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Monday, September 19, 2011

Which Goals Count in Article 101 TFEU?: Public Policy and its Discontents

Posted by D. Daniel Sokol

Christopher Townley, King's College London asks Which Goals Count in Article 101 TFEU?: Public Policy and its Discontents. ABSTRACT: Midway through 2010, the OFT organised a breakfast roundtable to discuss Article 101’s goals. The focus was a recent OFT paper: OFT, Article 101(3) - A Discussion of Narrow versus Broad Definition of Benefits (OFT Discussion Paper). 23 experts attended, some from other UK competition authorities (the Competition Commission and Ofcom), DG COMP, some UK government departments (the Department of the Environment and the Department of Business (BIS)), academia, businesses and law firms. This paper focuses on the OFT Discussion Paper itself and the OFT’s synopsis of the discussion at the roundtable (Synopsis).

There is renewed interest in Article 101’s goals today. This is an important issue. Knowing: which goals count; which markets one can look to for benefits; and, when these benefits must arise, can affect the compatibility of agreements with the internal market, when examined through an Article 101 lens. The OFT Discussion Paper discusses all three points. The legal position is relatively clear. As I note below in greater detail, several ECJ and General Court judgments (together the EU Courts) consider public policy benefits in Article 101. The EU Courts also balance benefits against losses across various markets. Additionally, the EU Treaties demand that benefits to future consumers should be considered even at the expense of today’s consumers.

Despite this, confusion reigns, because in its Article 81(3) Guidelines, the Commission makes a very different claim: "[t]he objective of Article 81 [now Article 101 TFEU] is to protect competition on the market as a means of enhancing consumer welfare and of ensuring an efficient allocation of resources."

The Commission adds “[t]he assessment under Article 81(3) of benefits flowing from restrictive agreements is in principle made within the confines of each relevant market to which the agreement relates.” The OFT Discussion Paper does not necessarily reflect the OFT’s views; but, its arguments often follow the Commission.

Confusion has arisen for three key reasons. First, and despite its own claims to the contrary, the Commission’s modernisation of Article 101’s procedural aspects was a Trojan horse. Inside hid an army of Commission officials poised to reinterpret Article 101’s substance because of the new procedural landscape. Worse still, the Commission does not admit that its guidelines promote change. Secondly, under DG COMP’s tutelage there has been a rise in the importance given to economic (particularly consumer welfare) thinking in the EU competition rules and thus in the power that economists wield there. At times this has led to a blind fetishism with consumer welfare in DG COMP and many national competition authorities (NCAs); competition practitioners often follow this lead. Economic insights are important in the application of EU competition law; but, economics does not provide appropriate guidance on normative goals given the current EU framework and precedent and certainly not without an open discussion of the changes the Commission seeks. Thirdly, the Commission’s modernisation agenda has given more decision-making powers to the NCAs. Yet, the model of co-operation governing the links between the NCAs and the Commission is insufficiently clear about how much freedom the NCAs have over fundamental policy choices and, ultimately, how uniform Article 101’s application should be in the EU.

As I have said, there is a renewed interest in Article 101’s goals today. A recent UK report on business and the government’s Big Society vision lists competition law as a perceived barrier to firms coming together, even when this would have a powerful social or environmental impact. In a speech dealing with this report the UK Prime Minister talked of a deal where government would reduce taxes and regulation if business help tackle social challenges. In response to the perception that competition law bars firms from coming together to achieve public policy goals he said “…we will do everything we can to tackle those barriers head-on…” The Dutch Competition Authority’s Annual Report 2009 also focuses on public policy goals; and the Nordic Competition Authorities recently published a paper on EU competition policy and green growth. There have also been several recent academic conferences on this topic; and a few publications in the area.

This article focuses on the relevance of non-economic goals in Article 101. Part 2 makes a few general observations on the OFT Discussion Paper. Part 3 discusses the advantages and disadvantages of considering non-economic goals in Article 101(3)’s first test. Part 4 concludes. In two later ECLR papers I focus on the other two topics covered in the OFT Discussion Paper: which markets one can look to for benefits and when these benefits must arise.

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