingly, society must ask whether it would
better serve its social contract to focus solely on lowering prices and potentially increasing
quality, even marginally, at the expense of losing jobs, or whether a more delicate balance should
be struck which gives more weight to the interests of society in its citizens as workers.

B. Some suggestions

Even if one believes that the social contract is better served by giving weight to equality and
inclusive growth considerations, the question remains whether competition law is necessarily
the best tool to achieve these goals. Competition law suffers from some significant inherent
limitations. It has a limited number of instruments at its disposal, that mainly include fines and
prohibitions, rather than tools that allow for transfer payments between different groups of

47 One caveat exists once we add the globalization di mens ions: if thewea lthier ones have other options and a re
Ii kel y to move to other jurisdictions if prices for I uxu ry goods a re much higher than elsewhere.

18
society; it does not have the information or the ability to see the larger picture, of all the tools
available to the state to remedy a problem and the state's overall interests in remedying it; it
does not have the democratic mandate to engage in such balancing exercises, which involve
public interest considerations that go beyond pure competition concerns.

In light of these limitations, this section suggests several ways in which competition law can
better serve the social contract, without significantly changing its focus and the tools at its
disposal, yet introducing a more nuanced distributional dimension into it. 48 As noted above, more
significant changes, while possibly justified, require a deeper analysis based on decision theory
considerations, balancing between benefits and costs in light of realistic options. 49

The above considerations should affect the choice of cases, especially where enforcement
resources are scarce. 50 The authority should consider focusing on market access issues which
affect the ability of the weaker parts of society to take part and participate in the market on a
larger scale than their current conditions allow them. It should also consider giving priority to
cases which increase consumer welfare of the weaker groups in society. To use the above
example, lowering entry barriers in the market for lucrative cars should be given a lower priority
than in the market for cheap furniture.

Moreover, competition law enforcers should attempt to unpack the aggregatory group of
consumers, where it is likely to significantly increase social welfare .51 In relevant cases, Kaldor
Hicks optimality should be preferred to Pareto optimality. To reduce uncertainty, however, the
authority should develop tools that clearly spell out the balance to be sought, and only divert
from the aggregatory analysis where a more nuanced analysis is likely to bring about significant
benefits to social welfare. Transparency is an essential element of this analysis, to limit political
pressures and to increase awareness of the considerations taken into account.

Furthermore, even if competition law is not the best instrument for furthering the social interest
in securing jobs for workers for the long-term benefit of society, we still need to ensure that the
application of competition law does not inhibit the application of other policies which are aimed
at furthering reinforcing goals. Most importantly, it must be ensured that competition law does
not create a de jure or de facto veto power to competition law considerations, where it is in the
public interest that they be balanced with other considerations. Israel provides an illustrative
example . Offers to buy a large bankrupt firm must receive both the approval of the Bankruptcy
Court and the Competition Authority. Under Israeli merger law, the Authority can only take into

48
See also Joseph F. Bradley, 'The Economic Goals of Antitrust: Efficiency, Consumer Welfare and Technological
Progress' (1987) 62 N.Y.U. L. REV. 1020("[a]ntitrust law has a I ways permitted some degree of soci a I conductthat is
not in the immediate interest of consumers in order to sustain innovation and production efficiencies ."); Michael
E. Porter, 'Competition and Antitrust: Towards a Productivity-based Approach to Evaluating Mergers and Joint
Ventures' (2001)46ANTITRUST BULL 919,933.
49
For a suggestion that goes further, arguingthatcompetition lawshouldtake into accountdistributionalconcerns
see Anthony B. Atkin son, Inequality: What Can Be Done? (Harvard University Press 2015).
so For a s i mi I a rs uggestion see Baker and Sa I op (n. 10).
51 For such an example see, e.g., South African Competition Act, Act No.89 of 1998, ch . 1, para. 2(f) .

19
account competition law considerations. 52 Wider considerations can only be taken into account,
if at all, by the Competition Tribunal, in a lengthy process. This creates a de facto veto power to
the Authority to block mergers with bankrupt firms that significantly harm competition, even if
wider public interest considerations would have led to a different result.

In addition, the Competition Authority's advocacy role can play an important double role in
augmenting and strengthening the social contract. It should be used to advocate the adoption of
governmental policies that further the social contract by complementing competition law. These
may include, inter alia, increasing possibilities for market entry, relocation and retraining
programs for workers, and incentives for creating jobs in unemployment-ridden areas. They
should also include tools that create an equitable system of social redistribution, both in the short
and in the long run.

Relatedly, in those cases in which the straight-forward application of competition laws harms the
furtherance of equality and social justice, competition law may need to be calibrated to do so.
Crane offense an eye- opening example with regard to the application of competition law rules
to limit subsidization of the less profitable women's sports teams, which could limit the
furtherance of such sports teams. 53

The Competition Authority should also use its advocacy role to explain to the non-competition-
law-educated wide public the logic behinds the choice of its actions, to strengthen their
understanding of the market system and in the authority's choices. This is especially important
where the positive effects of its actions could only be observed in the long run; or where the legal
tools are inherently limited and citizens might get the impression that the system is not working
for them. Such advocacy can strengthen the trust that the actions taken are indeed in line with
the social contract.

Merger policy should also be changed so it would capture more firms that create significant
economic power. As Maurice Stucke suggests, it should be expanded to ensure that
concentration without offsetting benefits is arrested in its incipiency. 54 Also; antitrust agencies
and courts should be careful not to focus solely on static price competition and productive
efficiencies. 55

Finally, as suggested by David Lewis, 56 the tool of market inquiries, used by a growing number of
jurisdictions around the world, enables competition authorities to point out public restraints that

52 israeliCompetition Law 1988,Section 21.

53
Crane (n. 45) 4.
54 Stucke (n 41).
55 Ibid.
56 David Lewis as cited in Mehta (n 24).

20
strengthen or maintain elite dominance. This is because it grants them formal powers that extend
beyond the traditional powers of enforcement.57

VII. Conclusion

Significant and persistent inequality in favor of specific social groups creates a major challenge
to the existing social contract, or at leastto the way we apply it in practice. This has led to social
tensions, unrest and protests around the world . It is thus time to question whether our tools
must be changed to enable a better furtherance of the goals of this contract.

As this short article has showed, the challenges to the social contract, as it is currently applied,
go to the heart of the goals at the basis of competition law. They require that the goals of
competition law be broadened, in appropriate cases , to include distributional effects. Indeed,
suggestions with reg a rd to inclusive growth a re relevant, at least partially, to developed countries
and not just to developing ones .

It should nonetheless be stressed that in order for inequality to be reduced, competition law
should be one of several tools harnessed for advancing equality and inclusiveness. Loading the
delicate task of changing the current socio-economic fabric on competition law alone might be
highly problematic and negatively affect the ability of the competition law to achieve its other
goals.

57
See, e.g. Tamar lndigand Michal S.Gal, 'New Powers, New Vulnerability?Acriticalanalysisofmarket inquiries'
in Fa biana Di Porto and Josef Drexl (eds.) Competition Law as Regulation (Edward Elgar 2015) 89; OECD Di recto rate
for Financial and Enterprise Affairs Competition Committee, Policy Roundtables: Market Studies (OECD 2008).

21
 I 'II

UN IVERSITY OF LEEDS
.,
Historical and contextual position of fairness in
substantive EU competition law
Professor P1nar Akman
Centre for Business Law and Practice
School of Law
p.akman@leeds.ac.uk
@drpinarakman

13th Annual Conference of the GCLC, Brussels, 25-26 January 2018

• Spaak Report (1956):(ensuring that undertakings observe the rules of 'fair competition) is one
of the necessary practical measures for the establishment and operation of the common market.

• In the interests of producers themselves and in order to afford them the necessary security, there
has to be some direct method of enforcing the rules of 'fair competition .' (ibid)

• But, see also: '[o]ne of the essential guarantees which must be given to enterprises is that there
will be no unfair competition as a result of artificial advantages being given to their competitors.
Any assistance given by governments must therefore be very closely examined .... As a general
rule, whatever form assistance may take, it will be incompatible with a common market if it is
prejudicial to fair competition and the distribution of activity by favouring particular enterprises or
branches of production.' (ibid)

• Fair competition' is not about preventing unfair competition against competitors, but about
undertakings not being disadvanta ed due to ad'(_antages given to their competitors by
governments. e state aid.
2
Drafters were well aware c,f difference between
'unfair competition' rules and 'competition law'. UNIVERSITY OF LEEDS
Ill

• 'It has been proposed within ... the rules for cartels and monopolies, to announce, .... , cartel or
monopoly situations or practices as incompatible with the common market when they have the aim
or could have the effect of hindering the exercise of competition in that they facilitate the absorption
or domination of the market ... by a single or a group of undertaking(s) .... The proposed rule
appears perhaps to be directed at practices by which the rival undertakings are exclude~ out of the
market. Such practices, however, consist in not the restrictiqn, but rather the strengthening of
.......
CQ'!'petition and therefore are to be combated only when it is a matter of unfair competition.
However, if rules applying to unfair competition are to be included in the Treaty, ... they should be
separated from the rules on the maintenance of competition.' (20/10/1956, Note of von der
Groeben) (Akman, OJLS, 2009; Akman, Hart, 2012)

3
• See also von der Groeben (16/6/1965 : undertakin9.§_Ie_q.u~-r a-t~~ompetitioo is conducted 'fairly',
that it is not distorts ·· · te-aid, -qifferential taxation aoo----different commerciallaws;
they require t at~quality of opportunit is established and ensured.
-\ot?1 I ~v

• Basic duty of the EC is to accom lish such an economic order that would optimally advance
wealth and economic freedom, nd there also serve the consumer (ibid).

4
Fair competition versus free competition - the ~
. !' 'i i
ordoliberal dilemma UNIVERSITY OF LEEDS

Boehm, Eucken and Grossmann-Doerth, The Ordo Manifesto of 1936:

,. 'Free competition must not be stopped on the erroneous grounds of alleged unfair practicef On
the other hand, it must not be allowed to degenerate into truly unfair competition eith~ ow the
line is to be drawn between unfair and permissible competition, whether competition 1 restricted,
whether competition is efficient or obstructive, whether or not price-cutting contradicts the
principle of the system-all these issues/6an onl be decided by inve~tig~~ions conducted by
economists into the various states of the market. The collab_Qr_ation of [law and economics],_ which
in this respect still leaves much to be desired, is clearly essential.')

(Where) Has the line been drawn?

5
There is an underlying element of fairness in the
prohibition of Article 102 TFEU. UNIVERSITY OF LEEDS
E
• Preamble of TFEU calls for removal of ~ s to guarantee fair competition.
\.A :lv'?. .
• Article 102(a) TFEU explicitly prohibits 'unfair' prices and 'unfair' trading
conditions.

- -----------------
• Article 102(c) TFEU prohibits discrimination , which can be viewed _as 'unfair' on
one understanding of 'fairness' (ie as equality). l,

• Yet, we have a definition of neither 'fair' nor 'unfair' in this context.

6
 Decisional practice interprets 'fairness' in different
ways in different situations. IE
UNIVERSITY OF LEEDS

• Restrictions going beyond what is absolutely necessary to achieve one party's objectives and
unfairly encroaching on the copyright holder's freedom to exercise the right (SABAM) - fairness
requires balancing of rights and obligations;

• Imposing co~ on competitor~not imposed on one's self for the same operations/ -
discrim~nation (Telemarketing:J:, . / / \J"'l,,vw~' ._ --

/ "

• Commercial term tj(at fails to comply with the principle of proportionality (EC OSO);

• Oppressiveness and one-sidedness of contract term (A/sate/);

• ·Michelin's discount system was ~ because, inter alia, '.. oat only because the dealers were
_placed in a weak psychological position during negotiations/but also because, during the
negotiations, they w e r e ~ to base themselves on a reliable estimate of their cost prices and
~h~§_determf~ir business strategy free~y.' (EC, Michelin II, [223]) · · _,
7

5'c4\~--
\:~I'"- A.,1,\~~.,\,t~ \""\,,,~.A '¥~ .
• Fairness to competitors? Comes close to prohibition of 'unfair competition'.

• CoJ(some rules of unfair competition 13/themselves may be anticompetitive (Yves Rocher,

[22]).

•
iJ )
Fairness to customers or consumers? Interests not always aligned (Akman, JLS, 2010).

• Fairness to competitors and to customers/consumers? Might bej~_p~ble to achieve

concurrently.

• Fairness to customers? Article 102 expressly aimed at 'situations which clearly originate in
contractuarFelat1ons' (Hoffmann-La Roche, [116]).
-====

• Unfair= exploitative? (see Akman (Hart, 2012) for exploitati90__being a necessary requirement
on top of exclusion and lack of an increase inefficiency),/
1-
· 1 ±--'-w'-
pA7 ~.,,.i,-c::;
? ;v,- . ~ - \ r· \.d. __-
- 1_,). ¼ t...r;'Vr'"""
"'1_1,,•t/P
a
 - I
I .

Adopting fairness as a stand alone policy or

enforcement goal should be avoided. UNIVERSITY OF LEEDS
El
• Legal certainty is a fundamental principle of EU law.
•<f~inciples of fairness and justi~ are extraneous to competition law: the lion eats the deer' (van
der Woude, 2008). '/4
• Fairness vs Welfare - legal rules should be selected entirely with respect to t'heir effec~? on the
wellbeing of individuals and notions of 'fairness' should receive no independent weight in the
assessment (Kaplow and Shavell, 2002).

• Potential clash with other policy goals - eg efficiency, competitiveness, etc.

• Subjectivity & arbitrariness - prone to manipulation to include political interests, populist views,
etc.

• Potential for 'fairness' imperative to push competition law into 'unfair competition law'.

• 'Most of the time, we get consumers a fairer deal by keeping markets competitive ... ' (Vestager,
2016) 9
 MICROECONOMIE APPLIQUEE
MICROECONOMIC APPLICATIONS

Fairness in economics: can it "make sense", and how?

13 th annual conference of the GCLC

25 January 2018

David Spector
 Surge pricing: unfair, but sound economics?
The dismal science's embrace of surge pricing

• Uber surge pricing: adjusting price to changing demand and supply

conditions, in real time
Demand side: avoid rationing, priority to riders with high willingness to pay
- Supply side: encourage more drivers to hit the road
- Conform to microeconomics 1.01
• Efficiency benefits confirmed empirically
Price surge mechanism increases car availability in peak demand periods

I Pay or delay
Uber trips
System not working System working
New Year's Eve. New York City, Dec 31st2014 Ariana Grande concert, Madison Square-Garden, Mar 21st 2015
,1•, 1
/'/1/i'/1' 1\U// lr.'1/(' Completion rate Av,-•rnqe wait trmc Completion rate
% %

100 10 100

80 8 80

60 6 60

A. • 40 1,
40

IW'v 20 2 ~ 20

o~,-,-,-,-,-;-,-,-..........-.......-.-.......--.......- 0 ~~ ~ ~ ~~ ~ . . . . . . . - o
22:00 00:00 02:00 04:00 20:00 22:00 00:00 02:00
Sources: "The Effects of Uber's Surge Pricing: ACase Study", Hall eta/, (2015)

Source: The Economist

 Surge pricing: unfair, but sound economics?
Popular outrage against surge pricing

• NYC customers outraged when Uber prices rose following

Sep. 2016 bombings or the 2011 New Year Eve's snowstorm
Uber announced temporary suspension of surge pricing

Uber NYC
• @Uber_NYC

Surge pricing has been turned off in the #Chelsea #explosion

area. Allow extra time for drivers to navigate due to road
closures. Stay safe.
2:46 AM - Sep 18, 2016

Q 13 t.1- go v 145 6

• 35 states have laws agains~ ice gouging' ...

... which most economists disagree with
The dismal science vs. the rest of us/them?
Price Gouging
Connecticut should pass its Senate Bill 60, which states that during a
"severe weather event emergency, no person within the chain of
distribution of consumer goods and services shall sell or offer to sell
consumer goods or services for a price that is unconscionably excessive."

Responses Responses weighted by each expert's

confidence
100~-" 100%

75',·i, 75%,

so·~. ,, 50%

25~/.,
15%
8%,

0%

Source: IGM economic experts panel

 Economists, economic agents and fairness
• Should economists care about fairness? Is it a relevant
economic concept?
- Implications for competition law to the extent that its implementation
makes much room for economic reasoning

• Do economic agents care about fairness, and how should

economists take that into account?
- Implications for functioning of markets
- Implications for economic analysis of competition cases
 Market prices, efficiency and fairness
Economists unwillingly fed early debates on fair income distribution

• Positive vs. normative approach

Economists from the outset have focused on positive price theory
Legal scholars have long complained about this short-sightedness

'The issue of fair prices, which so rightly concerned medieval theologians, is highly topical
today and most contemporary economists fail to grasp how important it is' (R. Jay, Revue
d'economie politique, 1901- my translation)

• Normative assessment with respect to efficiency rather than fairness

~ But fairn · rations intertwined with economic analysis from the

outse : rent theo_ry
The first meaningful, non-obvious result stated by economists (Ricard<;>, 1817)
... and the focus of an ely active political campaign based on fairness considerations
(John Stuart Mil enry George
• Land rent is determ ine wit respect to productivity differential relative to worst cultivated land
• Exogenous changes that increase cultivated areas (population increase, bad harvest abroad) increase land rent
• "Unearned increment" ... then extended to value of urban land, impact of railway construction, etc.
• 1890-1910: tax reform in UK largely based on campaign against 'unearned increment' with references to theory
of rent
 Market prices, efficiency and fairness
The classical approach: disentangling fairness from economic analysis

• 'Marginal revolution' (late 19th century)

At last, a theory of prices that unifies demand and supply issues
Under competitive conditions (atomistic demand and supply), price= marginal cost= marginal utility_
• Competitive equilibrium outcomes are efficient

• Concerns over fairness deemed largely irrelevant or redundant

Unhindered competition leads to "fair" prices since they are equal to both (marginal) costs and utility/ value '-

Tampering with price system would yield negative side effects

Intervention with prices is justified only in the presence of market failures
• Justifying minimum wages by labour market monopsony
• "Pigouvian" taxes (such as carbon taxes)
• Regulation of natural monopolies

• Fairness concerns should be dealt with through tax system, not interfering with market mechanisms
'Georgist' tradition in US: free-trade, competition + land taxes
Still dominant view among economists, but often at odds with non-economists', i.e. on agriculture: better
help farmers through direct income support measures than by artificially raising food prices, setting up
quotas or tariffs, regulating retailers' flexibility to cut prices

• Economic analysis of fairness/justice: a lively field in the 20th century;'but remote from mainstream

---
John Rawls, Amartya Sen (Economics Nobel prize 1998)
Key theoretical ingredient: what would have been agreed upon behind "veil of ignorance"?
.~
 Economists, fairness and antitrust
The beginning of antitrust laws

• Political context: perception of unfair economic power

- Robber barons, 'malefactors of great wealth'

• Economists' views largely shaped by conceptY()ther than 'fairness'

Views in favour of a moderate approach to cartels
• Purported instability of full-fledged competition, leading to alternation of price wars and monopoly
• Mostly an efficiency argument driven by (we now know) incorrect view that competition prevents firms from
recouping fixed costs
• Different focus than ethical argument (common at the time) on need for fair return

Views in favour of antitrust laws

• Unfair market practices are those that prevent competition from functioning
- Procedural rather than distributional justice
• Early 20th -century economists (John Bates Clark, Alfred Marshall} focused on danger from
exclusionary practices such as targeted price-cutting
- Similar to logic of 'as-efficient competitor' test
- Less concerned about cartels and exploitative pricing, assumed to be vulnerable to entry if exclusionary
practices are precluded
 Economists, fairness and antitrust
The decline of fairness concerns

• Article 102: "Such abuse may~ in particular~ consist in

(a) 'Such abuse may, in particular, consist in directly or indirectly imposing unfair
purchase or selling prices or other unfair trading conditions (... )

(c) applying dissimilar conditions to equivalent transactions with other trading parties,
thereby placing them at a competitive disadvantage

• The 'more economic approach' seems to leave little room for such fairness
considerations
Targeted price cuts and other practices envisioned in Article 102 are now deemed
problematic~ ly to _the extent that they veto otential to exclu com etitors in a
w!'! that ~ CE_nsumers (Commission's Guidance paper, 2008)
 Fairness strikes back: when cooperative game theory meets IP
What does the 'F~ in FRAND stand for?

• Still a lively debate on what 'fair' means in the context of compulsory licensing of
standard-essential patents
Often, little use for market-based benchmark since standard is de facto monopoly

• Among the many ideas floated in recent years, two can be related to economists'
approach to fairness
Relevant thought experiment: which prices would have emerged had various pieces of IP been
competing against each other before decision was made on a standard
• Related to old argument that relevant counterfactual is a hypothetical competitive market (just like old
arguments on minimum wages)
• Logical similarity to Rawlsian 'veil of ignorance'
Proposals to use apportionment method borrowed from cooperative game theory: Shapley value
• Shapley value (1953): a method for 'fairly' apportioning value created through cooperation, in the absence of
any market
• In the context of IP: Defined as average marginal contribution of each piece of IP, under alternative
assumptions about which other IP is selected
• Advocated in several recent papers as a 'common-sense check' even though a literal application seems
impractical
 Empirical economic psychology: fairness matters
A classical experiment: the ultimatum game

• Fairness from the viewpoint of empirical economic psychology

Behavioural game theory has stress how actual people differ from homo ceconomicus
• Concern for fairness is one of these departures
Kahneman, Daniel, Jack L. Knetsch, and Richard H. Thaler, "Fairness as a Constraint on Profit Seeking:
Entitlements in the Market," American Economic Review, 76 (1986), 728-741.
J. Rotemberg, "Fair pricing", Journal of the European Economic Association, 2009

• Famous, oft-repeated experiment: Ultimatum game

Setting
• 100 $ at stake
• Player 1 offers X% to Player 2
• If Player 2 accepts, Player 1 gets (100-X)% and Player 2 gets X
The outcome according to standard ('homo reconomicus') theory
• Player 2 is better off accepting any offer above zero
• Therefore, Player 1 should offer almost nothing and keeping almost 100 $ for herself
Observed outcomes
• Agents may leave money on the table to punish unfair proposal
• Anticipating this, or out of a concern for fairness, division proposals are less unequal than predicted by theory
Similar results observed in non-human primates
• Proctor, Williamson and de Waal (2013), Chimpanzees play the ultimatum game, Proceedings of the National
Academy of Sciences, 110 (6): 2070-2075.
Empirical economic psychology: fairness matters
A classical experiment: the ultimatum game

YUGOSLAVIA, ROUND 1 JAPAN, ROUND 1 ISAAEL. ROUND 1

(400.000 DIN, NUMIIEH or OOSEHVATIONS-:q (l.000 YBf. t fNA l -29) (20 IS, NUMBER OF OOSEJlVATI =3DI
•2
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I I

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.---....--
~001- , _ . . . . , . . _
•
- L

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I
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100 100 100

800 900 IIOO

'JOC

1000 1
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1000
0
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0 10 10 lO
,
40 ,o IO 70 10 to 100
0 10 20 JO 40 !>0 60 10 80 ff 100
 Empirical economic psychology: fairness matters
How concerns over fairness affect the functioning of markets

• Long-standing puzzle for practicioners of the dismal science: why do

sellers sometimes leave money on the table?
'Firms in the sports and entertainment industries offer their customers tickets at
standard prices for events that clearly generate excess demand. Popular new
models of automobiles may have waiting lists that extend for months.
Manufacturers in a number of industries operate with backlogs in booms and
allocate shipments when they obviously could raise prices and reduce the
queue. (Arthur Okun, 1981)
J

Even antitrust's arch-villain sometimes failed to maximise profits out of concerns

for fairness: in 1920, Standard Oil California reacted to a severe gasoline shortage
by imposing a rationing scheme rather than by raising prices. Internal documents
mentioned that SOCal 'tried to maintain the appearance of being fair'.

• Proposed explanation (Okun, 1981): Customer~ view price increases not

justified by cost increases as unfair and sellers take this into account:
'In practiceJ observed pricing behavior is a vast distance from do-it-yourself
auctioneering'
 Final remarks
Which room for fairness in competition law?

• Overall, good reasons to be skeptical of recourse to fairness in competition law debates

An example: ongoing debates on agricultural markets and retail regulation in France seem to be
about to launch a new cycle, similar to one that took place in the 1990-2000 decades:
• Concern over 'fair wholesale prices' leads to laws restricting retailers' flexibility to cut prices
• Unintended consequences (higher retail prices, collusion) then lead to slow scrapping of these laws
Caveat: appeal to fairness may be needed for competition law to enjoy enough public support

• Implementation must take into account how fairness concerns affect working of markets
Merger simulation
• Hypothetised price increases may meet "irrational" resistance
Cartels
• Long-standing puzzle: why do sellers sometimes collude on list price even though actual competition is on
rebates, which cannot be monitored?
• Possible answer : framing 'fair price' perceptions?
Analysis of dominance: the role of 'competition against oneself'
• Theory of durable monopolist (hardcover and paperbacks, new and old versions of a smartphone etc.)
• But consumers' perceptions of fairness alter their behaviour (not just their feelings) and in particular their
reaction to price changes over time by durable goods monopolist (E. Anderson, D. Simester, "Price stickiness
and customer antagonism", Quarterly Journal of Economics, 2010).
More generally, empirical economists tends to estimate key supply and demand parameters (costs,
demand elasticities) on the basis of observable data + assumption of full rationality of all agents
• Accurately predicting impact of merger/ interpreting disputed market conduct requires one to take into
account deviations from homo ceconomicus (including fairness concerns)
 crowellrfmoring

UNFAIR COMMERCIAL
PRACTICES AND FAIR
COMPETITION

Jules Stuyck

Crowell & Moring I1

OUTLINE
• Introduction
• Unfair competition
• B2C Unfair Commercial Practices
• Ethical Rules
• B2C Unfair Contract Terms
• B2B Unfair Trading Practices
• Bringing oget er - competition law?

Crowell & Moring I2

UNFAIR COMPETITION LAW

• Paris Union Convention- 1900 Revision: related to LP.-

law: "actes contra ires aux usages honnetes en matiere
commerciale et industrielle" (bonos mores)
• German UWG 1909:" gute Sitten"(followed by other
MS): evolution in case law: the interests of consumers
and the general interest are taken into account
• EU: minimum harmonisation misleading advertising
only (D 84/450), later full harmonisation comparative
advertising (D. 97/55)

Crowell & Moring I3

B2C UNFAIR COMMERCIAL PRACTICES (D.
2005/29: UCPD
• 3 levels: general clause/prohibition of misleading and
aggressive practices/black list
• general clause: a commercial practice is unfair where it is (a)
contrary to the requirements of professional diligence and (b)
is likely to materially distort the economic behavio d the
average targeted cons_umer
• 'professional diligence: the standard of special skill and care
which a trader may reasonably be expected to exercise
towards consumers, commensurate with honest business
practices and/or the general principle of good faith in the
trader's field of activity

Crowell & Moring I 4

C-310/ 15 Deroo-Blanquart
• Preliminary reference by Cour de Cassation (FR)
• the sale of a computer equipped with pre-installed software
without any option for the consumer to purchase the same )< cl.:, 1 , A-

model of computer not equipped with pre-installed software

does not in itself constitute an unfair commercial practice
• The consumer having been duly informed and given the
option to cancel the sale the trader demonstrated,the
required care towards the consumer / /

• If the practic~is widespread there may be a onsumer 0-QI.ce--

issue and possibly a ~ p ~ s u e (wJiich, in the absence
of a dominant positiory'or collusion,;eannot---he-resoJ.ved with
the instruments of competition law)
Crowell & Moring I5
Ethical Rules
• Standards of modern laws on commercial practices (and
unfair competition) cannot be reduced to ethical rules
• Ethical rules are enforced through Codes of Conduct and self-
regulation
• The violation of an ethical rul,r1°s in itself/r{ot a violation of the
legal standard of "professional diligence"

Crowell & Moring I6

 C-
B2~UNFAIR CONTRACT TERMS
• Directive 93/13 Unfair Contract Terms in C~er Contracts
(UCTD)
• Art. 3: A contractual term in a q_~er contract which has
not been individually negotiated shall be regarded as unfair if,
contrary to h~ rements o f ~ , it causes a
si nifican · bala e in the parties' rights and obligations
arising under the contract, to the detriment of the consumer
• CJEU standing case law{he consumevis in a weak position
vis-a-vis the seller; as regards both bargaining power and
/
level of knowledge

Crowell & Moring I7

B2B UNFAIR TRADING PRACTICES (UTPs)
• Commission Communication 2014 UTPs in the B2B food
supply chain and Commission Report 2016
• At EU level no legislation, but soft law: "EU Supply
Chain Initiative"
• Legislation in 20 MS (in others, such as BE and NL, only
self-regulation)
• Subject matter: unfair contractual terms in B2B supply
contracts

Crowell & Moring I8

UTPs 2
• Commission Report 2016: four key categories of UTPs:
Unduly shifting risks on other party
• Asking advantages without performing a service
related to it
• Unilateral or retroactive changes of a contract
• Unfair termination of contract
• Concepts and enforcement from ntitrust law ut
often NCAs also deal with B?(Jnfair commercial

--
practices)
'

Crowell & Moring I9

UTPs 3 (Example France)
• France: Art. L 420-1(2) Code Com. prohibition of abuse,
-=by an undertaking or a group of bl-l'ldertakings, of the
stat economic depen----- e in which a client or
supp Ier In s itself towar s therrr, where it ls likely to
~ h e functioning of the structure of competition
//

• Art. 442-6 Code com.: black list

• Enforcement: Autorite, criminal and civil courts
• Comparable provisions in other MS (Germany, UK .. )
• Different thresholds (SME, grossly deviate ... )

Crowell & Moring I 10

Interim conclusion
• The laws mentioned only deal with fairness i
relations (B2C and B2B)
• Art. 3(2) and (3)Regulation 1/2003: neutrality of
C:_ompetition 1av.a vis-a-vi50'ational laws on UTPs and
unfair competition law7 o---l,l)(--;-6~ ¥

_/ C(>.,\/'- C

Crowell & Moring I 11

THE BROADER PICTURE: FAIRNESS IN
COMMERCIAL RELATIONS
------ - - -
• Should the law take care of(economic depende~ and
intervene to protect !.he weaker business partner?
• To fill the gap left by competition law?
• But if no effect on competition in the market probably
not
• Significant imbala ce in the rights and obligations of
the parties as the main test, ~ut supplemented by a
·nd of a "de min1mis effect on competition test

Crowell & Moring I 12

SOME FURTHER THOUGHTS
• Unfair competition as an oxymoron or a tautology
• The law of utf!air commercial practice) and r1Qfair trading
practiceffcan supplement competition law,,,l)ut also negatively
influence its application
• The latter risk can be diminishedif guaranteeing effective

-
competition is also an objective of the law of unfair
-
commercial practices and unfair trading practices

Crowell & Moring I 13

CONCLUDING REMARKS
• The development of the law on (_y_nfair commercial practices
and) unfair trading practice_
s' may aJLeviate the re_cent pressure
on competition law to take into account fairness
There ieneed for an increased importance of fairness in "7 V'\ -\W "- ':,
competition law r~__~( tz,,{./\ 1..-~ --
• There is an inherent tension between competition law and
unfair competition law
• Coordination of enforcement is desirable

Crowell & Moring I 14

Policy- Driven Regulation versus
Neutral Competition
Prof dr L Hancher, Tilburg University,
the Netherlands and FSR/EUI,
Florence. Italy.
 Outline

• Regulation versus general compe~ition law

c ~ I in network sectors - an ongoing debate
• New challenges - market design and proactive
regulation
• An alternative paradigm?
Competitive Neutrality (CN)
Pros and cons of a general CN framework
• Implications for fairness debate
 Ex ante v ex post

• Parameters of debate well known in network sectors

• Aysmmetrical regulation to curb incumbent market
power in transitional period - e.g. telecoms
• Residual asymmetric regulation of the former
incumbent is generally defended on two grounds:
• (1) to protect consumers from monopolistic behavior
because not all markets will move to effective
competition at the same pace; and (2) to provide a
"helping hand" to entrants by deliberately
handicapping the incumbent during the transition
period.
 Ex Ante v Ex post/2
• Structural re-organisation to prevent
discrimination against new entrants - e.g
ownership unbundling in energy sector;
• Aims to promote new entry, competition and
lower prices
• May also deal with barriers to exit and mobility
•
issues
• Focuses regulatory control on (monopolistic)
network issues - eg access terms, conditions and
• •
pr1c1ng
 Ex ante approach still fit for purpose?

• AMP approach intended to be transitional -

may create inefficiencies in longer term
• Unbundled entities - once unbundled do not
need ex ante regulation
• Network access regulatory [prices and terms]
only necessary for non-duplicable faciliies -
but is concept relevant for 'platforms' ?
 Ex post competition control
preferable?
• Ongoing debate in network sectors
• but 'proactive' regulation needed to shape
market as fit for new challenges:
• Example: electricity market design/clean energy
package= 1000 pages of draft regulation
• Aims to encourage new entrants (prosumers,
aggregators etc) and inter alia remove barriers
created by current EU/national legislation
 Current state of play

• Regulated activities/sub sectors co-exist

alongside (new or emerging) non-regulated
activities:
• Burdens or opportunities
• Example: Electrical vehicle provision/storage
• Is solution to regulate or leave to general
competition law?
• Clean energy package: compromise position
 Competitive neutrality

• a forgotten child? Initially adopted in 1990s

with relative enthusiasm in Australia,
competitive neutrality had by 2013 'fallen
off the radar' .
• Could this concept offer a useful and
operational paradigm as an alternative to the
ex ante/ex post debate?
 CN - A Revival of Interest?

• Alternative to state aid control - Brexit

implications?
• New generation FTAs - EU/Singapore?
• CN and public service provision - a new
dimension and challenge?
 CN - WHAT IS IT?

• Traditionally CN deals with SOEs/ government

intervention/mixed markets
• Could it be extended to deal with mixed
markets in sense of regulated v non regulated
segments?
• Implications for fairness debate?
 Unctad project (2011)
• Competitive neutrality is the recognition that
significant government business activities which are in
competition with the private sector should not have a
competitive advantage or disadvantage simply by
virtue of government ownership and control. This
allows resources to flow to efficient producers and
maximises consumer welfare.
• It also forces government businesses to be more
transparent and addresses private competitor concerns
about equity and the level playing field for
competition. It is a minimum condition for effective
markets where government is involved.
 OECD

11
• Competitive neutrality [is a] regulatory
framework (i) within which public and private
enterprises face the same set of rules and (ii)
where no contact with the state brings
competitive advantage to any market
participant" [OECD 2009]
•
 What is it?

• Competitive neutrality requires that

government business activities should not
enjoy net competitive advantage over their
private sector competitors simply by virtue of
public sector ownership (Austria/ion CN Policy
Statement 2009) .
 OFT

• Competitive neutrality is a minimum condition

for setting up effective mixed markets -
ensuring that there are no artificial barriers to
entry and that outcomes are efficient, given
wider policy objectives (OFT 2010).
 Role of CN

• Competitive neutrality is often a 'companion

policy' to the extension of the operation of
competition law to the public sector, and it
has the same rationale - allocative efficiency

• Literature distinguishes between 'weak' and

'strong' CN
 Netting out the advantages and disadvantages
• Advantages can include:
• immunity from certain taxes and charges• immunity from various
regulatory requirements
• explicit or implicit governmental guarantees on debt
• concessional interest rates on loans
• not being required to account for depreciation expenses
• not being required to pay dividends to the owner of the business (ie the
State)
• not being required to achieve a commercial rate of return
on assets
• the ability to act consistently in a non-commercial manner
• captive or tied markets
• effective immunity from bankruptcy and
• where the government business operates in both monopoly and competitive
markets, opportunities for cross-subsidisation
CN as complement to competition law

• CN applies even if entity is not an

1
undertaking'
• Case C-205/03P FENIN (Paragraphs 25-26)
• CN traditionally aimed at incumbency
advantages in transition to market
liberalisation
• Can address issues that are difficult to tackle
under competition law - e.g. (unfair) cross
subsidisation
 Policy Regulation as an alternative to
CN
• If Incumbency advantages are too large - allowing
potential new entrants and incumbents to compete on
the same parameters (that is, have competitive
neutrality) would imply that incumbents will always
win contracts and no new entry will take place.
• Is it better to encourage entry by private operators
into formerly public markets by granting them some
(temporary) competitive advantage?.
• If so - should CN be introduced as a
policy/benchmark once a sufficient level of entry has
taken place and competition in the market is
adequately regulated?
 CN and Public interest
• If CN could compromise public policy objectives,
Australian government can invoke a "public
interest" test - ex ante via ministerial decree or
ex post (whereupon the onus rests with the
government to prove its case).
A broad range of exceptions:
• environmental issues;
• social welfare and equity;
• occupational health and safety concerns; and
• economic and regional develop-ment, including
employment and
 Summing up
• Focus on CN is of limited use in resolving
discussion as to pros and cons of ex ante policy
versus ex post general competition
• Many of the same issues of optimal timing to
transition from one paradigm to another remain
• CN may be dis-applied in public interest - so this
does not resolve the fairness debate
• CN is not likely to offer a useful substitute
approach for ex post or ex ante contol in network
sector
 CN as complementary paradigm
• Recasting CN as benchmark for understanding
and assessing allocation of benefits and
burdens in 'mixed' markets [co-existing
regulated/non-regulated segments] may be a
useful tool to address role/impact of policy
regulation in markets in transition.
• CN complements competition policy - shares
same economic goals - adding 'fairness' to the
mix is not helpful.
Fairness - what do we mean?
"IS THERE SOMETHING ROTTEN IN THE STATE OF COMPETITION LAW?"

• What does "fairness" mean?

- Difficulties to translate "fairness" into French ; double meaning "equity" and "loyalty"
-------------..

• Fairness to whom and with which objective(s)? A need for clarification

- Protecting consumers?
• Consumer welfare is a competition law standard
• Is the objective to intervene in the distribution of surplus? Objective of distributive
justice?
- Protecting competitors?
• New economy, more concentration and more importance of "winner-take-all markets"
• Is the objective to protect competitors!,-Which ones?/Small ones? Less efficient ones?

• This presentation proposes a short review of the French approach/'

(1) Is fairness historically part of the design of competition rules in France?
( 2) Does it evolve?
(3) Is fairness taken into account in the current enforcement of antitrust law?

2
Fairness - how is it considered under French competition law?
HISTORICAL APPROACH

• Purposes of competition law - traditional approach

- Competition law protects, in principle, the market and competition
(fight against price increases)
- Strictly speaking, it does not encompass the notion of fairness of
competition
- What is sought is the economic efficiency and the well-being of
consumers
- No concern for fairness, neutrality in the allocation of resources, in
principle it is not driven by the idea of retributive justice
• Purposes of competition law - French approach
- Economic efficiency has never been the traditional aim of French
-competition law. Price theory is not the only objective. It is sensible to
other considerations than prices, such as employment, environment,
small businesses, fight against abuses of purchasing power. ..
- However, this approach knows evolutions

3
Period ante 1986
HISTORICAL APPROACH

• Before the Ordinances of 1945

- The Al larde Decree (freedom of trade and industry) and the Law Le
Chape llier (guilds' abolishment) are aimed at punishing artificial price
changes
- There is no significant evolution in the 19th century (such as the Sherman
Act in the US) despite industrialisation and concentration of the economy
- After WWl and the 1929 crisis (scarcity and inflation), lhe State intervenes
· increasingly in order to control prices (a Code on prices is adopted 1n 1941 }
• Ordinances of 30 June 1945: an administrated economy
- The Ordi nances regardi ng prices, detection, prosecution and punishment of
infringemen t s to eco nom ic legislation- i ntroduce a system of price control
and an adm inist rated economy { at a scarcity and inflation time).
- Competition law is seen as a tQol of econom ic policy. .
- Progressively, rules on anticompetitive practices are introduced ( cartels in
1953, abuses of dominance in 1963, merger control in 1977)
{;sf- Meanwhile, ecific rules are devel fair business practices
~ and discriminatory conditions of sale (Ordinance of 196 , aw

4
1986: entry into the modern area, but with some specificities (1)
HISTORICAL APPROACH

• Ordinance of 1 December 1986 regarding price and competition freedom

- Paradigm shift
• End of the administrated economy/, the principle of free competition is affirmed/
• The approach adopted is more in line with 'European law principles /
- The Competition Council (independent body) is created, ar,d becomes the French
Competition Authority later on (2008} ·
- But French specificities are maintained 7considerations of fairness? /

· Specificity in antitrust and merger law

- "~ecific abuses (infringements without dominance)
<ft ·.Abuse of economic de endenc (inspired by German l a w ~- introduced to
pr ec s I r n e1r re ations with lar e retailers
• Abusively low prices (1996) - introduced to protect small businesses
- Specific derogations/ exemptions
• Access or stability of employment ,are listed £mong the exemption factors as an
economic pro ress
• The Ministr ma grant exemptions by decree to certain categories of agreements,
especially when they are mten_ded__toJ mproveSMEs' management ·

5
1986: entry into the modern area, with some specificities (2)
HISTORICAL APPROACH

- In merger control
• Control remains in the hands of the Ministry of Economy
• Control test: ba nee between lessening of competiti QD:=C1 contribution to
the economic fillQ ocial rogress, which incluqes frr, ploymen (and later to
the competitiveness of the merged entitiesY ----------- -

• Specificity by introducing rules regarding "Transparency and

restrictive practices" with a f~irness purpose (Title 4 Fr. Com. Code)
- The purpose of this title is mainly to introduce transparency in business
relationships
- Behaviours impacting relationships between business partners (resale
below costs, fixed prices, discriminatory practices ... )
• Punished by means of civil or criminal sanctions
• Prohibited per se, independently of their effects on the market

6
1986 and~: evolution (1)
RESTRICTIVE PRACTICES

• Diversification and intensification over the time of restrictive practices rules

- Manifold objectives: protection of the weakest economic actors, search for a trade-off
in relationsflips ...
- Common feature: per se prohibition,@ssessment _o f the impact on competition
· Development implicitly allowed by EU law
- As opposed to antitrust law(Members States enjoy a wid~r latitude in that respect
because EU law did not intervene in this field yet
00 enshrines the Member States' latitude (under French initiative) -
~s~~~rt~1c~e~3~3~p'.......!o~ssibility to maintain provisions "that predominantly pursue an
~ ,ve , erent" from Art. 101 and 102)
• ~_radion between antitrusvand restrictive practicey
- Example of overlap - different purposes and enforcers/
• Booking case- regarding the parity clauses rmposed on hotels (prohibiting hotels
using online booking platforms to display lower night stay prices on other hotel
distribution channels including themselves)
/

- Commitments before certain competition authorities lFrench, Italiaryand

Swedish) were taken by Booking/in order to restore rice competition
- French commercial tribunal considered the parity clause~ull and void on -
the basis of Title 4 of the French Commercial Code

7
1986 and after: evolution (2)
RESTRICTIVE PRACTICES

· Questioning about a new reform

- Recent report« For a reform of competition law» - January 2018
- Various questions and options
• Are restrictive practiceypart of competition law?
• Are the existing ru les efficient and successfu l? Serious debate!See French gouvernement Etats
generaux de l'alimentation (Summit con ference on food) /
• Shall restrict ive practices be ~ ~n from t he commercial code?And rely on ~ ru les:
- antitrust law~hen restrictive practices have an effect on the market)
rl'-\fi-~ ( .french civil code (tort law) in other situations (to sanction unfair competition, "unfair"
contractual negotiations, ensure compensation to consumers through damages actions)
• Shal l restricti ve practices be simplified or reorganised?
- Simplification: deletion of certain restrictive practices considered as obsolete

·81-r+ -. ~ i o n : limit the number of rules; ~acilitate their implementation; introduce a

~ of the impact of the praa 1ce the situation of the operator on a market?
• A debate which also exists at EU level ,
- Initiatives of the Commission Intern I et in 2013. - Green paper on unfair trading
p · · e o oo and non-food supply chain in Europe
But recent initiatives seems limited;to two specific sector (i) food supply chain a ~ _
digital sector"/ -- - ·

~'il sJw- ~~ ~2---

8 aslust
1986 and after: evolution (3)
ANTITRUST

• An unsuccessful application of the provisions regarding French specific abuses

- Permitted by Regulation 1/2003 - Art 3§2 (possibility to maintain "stricter national
laws which prohibit or sanction unilateral conduct")
- ,1\busively low prices: no application - very strict conditions (pricing for consumers,
predatory test, foreclosure effect... -

•
r
\~
Abuse of economic de endenc
restrictive practices
Almost non-use of specific derogations
..,
lications strict conditions - ov~rlap with ) ~

• Progressive orientation of antitrust law towards the protection of consumer

welfare and economic efficiency
- Integration and development of economic analysis
- FCA President B. Lasserre in 2006 in the annual report "Competition law and policy
have@ other ob;ective than to contribute to economic efficiency and consumer
welfaii?7
- New President I. de Silva in 2016: mentions finding her inspiration in the contribution
of her predecessor, i.e. competition on the merits and the need for an open and fair
playing field
• Although soft law instruments and communication policy have increased in the recent
period, we do not observe - to date - a more frequent occurrence of "fairness" in
speeches and publications

9
1986 and after: evolution (4)
ANTITRUST

• Reform of merger control in 2008

- Decision-making power transfered to the FCA
- No more reference to social progress or to competitiveness
- SLC test and efficiencies approach are favoured

10
Fairness and the current enforcement of antitrust law (1)
FAIRNESS DOES NOT APPEAR AS A DIRECT RELEVANT POLICY CONSIDERATION

· No specific trend showing a new evolution in the approach

• But, consideration of fairness can be mentioned at three levels
- Sometimes when sanctions are set out (but no impact on the
qualification)
• 2010: Steel cartel - Court of Appeal reduces the fine from 575 M€ to 75 M€
in particular because of the context of the economic crisis
• 2015: FCA Poultry case - takes into consideration the ce§u_l_ii_ -rttv?of the
sector (~ ic cris_!_s ;)need of an inter-professional organisation) t~
exclude application of the Guidelines on fines_ ·
- Consideration of fairness in network industries? /
• Where the monopoly or the dominant position of incumbent companies does
not result from competition on the merits
• Reflects the Auth;ity's desir,?to regulat~ r~ther than to sanction1

11
Fairness and the current enforcement of antitrust law (2)
FAIRNESS DOES~ APPEAR AS A DIRECT RELEVANT POLICY CONSIDERATION

- Consideration of fairness in network industries - examples

• EDF case 2007 - production highly concentratye{Margin squeeze approach to force the
creation of a wholesale electricity market/
• ENGIE case 2014 and 2017 - access to the clients database to foster entry on the
market of new entrants
• In all of these cases/no final decisjQn_oJLtl:le_merits (and therefore no modification of
the economic test) - either commitments or set-t-fem-ent procedures
- Consideration of fairness in statements provided by the FCA in its advisory function
• 2008: the FCA obtains the ability to deliver opinions on an ex officio basis
• Use of this power in order to promote competition but with a large approach (market
design)
- The FCA has considered that the grant of access to essential facilities (railway
sector) or the grant of advantageous trade conditions (in the telecoms sector as
regards call terminations) to new entrants by the sectorial regulator was
necessary to restore "competitive equity"
- Further, it also considered that the question of "regulatory equity" falls more
properly within the competence of the government and, where appropriate,
international instances, than within the competence of the FCA (Opinion n° 12-A-
08 dated 20 Mars 2012)

12 astust
Final remarks
DOES PROMOTING FAIRNESS IN ANTITRUST LAW INCREASE RISK OF DIVERGENCE?

• Regulation 1/2003
- Coincides with a more economic and effect-based approach at the time
of its adoption
- Introduction of the rule of convergence (Article 3)
- Cooperation and coherence ensured through the ECN

• How to deal with fairness in the context of the decentralisation?

- What would the test for a "fair" approach?
- This concept of fairness is subjective - Different NCAs in Europe may
have a different sense of whether an outcome is fair or not
- How do we ensure a consistent approach throughout Europe?

13 ashrst
 Introduction
Prima facie view
• Fairness is essentially a matter for the
interpretati~nyf the German Unfair Trade
Practices Acya_nd does not as such describe any
essential element of competition law analysis
(save for the idea of procedural fairness under
Article 6 European Human Rights Convention).
Secunda facie view
• Fairness as a legal concept comes close to the legal
test of "equity" (Billigkeit) under Section 315 of
the German Civil Code and the overall balancing
~ Freshfields Brockhaus Deringer
test under the German equivalent of Article 102
TFEU (Abuse of a dominant position).
• Moreover, in parallel to the development of the
concept at European Union level, and even
. t h"1s deve1opmenY,/t h eermsmrness
preced1ng t "f · "
-and "fair com___petition':, along with "level playing
field", are notions which are frequently used in
---..
communications from the German Federal Cartel
Office (FCO) to the media. Fairness is also used -
sparingly - in the case law of German courts.
2
 Fairness as a legal term (Germany)

• Fairness is used in German legal language insofar correspond more to terms like "inappropriate",
as the original English law term has been '.'improper", "inequitable".
absorbed tel quel into German legal language:
• The German translation of Directive 2005/29/EC
- Fair trial under Article 6 European Rights concerning Unfair B-to-C Commercial Practices is
Convention "unlauter", not "unfair", "unlauter" being_an old-
f.asliioned termwhich closely mirrors
-FRAND En lish~terms lik dishonest" improper" -
• Typically, however, for the official German similar to the French law term of " o a .
equivalent of "fair/unfair" as part of English
language EU legal drafting (Article 101 para 3,
Article 102 TFEU: "... fair share .... ", "unfair
trading conditions") other adjective~re used;
which - if translated back into English -
® Freshfields Brockhaus Deringer 3
 Fairness as a legal term (Germany) (2)

• The adjectives "fair/unfair" have for a long time socially/morally reprehensible. This would
been part of everyday German language parlance explain why administrators and judges find the
and are used in a sense which broadly application of the term as a legal concept difficult.
corresponds to the original sense in the English
language. "Fair/unfair" will typically be used to
describe behaviour in sports, in the workplace
between colleagues or in trade negotiations
between companies, and could also relate to the
behaviour of politicians etc .. In all these situations
"fair/unfair" would have a meta legal meaning.
"Unfair" would be used as a verdict on behaviour
which technically complies with the rules but
which is somehow considered to be

®) Freshfields Brockhaus Deringer 4

 German Competition law:
A smorgasbord of undefined terms, fairness as a substantive term of legal analysis
would be yet another one

• Inequitable from the Roman law concept of ~ Where would fairness come in here and what
aequitas. would be the benefit of yet another vague term?
• Inappropriate.
• Competition on the merits/unmeritorious
behaviour.
• Necessity of a general balancing test in abuse
cases.
• Necessity of establishing "a significant"
overcharge in pricing abuse cases.

® Freshfields Brockhaus Deringer 5

 Use in communication by the FCO
• Quite frequently and at least since 2005 the FCO
uses the term "fair/unfair" or "fair competition" in
many of its German language communications.
• The standard formulae used in this context are:
- Objective of the FCO's enforcement policies are:
"To keep markets open and to assure fair
competition to the benefit of undertakings and
consumers".
- Achieving a "level playing field for privat~ly
owned and municipal network operators in the
energy sector is a keyreqfilrement for ensuring
fa_!! competition".
~ Freshfields Brockhaus Deringer
~ While the term "fairness" will appear frequenel in
such kinds of communication, there would b no
consensus in the legal community that "fair '
competition" would mean anything different to
"competition on the merits" or "effective
~ T h e term ''fair" is not necessarily
confined to describing the market structure but it
could-alse--be-lfSed to describe the behaviour of
dominant companies.
6
 Review of the ,,eq1jfu,·· of pricing, notably of
utilities
German Civil Code, German Antritrust Act
• Based on the Roman law concept of aequitas,
Section 315 of the German Civil Code provides for
the civil judge (not the FCO) to review the ' ~ "
of all contract provisions (notably on pricinv·
which can be determined _c1t the discretion of one
party. ------
---·--
• This has led to a l_o_ng establish-ea-practice_nf civil
courts (often lower courts at the district level) __
revtewing in particulay-the general trading terms
and pricing schemes of utilities, /specially-in cases
of price increases.
- The review standard as such is not that of
® Freshfields Brockhaus Deringer
competition law and at least in nuances differs
from Article 102 TFEU. But, if the trading terms
that are being reviewed have been imposed by
com anies ·n a dominant position,tthere is often
a reversal of.p.roof,in th~ the dominant
COJTIPany needs to show tlrat cost incr~aS~fW_ere
the reasoµ'for
- an increase in the price.
- - ·--· -
'C - At the same time, pricing abuses, especially by
utility companies (water utilities, district
heating etc.) are also frequently reviewed by the
German Federal competition authorities. Here,
fairness may be used in press communication,
but is not an element of the legal analysis as
such.
7

Examples of reviewing ,,inequitable
behaviour in abuse cases
a
• Traditionally, in German competition law; form
of behaviour which could be classifiedias abuse of
a dominant position 'is only l!!!lawful if it is
considered inequitable by the standards of a
general balancing test which, however, not only
~looks at the interests of the stakeholders involved
but also the "freedom of competition".
• Here are a number of examples from the more
recent case law:
- The Pechstein case (German ice skating World
champion Claudia Pechstein was excluded from
the relevant governing body of the International
~ Freshfields Brockhaus Deringer
11
Skating Union for doping charg~he review
mechanisms of the competent Court of
Arbitration for. Sports (Lausann~) were [also]
I ,
considered "fair"1by the standards of the
German Antitrust Act).
;;
- The number plate printer case~ (case law, purely
based on German antitrust law )Vhereby
municipalities as owners of office space
geographic~y close to number plate
r~gistration .officerinnst tenderthis office sp9-ce
ey_ery five years for r~g:rby _the_private sector
co-mpanies which produce and print car number
__ plate&, !O achieve fai!1market acce51i)/ -
8
 11
Examples of reviewing ,,inequitable
behaviour in abuse cases (2)

• The newspaper wholesaler case (termination of a

newspaper distribution agreement between a
large newspaper publishing group and a long
established regional multi-brand newspaper
wholesaler was considered acceptable under
German antitrust law even though there was a
strong relation of dependency and the competitive
conditions for a wholesaler not stocking
newspapers of all major publishers where
significantly impaired).

® Freshfields Brockhaus Deringer 9

 The role of fairness/unfairness in defining
enforcement priorities

• As shown, fairness has not yet developed into a ~ Hence, it would be difficult to show with any
stand-alone legal concept. Yet, the term is degree of certainty that cases which lend
frequently used in communication by the FCO themselves to being associated with "fairness"
about its most important cases. would be more easily picked up by the FCO than
others.
• One observation could be that those cases where
fairness as a general concept helps to define the
overall enforcement policy goal are selected for
more intensive press communication.
• Such a phenomenon, however, could also be
explained by the FCO' s trend, for the past ten
years, of communicating more actively about its
cases which have a direct impact on consumers.

@ Freshfields Brockhaus Deringer 10

 Thank you

This material is provided by the international law firm Freshfields Bruckhaus Deringer LLP (a limited liability partnership organised under the law
of England and Wales authorised and regulated by the Solicitors Regulation Authority) (the UK LLP) and the offices and associated entities of the
UK LLP practising under the Freshfields Bruckhaus Deringer name in a number of jurisdictions, and Fresh fields Bruckhaus Deringer US LLP,
together referred to in the material as 'Freshfields'. For regulatory information please refer to www.freshfields.com/support/legalnotice.

The UK LLP has offices or associated entities in Austria, Bahrain, Belgium, China, England, France, Germany, Hong Kong, Italy, Japan,
the Netherlands, Russia, Singapore, Spain, the United Arab Emirates and Vietnam. Freshfields Brockhaus Deringer US LLP has offices in
New York City and Washington DC.

This material is for general information only and is not intended to provide legal advice.
© Freshfields Bruckhaus Deringer LLP 2018
Fairness in Competition Law and
Policy: The US Experience
Eleanor M. Fox
Professor, New York University School of Law
Global Competition Law Center
Brussels 25 January 2018
Outline
• 1 Introduction and thesis
• 2 The evolution of US antitrust law and its informing values
• Sherman Act 1890
• Federal Trade Commission Act and Clayton Act 1914
• The depression years
• Robinson Patman Act 1936
• Celler Keufauver Merger Amendment 1950
• The Reagan Revolution and beyond: squeezing fairness out of the dialog
• Federal Trade Commission: defining "unfair methods of competition"
• The surge of populism, The Open Markets Project:
• Bringing antitrust to the people

• 3 Conclusion
I Introduction and Thesis: The fairness debate
• People care about fairness
• The exploitation by the strong of the weak is considered unfair
• This was one of the main motivations for the Sherman Act
• If the antitrust laws were perceived as unfai,rthey would lack legitimacy
and the support of the people
• History: US antitrust law recognized and incorporated threads of fairness in
its case law until the Reagan revolution, when it became unpopular
• Unfairness discourseAed us down the slippery slope to protect inefficient
competitors
~ - - - -
• The law and discourse gained a motivation to explain unfairness ih terms consistent
with efficiency and making markets work,-,and thqt i~ow it is generally invoked
today
Sources of law?

What Monkeys Can teach us about FairnesS,NewYorkTimesJUNE3,2017

7
THE BIG TRUSTS CONTROLLED CONGRESS. WAS THAT UNFAIR?

Bosses of the Senate

II. The statutes, their motivations and meanings:
A. The Sherman Act 1890

Standard Oil controls industry and Congress

Muckrakers and robber barrens
B. 1914 The Cla ton Act and FTC Act:
The Progressive Era and evolution beyond
• Clayton Act- against certain tying, exclusive dealing and mergers
• Federal Trade Commission Act
• Prohi · nfair acts and practices (consumer protection) an unfair methods
competition antitrust)
• ntitrust: The FTC recognized the need to anchor "unfairness"
• The te~~£-frats hate the word
• The a~ency l;>egan to use it to mean "anticompetitive" and to follow the footsteps of Sherman
~ct interpretat ion_s,
• When much later the Supreme Court began ~ e scope of the ShermaQ Acttfor
f~te-awoR5---€hill ing competition,@ ~ology of business freedom / -
• The FTC debated whether to fill the slack and issued a one-page statement saying that unfair
methods includes acts that contravene the spirit of the Sherman and Clayton Acts, and the
Commission will be guided by consumer welfare 2015
C. One more_'~perJod,/two more statutes
• The 1930s: The Great Depression -
• The law was used to help big business lift itself by its_bootstap1,fairness to
businessAometimes too much competition was seen as unfair ~.( _,J_ liA l _
Y v' ':.)y~ ~~dlvv1
• Appalachian CoalstSugar Industry exchange of information ° .... _.........\ :~.;iv'\'\e.>$ %.:4->r -;.q__
• 1936 - the RobinsoJi::Batman Anti-price-discrimination statute ~ s s -1-,. ,.;,..,.,..

• To protect small bu~rom price discrimination ~~,~>.

111v<--S ,,~c:,.7~ €!. _
>

• Modern times: The Robinson Patman Act is o f-fav9 ; the Supreme Court construes it
to gut it; prohibition on price discriminatio m - 1 competition_
:::---
• 1950, in the aftermath of World War II
• The Celler Kefauver amendment to the C l ~ c t ~1___ .
• To help assure that the country does not fall into fascism or communism
D. Modern times: The Supreme Court's
current (dis)regard of unfairness
• Brooke Group, predatory pricing 1993
• Charging below marginal cost for 18 months to get rid of or compromise
competition by no-frills cigarettes, which succeeded, was not a violation J_
because the court did not see a r~ ent scenario -11 t, "l...
• "Even an act oJ pure malice by one business competitor ag~i~ st anothe1/do ot r:l,1 /
1
without monl, state a claim under _the federal antitrust lawy, ~h oseTaws d not reate a V
~deral law of unfair competition" ' 'hYv'li~ ~~
• Trinka (2004) ~v.\,- c-\J~~ ~ ?t- ~=t ·
0

• Incumbent~ ~ hich controls th_e lo~al loop, dc;,es not violate antitrust la~y.
cutting off local loop connect1on/sporad1cal y tot e new focal compet1tor:s/·1n
order to keep the customers for itself /
• Antitrust ca~e bothered with competitors' claims of "death by a thousand cuts";_//
this would ~~mpetition and investment [~gulatory oversight was a separate ground]
E. The populist backlash
• There is a ne\l\i~ to expand antitrust to me be __challenges of
growing concentration and control in the digital econom ~ --
- -- - - --- -------- --
• A recent former AAG called the goal of antitrust economic fairness"
• Open Markets Institute and some congresspeople fear/new forms of
bigh tech economic power_gripping America, leading to a downw~r9~ _
cycle of lnequality and loss of control OV§!:_OUr liv~
• J_nequality and unfairne~s motivations~
• These are important debates b~ relatively unlikely to gain policy traction in
the form of changes in US la""1/.. ·
111. Conclusion
• Fairness and efficiency live relatively comfortably side by side in the US, in
the sense thj){ the law in effecLJ:lefines the limits Qf fa±r:::ness_
• The fact of the fairness gebateskloe~undercJJt the ability of lawyers to
predict for their clien~what they can cir cannot dO-Without challenge
• Fairness does not have an unhinged life of its own .,
• Fairness in antitrust doe?/J'JOllinrlu~e-p.rotecting inefficient competitors at t~h~
_expense-of-C-t).A-StJm-e+s; a~r?astnot 1n the us --
• In my opinion there is room for fairness rhetoric to help construct a more
dynamic view of efficiency in US law
• For example, certain of incumbents' exclusionary strategies can be inefficient as well
as unfair
• Fairness is a part of our lives, comfort zones, and legitimacy of the law, and
can and should be recognized as a help-meet not an enemy of making
markets work
ALLEN & OVERY

Competition, copyright
licensing and the EU Digital single
market a fairness conundrum
Dirk Arts

, \ llcnA:<hcl\~lll)s
 ALLEN & OVERY

Identifying the issue?

- Can the concept of "fairness" be a guiding principle for

determining the competition law rules applicable to copyright
licences?

- What does fairness mean?

• Vague concept, with a strong subjective colouring
» "Implies a proper balance of conflicting economic interests"
» "Impartial and just treatment or behaviour without favouritism or
discrimination"
» Something is fair when it is perceived by those involved to be a
"proper balance of conflicting economic interests"
In the context of the EU Digital Single market, the o@g or not
offering of cross-border (performance) services seems to be a
central issue in the current debate. Should or can fairness play
a role in that debate?

, \llc118:(l1c11.cill~
 ALLEN & OVERY

Coditel (C-262/81)

Territorial exclusivity

No restriction of competition
- ':ff)he{fjjjj) fact that the owner..nflb.e_copyrightin__a film has
gfBnted to a sole licensee th ~xc usive ri to exhibit that film in
the territory of a Member State and, consequently, to prohibit
during a specified period, its showing to others, )s not sufficient to
justify the finding that such a contract must beiegarded as the
purpose, the means or the result of an a . reement decision or
concerted practice prohibited by the Treaty"
/o/.(IJ . .-.;, X

Why?
- Characteristics of the film industry, system of financing
- No explicit reference to "fairness"

, \lk11S_(>1LT1 ~ (l[S
 ALLEN & OVERY

Coditel (C-262/81)

The exercise of the right exhibiting a film may restrict competition

"the exercise of the exclusive right to exhibit a .. .m/ creates:

which are artificial and unjustifiable in terms of needs of the
cinema to c_a12t,ic industry or the possibility of charging fee~wbich-
exceed;(he fair return on i(l'!_estmentpr pn exclusiv~ty_tl]e_ dufa_t{C!_n <;>f
which is dispro ortionat to those re uirements_~,,_

Does the Court rely on the concept of "fairness" ? //

No specific guidance as to what a fair return on investment is.

\lk11S:<1,c11 ~111~ -I
 ALLEN & OVERY

Premier League Case (C-403/08 and C-429/08)

Premier
Territorial exclusivity no restriction of competition
League Case
(C-403/08
and
C-429/08) Additional obligations designed to prohibit or limit the cross-
border provision of broadcasting services - restriction by object

Copyright does not guarantee the highest possible remuneration, but

only an appropriate remuneration in relation to the economic value of
the service provided

What constitutes an appropriate remuneration - Objectivising the

"fairness" element ?
- Reasonable in relation actual or potential number of persons who enjoy
or whish to enjoy the service
- Premium for sole licence
- Premium for absolute territorial protection - "artificial price differences"
not acceptable (completion of the internal market)

, \lk11S(>1c,,.,111s
 ALLEN & OVERY

Blocking of unsolicited requests from customers established in the

EEA but outside the broadcaster's licensed territory

Final Report
on E- - Single licence for a territory is not restrictive
commerce - Geo-blocking does potentially raise a competition law issue
sector (amongst others)
inquiry

, \lk11S_(>1cn:111.~ 11
 ALLEN & OVERY

Territorial protection in the EU Digital Single

Market : the issue

Territorial scope of copyright is still linked to the territory of a Member State.

License agreements regularly mirrors territorial scope of the copyright involved.

Holder of a copyright has right to receive "appropriate remuneration" compared to the

economic value of the service.

"Value" of a work protected copyright may significantly differ from Member State to
Member State, which almost naturally should result in significant differences in the
appropriate remuneration received.

Can in a digital context consumers established outside the territory covered by the
licence easily (from a technical perspective) and arguably lawfully (from a copyright
perspective) get access to content in the licensed territory?

If so, significant "risk" or "opportunity" of arbitrage by migration of consumers from

"high value" territory'' to "low value" territory.

• \lk118'lhc11 .'IIIX
 ALLEN & OVERY

Does "absolute" territorial protection constitute an infringement ?

- What could be the "classic" assessment?

- Could considerations of "fairness" add anything?

' \lien S: 1 he r, .7 11 IS
 ALLEN & OVERY

Questions?

These are presentation slides only. The information within these slides does not
constitute definitive advice and should not be used as the basis for giving definitive
advice without checking the primary sources.

Allen & Overy means Allen & Overy LLP and/or its affiliated undertakings. The term
partner is used to refer to a member of Allen & Overy LLP or an employee or consultant
with equivalent standing and qualifications or an individual with equivalent status in one
of Allen & Overy LLP's affiliated undertakings.
• \lkn & <h~I\ 20JX .,
Regulating e-commerce
through competition rule ·
a fairness agenda?

GCLC Annual Conference

Dr Helen Jenkins
Managing Partner

25 January 2018

oxera
compelling economics
Fairness in e-commerce

• foundations for successful markets

~ an ransparenc : codified in regulations to correct market failures
• e~ ante consumer protection/fair trading rules
• prohibition of anti-competitive behaviour (101/102)
• 'fairness' concerns can be addressedihrough any one of these.
Be clear about: WPvlL : cJl ~1
• what sort of unfair practice is of concern
• the trigger and prevalence of these concerns
• the same framework is relevant-in e-commerQe1
• first, discuss types of fairness and concerns Urat are raised in the
e-commerce sector '
• focus on a few examples
Is e-commerce different? When does a
fairness aim conflict with an efficiency aim?
 Fairness has different dimensions

• it's complex to define

• there can be mutually incompatible
definitions
• equality? of what? vertical (un)fair (un)fair
• fairness perception often prices bargaining
context-dependent
• fairness and efficiency are
interrelated

•
• often aligned
e.g. collusion
horizontal
(un)fair price (un)fair access
discrimination to information

r \ Jr ~ but potentially conflicting

• choice of welfare standard
l.7-'~J"'v""s- • pljce discriminati.on
outcome process

\ • how to balance trade-offs?

Overview

Fair share
Fairness of value
created

Coordination
(A101)

Algorithms' role
in coordination
Vertical agreements
 Fairness prominent on the agenda in digital markets

~and~pare~ .
~ P28 fairness initiative R~~WL,-.--~~ i\A--e_ 5 s- .

• German Facebook investigation

• Personalised pricing 1

Sharing gains fairly (A 101 or A 102)

• FRAND terms: IP rights: SEPs, copyright, other content
• Vertical agreements: Coty
 Building trust and transparency (I)

? E-commerce, combined with new technology

\• issues for both consumers and suppliers
P2B fairness initiative by DG Connect
• terms and cq_oditions (unilateral_and frequent changes) and lack of access to/
portability of data
• lack of transparency of search, ranking and advertising placement
-
•_favouring own products or services ,,
German Facebook investigation
f•privacy terms/as form of 'exploitative abuse' /,
Personalised pricing
• high degree of personalised targeting and pricing-0ecomes feasible based on
personality, 'locatioQ~purchase or browsing history
• associated with perception of unfairness
• depending on market context (e.g. airlines vs online marketplaces)
• certain forms illegal (e.g. race, gender); if/when transparent, can undermine trust in supplier
Building tr~t ancr~encY)(II)

Is e-commerce different?
• the feasibility of granular differentiation between customers is much greater,iut can
a~qltrage be preventecfor will it become a reason for switching? /
Is it both unfair and inefficient?
• comJ:1.lex interaction wi_th efficienc :
• ~-ce discrimination an be efficiency-enhancing: iticreasing_variety, choice and quality
• pe ~c~ price ~iscrimination/is fully efficien(;Bu~suggliers not consumers
• to what extert8o limitationsJ_on price_discrimjnation reduce competitio~~----
What interventions are appropriate? )
• P28 intervention focuses on the ex ante framework
• privacy and data protection laws already exist
• using A 102 implies either that' a practice is oniy feasible (profitabl~if undertaken by a
dominant firm, pr that the identified harm arises only- when undertakeri-b}Taoominant firm
• Are these likely to be true with respect to personalisation?
Fair distribution of value

Vertical fairness issues-related to bargaining power

• coordination at one level of the value chain to enhance bargaining
Interests relating to fairness and efficiency likely to be aligned here
• generally about rewarding investment and/or controlling distribution
• static vs dynamic efficiency
• 101 (3) captures the balance: underutilised
• also can fall back to ex post excessive pricing prohibitions - will these be
useful or sufficient?

Current tools likely to be fit-for-purpose

Fair distribution of value along the value chain
Using competition rules to balance remuneration in IP and copyright

Fair share for right holders

FRAND framework explicit reference to fairness
• concern in, for example, standard-essential patents and collecting societies
• balancing incentives to invest in innovation and in dissemination
• in practice, interpretation often circular
• looking at existing royalty levels to determine 'fair and reasonable' price level
• need for cooperation between owners of complementary goods creates rationale
Creative works online
• concerns about platforms having too much bargaining power vis-a-vis creators
• potentially reducing incentives to create high-quality content
• press publishing right aimed at creating a more balanced bargaining environment
• balancing incentives in multi-sided markets challenging
• efficiently considerations important
Fair distribution of value along the value chain
Selective distribution

• Coty judgment confirms legality of marketplace bans for luxury goods

• brand owner more control over distribution than retailer
• 'aura of luxury' considered admissible commercial objective
• how is the return on image shared between manufacturers and retailers?
• requirement of objective and proportionate criteria for channel selection
• no exclusion of online channel as a whole
• no dual-pricing for on-/offline sales
• i.e. limits to price discrimination at wholesale level

Existing frameworks allow for the balance

Ccintact:
Name: Helen Jenkins
Email: helen.Jenkins@oxera.com
Tel: +32 (0) 2 535 7878

Follow us on Twitter @Oxer-2:Cc-nsuitino

__,, . ~

Oxera Consulting LLP is a limited liability partnership registered in England

no . OC392464, registered office Park Central, 40/41 Park End Street,
Oxford, OX1 1JD. UK; in Belgium, no. 0651990151, registered office
Avenue Louise 81, 1050 Brussels. Belgium; and in Rome, REA no. RM -
1530473, registered office Via delle Quattro Fontane 15, 00184 Rome.
Italy. Oxera Consulting GmbH is registered in Germany, no. HRB 148781
B (Local Court of Charlottenburg), registered office Rahel-Hirsch-Stralse
10, Berlin 10557, Germany.
Although every effort has been made to ensure the accuracy of the
material and the integrity of the analysis presented herein. Oxera accepts
no liability for any actions taken on the basis of its contents .
No Oxera entity is either authorised or regulated by the Financial Conduct
Authority or the Prudential Regulation Authority within the UK or any other
financial authority applicable in other countries . Anyone considering a
specific investment should consult their own broker or other investment
adviser. Oxera accepts no liability for any specific investment decision.
which must be at the investor's own risk .
© Oxera 2018 . All rights reserved . Except for the quotation of short
passages for the purposes of criticism or review, no part may be used or
reproduced without permission .

oxe,a
compelling economics
 Arbitrating between competition and other
social aims - a fairness dilemma?

Brussels 2018

A.Gerbrandy@uu.nl

Universiteit Utrecht
 Outline

rn The issue

An issue of what?

(III) Possible solutions

Universiteit Utrecht
 I. The issue (1)

1. Dairy farmers protecting

the black tailed godwit

• Marble importers &

ret~_i!~rs ~ e c t
.~ rkers' ri h

Univeniteit Utrecht
Illustrations: kingofthemeadows.eu; pinterest.com
 I. The issue (2)

Assessment under article 101 TFEU:

balancing positive and negative effects
~ COM ~

l
\\

\
.• \
/ \
\
\ / \

· Universiteit Utrecht
Illustration: Pinterest
 I. The issue (3)

... but difficulties for non-economic benefits

~ " µ>c~~ .

' .

. \
I ''\
,'I / \
/ \ / \
/ \
/
i \\ I
/ \I
/ \
/ \ / \,

Universiteit Utrecht
Illustration: Pinterest
 I. The issue ( 4)

Result: agreements/not allowed under competition law

;z_\.. ::Y~ ("'Ot.,S--(____

~ -

Is this (un)fair?

Universiteit Utrecht
Illustration: the blued iamondga Ilery .com
 II. An issue of fairness?

Many different meanings of fairness ...

I. II.
Fairness within Fairness as overarching
competition concept/
th.§_o ry of justice

•competition on the merits •rights to equal basic

•consumers' choice liberties
•consumer welfare •fair equality of
opportunity --
•advantages ought to
benefit l e eas -
advantaged
· Univeniteit Utrecht
 II. An issue of competition law?

Different answers

I. Fairness within II. Fairness as overarching

competition/consumer concept/theory of justice
welfare

descriptive & normative answers

Universiteit Utrecht
III. Could we solve the problem?

Outside 101 (1) TFEU

•Wouters-doctrine (inherent restrictions)
•solidarity-type exceptions
•government involvement as legitimizing factor?

rticle 101 (3) TFEU

• wider range of benefits count
• qualitative approach to benefits
• a@ hare for consumers

• Commission: efficiencies-cen d
• but re-modernisation cases more flexible
 III. Could we solve the problem?

But:
• this leads to less certainty for companies
• problem of legitimacy for (national) agencies

However:
•EU competition law part of a
constitutional system
•within that system: multiple goals

And also:
ht not to be

· Universiteit Utrecht
Illustration: euruni.edu
 III. Could we solve the problem?

Meanwhile, in the Netherlands:

• informal non-enforcement
• legislative proposal for 'sustainability initiatives'

· Universiteit Utrecht
Illustration: Passporthealth
 Conclusions

• Issue of balancing competition interests with non-

competition interests is a problem
• airnes ( when encompassing more than consumer-
welfar , could help shape solutions
,. Responsive competition law is necessary

Universiteit Utrecht
 • A. Gerbrandy, Futureproof Competition Law (inaugural lecture), Eleven Publishing 2018 (forthcoming)
• R.J.G. Claassen & A. Gerbrandy, Doing Good Together, BEQ 2018 (forthcoming)
• A. Gerbrandy, Solving a Sustainability-Deficit in European Competition Law, World Competition 2017
• A. Gerbrandy, Addressing the Legitimacy Problem ( ... ), European Law Review 2015

~~,~
~,~.
~ ~ Universiteit Utrecht

Institutions for Open Societies

Universiteit Utrecht
 COMPASS LEXECON

The Rediscovery of Excessive Pricing in Europe

Fairness in action?
13th GCLC Annual Conference

19 January 2018

Lorenzo Coppi
 THE REDISCOVERY OF EXCESSIVE PRICING

Historically, excessive pricing cases have been few and far between

However, recently there has been a bit of a revival, especially in the pharmaceutical sector:
• The ICA fined Aspen Pharmacare €SM in September 2016 for increases of between 300%-1,500% in the
price of several oncology drugs
• The CMA fined Pfizer and Flynn £90M in December 2016 for increases of up 2,600% in the price of an
epilepsy drug
~ The European Commission opened in May 2017 an investigation on the price of Aspen's oncology drugs
in several Member States
• The CMA is currently investigating Concordia International for increases of up to 6,000% in the price of a
thyroid drug

In September 2017, the EUCJ delivered its judgement on the Latvian collecting societies case
(AK KA/LAA)

... and an excessive pricing investigation on Gazprom's prices in several Eastern Member States
has been on-going since 2012

COMPASS LEX ECON 1

FIRST OF ALL, SHOULD EXCESSIVE PRICING EVEN BE AN ABUSE?

All companies generally price above costs, otherwise they would not make any profits
11
The pursuit of profits is the engine of economic activity, limiting natural" profits - even when
high - would dampen the incentive for firms to invest

Moreover, in the absence of anticompetitive or regulatory foreclosure, in the long-run entry will
ensure that the market converges to a "natural" level of profits
11
Because of this market self-correction (and the difficulty of identifying natural profits"}, in many
jurisdictions (e.g. in the U.S.) excessive pricing is not even a violation of competition law

"in its practice, the Commission has been extremely reluctant to make use of that provision against
(allegedly) high prices practiced by dominant undertakingy.Rightly so, in my view. In particular, there is
simply no need to apply that provision in a free and competitive market: with no barriers to entry, high
prices should normally attract new entrants: "rhe market would accordingly self-correct." -
AG Wahl's Opinion in AKKA/LAA

In practice, most competition authorities and scholars agree that excessive pricing cases should
be limited to certain extreme (unfair?) cases
?

COMPASS LEX ECON 2

UNFAIR PRICING

Article 102(a) prohibits a dominant firm from "directly or indirectly imposing unfair purchase or
selling prices or other unfair trading conditions'~

In United Brands, the ECJ determined that this includes "charging a price which is excessive
because it has no reasonable relation to the economic value of the product supplied'~

What is the "value" of a product?
• An objective value intrinsic to the product?
• Whatever consumers are prepared to pay?
value
/'valju:/ ~~
noun
1 the regard that something is held to deserve; the importance, worth, or usefulness of something.
"your support is of grea1 value"
synonyms merit. worth. usefulness use utility. practicality . advantage . desirability . benefit. gain .
profit, good. service help. helpfu lness assistance effectiveness. efficacy, avail.
importance significance , point sense: mforrnal mileage
"the value of adequate preparat ion cannot be understated"

• Or some form of competitive benchmark?
2. principles or standards of behaviour; one's judgement of what is important in life.
''\hey internalize the ir parents' rules and va lues"
synonrrns pnnc1ples moral principles. ethics moral code, morals. moral values. standards.
moral standards. code of behaviour. rules of conduct standards of behaviour
"soc iety's values are passed on to us as ch ildren"

verb

None of these concepts provides a 1. estimate the monetary worth of.

"h is estate was valued at £45.000"
synonyms evaluate. assess. estimate. appraise assay, rate. price, put/set a pnce on. cost (out)
straightforward way to identify excessive "his estate was valued at £4:, .000"

2. consider (someone or something) to be important or beneficial; have a high opinion of.

pricing in practice "she had come to value her privacy··
synonyms appreciate rate (high ly) . esteem . hold in high esteem hold 1n high regard. hold dear.
have a high opinion of. !h1nk highly of lhink much of. set (great) store by. attach
importance to respect admire . prize, cherish . treasure More

COMPASS LEX ECON 3

A PRAGMATIC APPROACH

The United Brands test determines two conditions for excessive pricing:
• the "difference between t~ actually incurred and the price actually charged is
excessive"; and
• a "price has been imposed which is either unfair in itself or when compared to ~ g
products'~

This may solve the issue of the benchmark (costs or competing products),;but leaves open the
I

issue of the threshold:1how high above the benchmark has a price to go before it becomes
excessive?

COMPASS LEX ECON 4

NORMAL MARGINS IN VARIOUS INDUSTRIES
Source: Google Finance

54.66%
49.33% 22.62%
21.40% 29.13%
19.67% 19.47%
60.53% 54.99%

46.24% 45.47%
69.27% 59.36%

A margin of 60-80% above variable costs is not unusual, so it should not be considered excessive
{5/'(. . ,

In industries subject to significant recurri_Qg_fi~_§O c_ost£_(R&D, physical infrastructure, advertising)1//

higher margins (over variable costs) are needed to justify incurring those costs
( ~..·r (
- .

COMPASS LEX ECON 5

THE COURT HAS USUALLY APPLIED A VERY HIGH THRESHOLD

From an economic perspective, excessive pricing requires a high threshold, given the
potential negative implications of "regulating high prices"

Case Price difference Decision

100% compared to other suppliers

General Motors, EC, 1975 (certification) ECJ confirmed finding of excessive prices
1
500% difference over time

British Leyland, EC, 1984 (certification) 400-600% RHD compared to LHD vehicles ECJ upheld EC decision of excessive pricing.

ECJ upheld judgement that prices charged were

Lucazeau v SACEM, 1989 (music royalties) 400% compared to European average
excessive and unjustified.

However, the EUCJ recently stated that "there is in fact no minimum threshold above which a rate must
be regarded as appreciably higher, given that the circumstances specific to each case are decisive in that
regard." and that "a difference between rates may be qualified as "appreciable" if it is both significant
and 12ersistent on the facts".
AK~A'
----------------
COMPASS LEX ECON 6
ANOTHER APPROACH TO EXCESSIVE PRICING?

J
Focus on excessive priceG3s instead of excessive prices?

The previous (pre-increase) price could be used as a benchmark, provided that:

• It was profitab!e (including a consideration for recurring fixed costs); and
• There were no changes in supply or demand conditions;that justify a price increase

Even in this case, however, a relatively high threshold should be applied to ensure that regulatory
intervention does noJ; discoura _ investments

In such cases, the price increase would typically be considered unfair

--- ---------
COMPASS LEX ECON 7
SIDLEY
Outline
• What does fairness mean?/Can discrimination be seen as "unfair" per se?/

• Are concepts of fairness and non-discrimination actually finding their

way into antitrust enforcement?

• Decision in Google Shopping case -Brave New World or The Same Old
Story? Is there now a new "non-discrimination" obligation//on dominant
companies? --

• Conclusions
What is ''fair''?

,rs NOr FAIR/ 11-.\E NO/lU, \S~'T

\:A\Q, CAL\JIN.
}f
Is discrimination ''unfair'' in itself? What if it enhances
consumer welfare and economic efficiency?

-
Senior Railcard
•
Are "fairness" and "discrimination" actually finding
their way into antitrust enforcement?

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Brave New World of ''non-discrimination''
obligation? Or The Same Old Story?
Go2ng gie ff
Brandishing
"fairness" and
"discrimination" as Factual and legal
legal conce pts analysis
Conclusion
"Fair" and "non-discriminatory" competition best achieved through
rigorous, factual, economic and legal analysis

Consumer
Welfare/Economic
Efficiency
 1,900 LAWYERS and 20 OFFICES
located in commercial, financial
and regulatory centers
around the world

Beijing Chicago Houston New York Singapore

Boston Dallas London Palo Alto Sydney
Brussels Geneva Los Angeles San Francisco Tokyo
Century City Hong Kong Munich Shanghai Washington, D.C.
 AA[EfELJ~~~ (C(Q)AA[p)[EtJ~U~(Q)~
OUTLINE OF PRESENTATION

@ PRELIMINARY COMMENTS

@ MEETING COMPETITION: CUSTOMERS

@ MEETING COMPETITION: DOMINANT FIRMS

@ MEETING COMPETITION: COMPETITORS

@ CONCLUDING COMMENTS

26 January 2018 David Bailey

 ~[EY~~CG (C(Q)fM\[p)[Elf~T~(Q)
PRELIMINARY COMMENTS
@ CASE 27 /76 UNITED BRANDS v COMMISSION
(1978), PARA 189:

"THE FACT THAT AN UNDERTAKING IS IN A DOMINANT

POSITIO~ANNOT DISENilTLE IT FROMJ~ROT_ ECTING
ITS OWN COMMERCIAL INTERESTS4F THEY ARE
ATTACKED,/AND THAT SUCH AN UNDERTAKING MUST BE
CONCEDED THE RIGHT TO TAKE SUCH REASONABLE
STEPS AS IT DEEMS APPROPRIATE TO PROTECT ITS SAID

---
INTERESTS."

26 January 2018 David Bailey

 AA~~,r~ CG (C(Q) rtELI~tf~(g~
WHAT IS MEANT BY
MEETING COMPETITION (1)
@ A RESPONSE TO COMPETITIVE PRESSURE FROM
WITHIN AND OUTSIDE THE RELEVANT MARKET?
@ A RESPONSE TO A SPECIFIC OFFER BY AN

INDIVIDUAL COMPETITOR?
@ A RESPONSE TO A CUSTOMER'S BUYER POWER?

@ AN INITIATIVE TO WIN NEW CLIENTS?

@ ALL OF THE ABOVE?

26 January - ' 18 David Bailey

 [E[EY~ ~ (C(Q) f[EY~T~(Q)~
WHAT IS MEANT BY
MEETING COMPETITION (2)
@ DOES MEETING COMPETITION REFER TO:
• OFFERING THE MARKET PRICE, STANDARD
TRADING CONDITIONS ETC.
• OFFERING THE SAME PRICE, TERMS ETC. AS A
PARTICULAR COMPETITOR?
• OFFERING A SLIGHTLY BETTER PRICE, TERMS ETC.
THAN A PARTICULAR COMPETITOR?
• OFFERING THE BEST POSSIBLE DEAL?

26 January 2018 David Bailey

 M[EtELJ~ ~ ((0JM [ELJ~LJ~(0J
WHAT IS THE LEGAL STATUS
OF MEETING COMPETITION?
@ IS IT A SEPARATE, STANDALONE DEFENCE?
o SEE PARA 47 OF OPINION OF AG MAZAK IN CASE C-
202/07 P FRANCE TELECOM v COMMISSION (2008)

@ IS IT A TYPE OF OBJECTIVE JUSTIFICATION?

o SEE PARA 79 OF DG COMP'S DISCUSSION PAPER (2005)

@ IS IT A RELEVANT FACTOR WHEN ASSESSING THE

CONTEXT OF THE IMPUGNED CONDUCT?
o SEE PARA 20 OF COMMISSION'S GUIDANCE ON ITS
ARTICLE 102 ENFORCEMENT PRIORITIES (2009)
26 January - ~1 8 David Bailey
 ,.

MEETING COMPETITION:
FAIR OR UNFAIR TO CUSTOMERS?
@ SOME CUSTOMERS ARE BETTER AT NEGOTIATING
THAN OTHERS
@ THOSE CUSTOMERS TEND TO SECURE BETTER

DEALS THAN OTHERS

@ CHARG ING DIFFERENT CUSTOMERS DIFFERENT

PRICES FOR GOODS OR SERVICES WHOSE COSTS

ARE THE SAME ~ AN EXCLUSIONARY ABUSE: SEE
CASE C-209/10 POST DANMARK I (2012), PARA 30

26 January 2018 David Bailey

 MEETING COMPETITION:
FAIR OR UNFAIR TO CUSTOMERS?
@ E.G. CASE 62/86 AKZO v COMMISSION (1986),
PARAS 116-121
• AKZO OFFERED_LOW-ER PRICES TO 1~DJY-IDlJAL--MJLLS_JN
THE ALLIE~ MILLS GROUJrTHA"<:LARGE INDEPENDENT
1
CUSTOMER~
• THE COMMISSION FOUND THAT AKZO'S SELECTIVE
PRICES WERE DISCRIMINATORY AND UNLAWFUL
q • THE COURT OF JUSTl_~E DISAGREED, SINCE THE
-CUSTOMERS WERE ~-COMPARABLE _

26 January - ' 18 David Bailey

 MEETING COMPETITION:
FAIR OR UNFAIR TO DOMINANT FIRMS?
@ A DOMINANT FIRM MAY COMPETE ON THE MERITS/AND
THEREBY WEAKEN OR ELIMINA+E-C-OMP-ETITORS THAT--
ARE
-~ - LESS EFElO.ENTTJ:IAhJ.JTSELF: ·sEE CASE C-413/14 P
--------- ...

INTEL v COMMISSION (2017), PARAS 133-134

@ A DOMINANT FIRM HAS A QUALIFIED RIGHT TO_DEFEND

/ C - - - -

ITS COMMERCIAL INTERESTS:/SEE UNITED BRANDS

@ A DOMINANT HAS A Q ALI Fl ED RIGHT TO AL_IGN ITS_

PRICES ON ITS COMPETITORS: SEE CASE C-202/07 P
FRANCE TELECOM V COMMISSION (2007), PARA 47
26 January 2018 David Bailey
 MEETING COMPETITION:
FAIR OR UNFAIR TO DOMINANT FIRMS?
@ CASE C-202/0?P FRANCE TELECOM v COMMISSION
(2007):
• WANADOO OFFERED PRICES THAT WERE BELOW AVERAGE
VARIABLE COSTS, AND LATER BELOW ELJI I COSTS
• WANADOO ARGUED THAT IT WAS RESPONDING TO
PROMOTIONAL PRICES OFFERED BY NEW ENTRANTS
• THE COMMISSION REJECTED THAT ARGUMENT: SEE, IN
PARTICULAR, RECITAL 315 OF ITS DECISION
• THE EU COURTS UPHELD THE COMMISSION DECISION

26 January ' 18 David Bailey

 MEETING COMPETITION:
FAIR OR UNFAIR TO DOMINANT FIRMS?
@ E.G. CASE C-202/07 P FRANCE TELECOM v
COMMISSION (2007):
• YES, IN PRINCIPLE, A DOMINANT FIRM MAY ALIGN ON ITS
COMPETITORS' PRICES
• BUT THERE IS NO-ABSOL--LJI-E--RlGHT TO ALIGN .~
• WANADOO DID _NOT HAVE ANY_SUCH RIGHT, SLNCE
o WANADOO'S PRICES WERE BELOW COST
o WANADOO WAS TRYJN.G---IO-ERE=EMPT THE MARKET,/ RATHER
TFIAN RESPOHOJO_CQMPETITION

26 January 2018 David Bailey

 MEETING COMPETITION:
FAIR OR UNFAIR TO DOMINANT FIRMS?
@ CASE C-209/10 POST DANMARK I (2012):
• PARA 29: NO PLAN TO ELIMINATE THE COMPETITOR
• PARA 36: PRICES~POST DANMARK'~ERE
DEEMED TO HAVE f:{mANTI-COMPETITIVE EFFECTS
• PARA 37: PRICE~ POST DANMARK'S@Q &
ABOVE AVERAGE INCREMENTAL COSTS~
EXCLUSIONARY ABUSE A~.
• PARA 38: AS EFFICIENT COMPETITORS CAN COMPETE
WITH PRICES THAT COVER THE 'GREAT BULK OF THE
COSTS ATTRIBUTABLE' TO UNADDRESSED MAIL
26 January '18 David Bailey
 MEETING COMPETITION:
FAIR OR UNFAIR TO DOMINANT FIRMS?
@NB:
• AKZO INTERIM DECISION (1983): AKZO WAS
PERMITTED TO MEET (BUT NOT UNDERCUT) A
LOWER PRICE OFFERED BY A COMPETITOR
• HILT/ UNDERTAKING (1988): HILTI WAS PERMITTED
TO "MEET A COMPETITIVE OFFER"
• DIGITAL UNDERTAKING (1997): DIGITAL RETAINED
THE RIGHT TO OFFER "NON-STANDARD PRICE-
REDUCTIONS TO MEET COMPETITION"
26 January 2018 David Bailey
 MEETING COMPETITION:
FAIR OR UNFAIR TO COMPETITORS?
@ NB THE MEETING COMPETITION ARGUMENT HAS
BEEN UNSUCCESSFUL IN A NUMBER OF CASES
• CASE T-65/89 BPB INDUSTRIES (1993)
• CASE T-228/97 /RISH SUGAR (1999)
• CASES C-395/96 P CMBT (2000)
• CASE C-202/07 P FRANCE TELECOM (2007)
• COMMISSION DECISION INTEL (2009)

26 January ~18 David Bailey

 MEETING COMPETITION:
FAIR OR UNFAIR TO COMPETITORS?
@ WHY HAS TttE MEETING COMPETITION)\RGUMENT
BEEN SO UNSUCCESSFUL?
• PRICING BELOW AVC: SEE PARA 83 OF DG COMP'S
DISCUSSION PAPER (2005); WANADOO
• THE 'MEETING COMPETITION' CLAIM WAS
CONTRADICTED BY INTERNAL DOCUMENTS
• DOES NOT APPLY TO COLLECTIVE ACTIONS: SEE PARA
81 OF DG COMP'S DISCUSSION PAPER; CMBT
• PROPORTIONALITY!

26 January 2018 David Bailey

 CONCLUDING COMMENTS ( 1)
@ SO ... WHAT DOES THE 'MEETI NG COMPETITION'
ARGUMENT CONSIST OF?
• #1 : EITHER A RESPONSE TO THE ACTIONS OF
EXISTING/POTENTIAL COMPETITORS OR A GENUINE
ATTEMPT TO WIN NEW CUSTOMERS
• #2 : THE DOMINANT FIRM'S CONDUCT MUST NOT
SEEK TO STRENGTHEN ITS DOMINANT POSITION NOR
BE PART OF A PLAN TO ELIMINATE COMPETITORS
• #3 : THE DOMINANT FIRM'S CONDUCT MUST ALWAYS
BE REASONABLE AND PROPORTIONATE

26 January 18 David Bailey

 CONCLUDING COMMENTS (2)
@ THE MEETI NG COMPETITION ARGUMENT MAY
EXONERATE / JUSTIFY:
• PRICE DISCRIMINATION, IF THE PRICES REFLECT
DIFFERENT COMPETITIVE CONDITIONS OR CLIENT
RELATIONS
• EXCLUSIONARY PRICES THAT REMAIN ABOVE ATC
• EXCLUSIONARY PRICES THAT REMAIN ABOVE
AVC/ AAC AND IN THE ABSENCE OF ANY PLAN TO
ELIMINATE A COMPETITOR

26 January 2018 David Bailey

 CONCLUDING COMMENTS (3)

@ SOME OPEN QUESTIONS:

• SHOULD MEETING COMPETITION APPLY TO NON-
PRICING AS WELL AS PRICING ABUSES?
• SHOULD MEETING COMPETITION APPLY TO
COLLECTIVE ACTION?
• SHOULD MEETING COMPETITION APPLY NOT ONLY TO
MINIMISE LOSSES BUT ALSO TO WIN NEW
CUSTOMERS?

26 January 18 David Bailey

 CONCLUDING COMMENTS (4)

@ALL ELSE BEING EQUAL, SHOULD THE LAW

FAVOUR THE DOMINANT FIRM'S INTEREST
IN MINIMISING SHORT-TERM LOSSES OR
THE INTEREST OF ITS COMPETITORS TO
ENTER OR EXPAND?

26 January 2018 David Bailey

THANK YOU FOR YOUR ATTENTION!

26 January 2018 David Bailey

Fairness in the context
of State Aids ·

Paolo Stancanelli
Fairness: what in a noun
• Impartial and just treatment or behaviour
without favouritism or discrimination
( Oxford Diet.)

• Decency, equitableness, equity,

impartiality, justice, legitimacy,
rightfulness, uprightness
( Collins Thes.)
 A policy rationale of EU
competition rules
Fairness is not an legal principle

Fairness is the policy rationale which sits at

the core of the Commission competition
policy:
• In the design of the rules
• In the enforcement proceedings
• As the targeted outcome
 State Aids discipline
State aids are unfair by nature ?

Only incompatible aids are prohibited

The wider dimension of fairness in the SA

context
 Fairness
in the enforcement process
Commission duties
• Rigour and accuracy
• Equal treatment and even-handed
enforcement
• Due process and right of defence

Specificities in the SA context: the rights of

the Member States and those of the other
interested parties
 Fairness as the targeted
outcome of SA discipline
The direct purpose : ensuring fair competition, in
the ultimate interest of the consumers

The indirect consequence: ensuring the proper

use of taxpayers' money

Limits of the SA discipline : tensions in the

internal market stemming from divergent rules
among the Member States
 The wider dimension:
compatible State aids
The delicate balance: undistorted
competition v. objectives of general interest
The Commission's margin of discretion and
its limits
An essential requirement: predictability
• General block exemption regulations
• Guidelines
 SA in the energy sector
Promotion of renewable energy and of energy
efficiency
• Integrating energy and environmental policies
into competition rules
• The paradox: claim of breach of the "fair and
equitable treatment provision" by disappointed
investors
Levy reductions in favor of energy intensive
users
• The even more complex balance of interests
SA in the banl<ing sector
The 2008 crisis and the Commission response:
saving the banks or the real economy ?

The 2013 Banking communication: shifting the

burden more on the investors, while protecting
depositors

The interplay between SA discipline and the

Banking union rules
 To sum up:
is SA discipline fair?
The positive message of the SA discipline
• To the market operators
• To the society at large

... and the Brexit ?

Baker Beyond Goals:
McKenzie. Fairness in State Aid Cases
Fairness and selectivity -
testing the limits of State aid rules?
Nina Niejahr
13th Annual Conference of the GCLC
Fairness, State aid & selectivity
A fair playing field also means that in
Europe, consumers are protected
against cartels and abuses by powerful
companies. And that every company, no
~ how big or small, has to pay its
~ w h e r e it makes its profits.[ ... ]
Competition Commissioner
Margrethe Vestager
speech, High Level Forum on State Aid
Modernisation, Brussels, 28 June 2017
© 2018 Baker & McKenzie CVBA/SCRL
In the current context of tight
public budgets,
it is particularly important
that large multinationals
pay their fair share o ~ .
Competition Commissioner
Joaquin Almunia
on the FFT & Starbucks
opening decision
in June 2014
Commission President
Jean-Claude Juncker
2016 State of the Union Address
The state aid rules have also helped banks to compete on fair
terms.[ ... ] 1
Special tax treatment can also undermine competition, when it gives
some companies a benefit which their rivals can't gev
That special tax treatment for a handful of companies doesn't
support the economy. It just denies other companies a fair chance
to compete. So when we make companies pay back those special
benefits, we're helping to make competition fairer across Europe.
13th Annual Conference of the GCLC

Selectivity & (un-)fairness

• General State aid prohibition of Art. 107(1) TFEU, 2 nd criterion
"favouring certain undertakings or the production of certain goods"
• Select" ·ty (eg Adria Wien Pipeline, C-143/99, para. 34 & 35)
"an economic benefit [advantage} granted by a Member State constitutes State
b y displaying a degree of selectivit¼ it is such as to fa \(_our certain
aid only if, _
undertakings or the production of certain goods."
"A State measure which benefits all undertakings in the national territory, without
distinction, cannot therefore constitute State aid."
• Do some/does someone enjoy an advantage as compared to others in a
comparable legal and factual situation?
Question
Is a selective advantage unfair by definition?
(Differentiation, unequal treatment, discrimination)

© 2018 Baker & McKenzie CVBA/SCRL

13th Annual Conference of the GCLC

Selectivity applied
• Selectivity can be relatively straightforward .(e.g. individual/ad hoc aid)
• World Duty Free, C-20/15 P, para. 54 and cases cited
"selectivity ... requires a de~tion whether,· under a pat1icular legal regime,
a national measure is such as to favour "cet1ain undet1akings ... " over other
undet1akings which, in the light of the objective pursued by that regime, are in a
comparablft. factual and legal situation and w]7o accordingly suffer different
treatment that can, in essence, be c_lassified as discriminatory"
• Three-step test:
1. Identify the ordinary or normal regime as benchmark or reference system
(NOx, Case C-279/08 P, AG Bobec in BSEITSE, Case C-270/1~13ar. 40-51)
2. Are undertakings treated differently that are, in view of the objectives
pursued by the reference system , in a comparable situation (facts & law)?
No prima facie selectivity if the undertakings are in a different factual or
legal situation by reference to the benchmark's objectives
3. Is the prima facie selective treatment justified/in line with
nature/logic/general structure of the reference system? ( World Duty Free,
C-20/15 P, para. 58 and cases cited)
© 2018 Baker & McKenzie CVBA/SCRL
13th Annual Conference of the GCLC

Selectivity & non-discrimination

• Discrimination
• Qifferent treatment of undertakings in a comparable legal and factual
situation and
• Absence of 9bjective iu~tificatio_n
• Selectivity
• Narrower apQroach "justification" of different treatmer;tin step 2 and 3
limited to the parameters of the reference system -
• Allows wtder political objectives to be considered only in the context
of the compatibility assessment
Questions:
• Is the narrower approach to differentiation in State aid enforcement fair?
• Why not? State aid addresses competition distortions by Member States
in markets in which companies should compete strictly on the merits
• Is direct company taxation different? Maybe? Fiscal autonomy of
Member States; bilateral double taxation treaties apply cross-border
© 2018 Baker & McKenzie CVBA/SCRL
5-
13th Annual Conference of the GCLC

Selectivity & the arm's length principle

What is in the arm's length principle?
• Art. 9 of the OECD Model Tax Convention:
Transactions between related parties should be valued as if they had
been carried out between unrelated parties (OECD TPGL: 5 methods)
• Commission's Notice on the Notion of Aid (July 2016):
"[ ... ], a tax ruling which endorses a transfer pricing methodology for determining
a corporate group entity's taxable profit that does not result in a reliable
approximation of a market-based outcome in line with the arm's length principle
confers a selective advantage upon its recipient. The search for a 'reliable
approximation of a market- based outcome' means that any deviation from the
besf estimate of a market-based outcome must be limited and proportionate to
the uncertainty inherent in the transfer pricing method chosen or the statistical
tools employed for that approximation exercise." (para. 171)
"The arm's length principle the Commission applies in transfer pricing rulings
under the State aid rules is therefore an application of Art. 107(1) of the Treaty,
which prohibits unequal treatment in taxation of undertakings in a similar factual
and legal situation" (para. 172)
© 2018 Baker & McKenzie CVBA/SCRL
13th Annual Conference of the GCLC

Testing the limits in the tax rulings cases

• Reference system
• Normal system of corporate income taxation?
• Transfer pricing rules for related companies and transactions and
accounting profit for unrelated companies and transactions?
• Separate for resident companies (taxed on worldwide income) and
non-resident companies (taxed on local income of agency or
branch)?
• Differentiation - comparing apples with apples or apples with oranges?
• Unrelated (arm's length transactions) and related companies (TP),
resident/non-resident, cross-border/in-country transaction
• In TP cases : best estimate of a market-based outcome (any
deviation limited and proportionate to the uncertainty inherent in the
method chosen or the statistical tools used for approximation)
• In line with objective/nature/general structure of the reference system?
Wide reference systems render differentiations very difficult to justify
© 2018 Baker & McKenzie CVBA/SCRL
13th Annual Conference of the GCLC

Does selectivity contribute to fairness ...

• By making State aid enforcement fairer?

• By making competition between undertakings fairer?

Baker
McKenzie.

www.bakermckenzie.com

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