Source: https://competitioncourses.wordpress.com/competition-law-conservativeprogressive-2016/seminar-7-historical-approaches-to-eu-competition-law/
Timestamp: 2017-08-23 13:49:03
Document Index: 708519953

Matched Legal Cases: ['CJEU ', 'Art. 102', 'CJEU ', 'Art. 101', 'Art. 101', 'Art. 101', 'Art. 101', 'Art. 101', 'Art. 101', 'Art. 101', 'art 101', 'art 102', 'Art. 102', 'CJEU ']

Seminar 7: Historical Approaches to EU Competition Law « competitioncourses
Seminar 7: Historical Approaches to EU Competition Law
The history of EU competition law involves consideration of the notion of ordoliberalism. I have selected Tuori, who looks at this notion from a wide lens, and Beherns who looks at it specifically from the perspective of the provision in Article 1102 TFEU. In adddition to ideology, Chirita looks at the drafting history of selected puzzles.
Those unfamiliar with competition law should look at Article 102 TFEU.
Tuori European Constitutionalism (Cambridge, 2015) ch.5 (available on line from the EUI library)
Behrens ‘The ordoliberal concept of “abuse” of a dominant position and its impact on Article 102 TFEU’ (available on SSRN)
Chirita ‘A Legal-Historical Overview of the EU Competition Rules’ (2014) 63 International and Comparative Law Quarterly 281
A key work is Gerber Law and Competition in Twentieth Century Europe (1998) esp. chapter 7 for this seminar.
Akman ‘Searching for the Long-Lost Soul of Article 82’ (2009) 29(2) Oxford Journal of Legal Studies 267 – this is the paper discussed by both Behrens and Chirita.
19 comments on “Seminar 7: Historical Approaches to EU Competition Law”
Session 7: Historical approaches
Ordoliberal – it is not a frozen concept (Behrens)
Behrens seems to claim that most scholars have misconceived the impact ordoliberalism has had on the development of EU competition law. (p.2) In his view the reason is that the term ‘ordoliberalism‘ is in itself both imprecise and problematic for at least two reasons. Firstly, the concepts associated with ordoliberalism cannot be adequately conveyed in a few lines (which implicitly seems to be is the mistake most other scholars make). Secondly, ordoliberalism is frequently discussed as a static and homogeneous school of thought. However, the reality is that it is a cluster of interlinked ideas, which have evolved over the past 75 years and should not be regarded as a set of ideas frozen in time. (p.26)
Behrens claim, contrary to some, that the ordoliberal approach, which has had a dominant influence on the drafting, interpretation and application of the “abuse” control of dominant undertakings is neither; (i) obsessed with interventionist regulation nor (ii) with fairness instead of competition and it (iii) does not protect competitors instead of competition nor (iv) is it formalistic instead of following “good” economics.
His main point is that ordoliberalism stands for the protection of a “system of undistorted competition” that is based on individuals using their legally protected rights in order to freely disclose their preferences in a constant process of choice making, a process that according to experience is the most efficient way of organizing the economy. (p.29)
Microeconomics – is the dialog between law and economics the triumph of antitrust? (Tuori)
The main goal of competition law appears, according to the article, to be the maturing of the trans-border component of competition law, which is closely linked to the common (single) market objectives of the EU/EEA. (p.166) To achieve a common single market, ordoliberals have advocated a strong State, which matches the criteria of a liberal ‘Rechtsstaat’ and does not fall prey to corporatist rent-seeking interests. (p.169) Tuori also seems to claim that EU competition law is an example of a field of law where there has been a successful dialog across fields, between law and economics, which account for the dynamics in field.
Legal–historical review of EU Competition law – the measure of efficiency in EU competition law is it based on economics influenced by cultural differences? (Chirita)
The article is ambitious. It sets out to comprehend the (main) reasons and intention of the legislator when drafting EU competition rules by undertaking a holistic, rather than exhaustive review, of these rules (p. 281) But does it full manage? It seems to recapture other authors view rather than to back the reasons for the intention behind EU competition law with supplementary empirical data.
As it is pointed out, observers in the field have suggested that productive efficiency is the original goal of EU competition law. (p. 284) According to Chirita, however, EU competition has not only attained its mission of efficiency, but also gained its own legal status with a solid normative foundation in economics and has cemented the cultural traditions. (p.316) However, I am not convinced by the underlying arguments and example(s) provided to reach this conclusion are effective. There is to little deduction of what the author reads of the historical findings and regurgitations of others – or it is too implicit.
two quick reactions: (1) the relationship between the internal market objective and competition law was a little less smooth for ordoliberals, according to the paper; (2) the successful dialogue btw law and economics jars a bit with some of the other readings we’ve done earlier so it may be worth thinking about how the claim he makes fits with others’ views.
agree with your take on the other 2 papers.
I would like to refer to the article of Chirita. Even though I generally liked it and appreciated for the general knowledge, I just have to disagree with her critical approach to the Treaty of Rome, especially in the conclusion. Apparently, she is unsatisfied with the competition provisions of this Treaty as “not a successful outcome”, “empty of content”, “not sufficiently detailed”, having “incomprehensible gaps”, causing problems to competition lawyers. I think that one should be a little more comprehensible about the whole process and the reality of 1950s and be cautious with the critics, especially on such technical and non-priority at the time points as competition rules. Creating of the European Communities was not really about detailed, perfectly-thought-of and ready-to-cure-competition-for-100-years regulation, it was about avoiding a new war (most importantly), reconciling France with Germany, reinforcing against the other side of the Iron Curtain, remedying the devastation after World War II. That is to say, the concerns were quite different, stakes higher and (economic) expectations more modest than today. I don’t see how the problems we enumerate today could have been identified and cured by signatory countries through the Treaty 60 years ago while also, leaving open some sensible questions could have been a way to tempt other countries to join in. I don’t feel it is fair to ignore this big, political context and to put the competition rules over, or on an equal footing with, all these values and challenges of 50s. Moreover, Chirita herself says how the goals of the EU competition law changed throughout the years so even if the competition provisions were perfectly designed back then, they would probably not work today anyway.
24/11/2016 at 11:14 am
your point about the low level importance of competition law at the time is well taken. in fact nobody expected much even when the Commission got Regulation 17/62.
I’m not so sure however, that she claims the goals have changed. her contemporary examples appear to suggest that things have not changed (with regards to the goals) or that the problem still exists (when she mentions the Glaxo case)
Zeynep Timocin Cantekin says:
Behrens argues that it is important to understand the historical origin of abuse and what ordoliberalism meant at the time of the Rome Treaty. According to him history does not necessarily determine the basis for interpretation today – of the jurisprudence of the CJEU and the Commission. In order to understand the impact of ordoliberalism on the interpretation of the concept of abuse, it is important to understand the evolution of ordoliberal thinking on the problem of monopoly. Origins of the abuse concept during the negotiations of Rome Treaty are not clear. Even the leading academics on the area cannot agree. David Gerber says that the concept has its roots in German ordoliberalism, while Pinar Akman argues to the contrary saying German ordoliberalism had no impact on the wording of Article 102 TFEU. Behrens agrees with neither.
According to him, Gerber is mistaken because his understanding of ordoliberalism is too narrow and focused exclusively on its initial version in the 1930s and 1940s. This early ordoliberal thinking (the Freiburg School), the creation of dominant positions and monopolies should be prevented and if it is not possible they should be subject to strict state regulation to avoid specific exploitative and exclusionary practices. However, ordoliberalism was far from monolithic. In 1950s some adherents of the ordoliberal thinking evolved into a more neoliberal thinking whereas others developed the concept of “social market economy.” Therefore, there is not one ordoliberal school of thought and it went through considerable adjustment before the negotiations of the Rome Treaty took place in the 1950s. Gerber argues, not the initial approach of the Freiburg School but the later refined version had an impact on the incorporation of the concept of abuse into the Rome Treaty. Hence, the total disregard the dynamics of ordoliberalism and its development since the 1930s would result in an underappreciated interpretation of the Article 102 TFEU.
Pinar Akman is mistaken because she denies the influence of the ordoliberalism on the drafting of the Article 102, but her understanding of the ordoliberalism is also narrow and solely reduced to the initial arguments by the Freiburg School – that the monopolies are inherently harmful because they are incompatible with the models of prefect competition, all avoidable monopolies should be abolished and the ones that are unavoidable should be under strict state supervision so that they act as if perfect competition succeeded – ignoring the later positions in the ordoliberal thinking. Additionally she also denies that as the ordoliberal approach had been unsuccessful in Germany, the German delegation during the negotiations of the Rome Treaty did not propose the wording of the Article 102. Although Behrens agrees with the first part of the argument, he disagrees with the second part because according to the travaux preparatoires, it is clear that the German delegation, which was composed of second-generation ordoliberals, played a major role in the incorporation of the abuse concept into the Article 102 TFEU.
From these, it follows the Behrens’s argument that ordoliberalism cannot be limited to the initial ideas of the first generation supporters between 1930s and 1950s and it spans over at least four generations. Thus it is not a homogenous school of thought and perceived as frozen in the period of its first generation of supporters as many in Europe would like to think so. For example, the premise that monopolies are harmful to begin with has been deviated from after the initial period and has been reconsidered to say that they are not harmful per se –especially when such dominant positions are result of their success on the market. Today, the contemporary ordoliberalism accepts that if a dominant market power, or a monopoly is the result of market success, there is no need to punish it. However, market dominance should not be allowed if it is the result of external growth i.e. mergers or acquisitions. Another point is that the ordoliberals abandoned an earlier “as if” doctrine i.e. the requirement of the naturally occurring dominant market power to behave as if they were in a perfect competition. Because of this earlier doctrine many believe that the ordoliberalism creates a highly regulated economy, but this is not true. As opposed to regulatory intervention and prescribing specific conduct, the ordoliberals asserted on prohibiting conduct having negative impact on the competition.
For example, the inclusion of the exploitative abuses such as imposing unfair prices or trading conditions under the non-exhaustive list of examples under the Article 102 TFEU, has been attributed to the influence of ordoliberalism while drafting of the provision; that ordoliberals ignore any concerns about efficiency; and that they put more emphasis on fairness than efficiency. Behrens refuses all of these misunderstandings. Historical evidence supports that the strict regulatory interpretation of the Article 102 TFEU originated from Rene Joliet, who was not an ordoliberalist, who advocated direct state intervention into dominant market power’s pricing decisions. However, the ordoliberal approach (by Ernst-Joachim Mestmäcker) was responsible for preventing this strong regulatory interpretation from becoming the law by arguing that Article 102 TFEU must be interpreted vis-à-vis the goal to establish a system of undistorted competition. This has been reflected in the case law of the ECJ too. The court has found exploitative abuse only in one case and mostly targeted exclusionary abuses. According to Behrens, ordoliberals favour a system of undistorted competition more than they favour a strong interventionist state; they believe in consumer’s freedom of choice, and allocative and dynamic efficiency as a result of effective competition; refuse efficiency of individual business strategies; it is not true is that ordoliberals put more emphasis on fairness than efficiency and thus protects competitors rather than competition. Ordoliberals protect the freedom of choice of individuals, not because of concerns about fairness, but because they believe it is the foundation of a system of competition based on the rule of law.
In conclusion, Behrens summarises his point that the term ordoliberalism is imprecise and problematic by saying that (1) the term ordoliberalism cannot be adequately conveyed in a few lines (2) it is a family of ideas rather than a static and homogenous school of thought. Ordoliberalism for sure influenced the drafting, interpretation and application of the “abuse” concept, but it simply advocates the protection of one of the goals of the internal market, that is having “a system of undistorted competition” that is “based on individuals using their legally protected rights in order to freely reveal their preferences on a continuous process of choice making, a process that according to experience is the most efficient way of organising economy.” (as stated on page 29)
This is a good summary of the main points in Beherns’ paper. Note that in the second paragraph, where you say ‘Gerber argues’ you probably mean Behrens: that is to say, your point is that Gerber used 1st generation ideas, and not 2nd generation ideas.
How do you react to this paper? what are the implications of these findings?
Behrens engages into a discussion about ordoliberalism. Firstly, he analyzes the origins of the abuse concept and also he explains the ordoliberal approach to the monopoly problem. He denies that ordoliberalism is in favour of a strong state intervention in market regulation. On the contrary, he argues that ordoliberal scholars stand for competitive markets as “the preferable way of coordinating consumers’ and producers’ choices”. He argues that, on the one hand, ordoliberalism advocates a liberal approach towards markets regulation, but, on another hand, it does not mean that a market should be left untouched and unregulated. In the legal doctrine ordoliberalism was not defined precisely, so indeed, each discussion should start with a definition of what an author considers to be ordoliberalism.
I would agree with his statement that the EU adopted a ordoliberal concept saying that “competitive markets must be based on the rule of law, more specifically on competition rules which the state must enforce by administrative and adjudicative means” (citation of V. Vanberg, The Freiburg School: Walter Eucken and Ordoliberalism). The logic behind was that creation of the internal market would not be possible without competition rules. This point of view was expressed in the chapter by Tuori, where he explained how competition and free movement are linked.
In the section “The proper role of efficiency considerations” the author argues that participants’ freedom of choice linked to allocative efficiency in a way that without ensuring a choice for consumers, the market achieve allocative efficiency. The rightfulness of this statement depends on the definition of allocative efficiencies. But I would agree with the author’s argument that it is impossible to “translate all qualitative criteria into quantitative criteria”. The problem with economic analysis, for instance, is that very often it is simply impossible to create a formula that with all-encompassing data that would explain all the processes taking place on the market.
When I was reading this articles I was asking myself: what is progressive approach and what is conservative? If one agrees with Behrens arguments, a concept of ordoliberalism seems to be quite progressive: competition is needed to regulate only when negative effects are present at the market and too much regulation and intervention by the state is not supported.
The author tries to answer when the intervention from competent authorities is needed on a several examples of exclusionary abuses. According to Behrens, the ECJ applies the ordoliberal approach (according to Behrens’ definition of ordoliberalism) in its cases on predatory pricing and refusal to deal. Behrens suggests that inefficient competitors would be eliminated by the market itself, whereas a role of a state is to take measures against dominant firm who use their dominance to eliminate other competitors illegally. Chicago School argues that we should not care much about less efficient competitors. And Behrens says that the EU rules on abuse of dominant position are not about protecting competitors, but protecting a process of competition.
On the example of predatory pricing, I think that it would be difficult in many cases to show the likelihood of recoupment, simply because this “evidence” will be based on unknown and uncheckable hypotheses. Perhaps, this approach while pretending that consumer welfare is a central issue, in reality is aimed at protecting big companies?
One has to wonder how well the progressive/conservative labels, which you find in some of the US papers, really maps out onto the debates in Europe. But note that for example Tuori’s reading suggests a very limited scope for competition law if one is ordoliberal.
is it really true that one cannot measure allocative inefficiency? if one predicts a price increase, then one is able to measure the effects of the price increase on consumer choices.
The readings for this session share a historical perspective on the evolution of European competition law. Tuori discusses the ‘doctrinal and theoretical volatility’ underlying the European economic constitution – translated into competition law and the market freedoms -, where ordoliberalism is presented as one of the constitutional discourses in conflict. Behrens’ paper is a defense of ordoliberalism, determinant in the interpretation of article 102 and going beyond the empty slogan of the ‘protection of competitors’. Finally, Chirita presents an overview of the drafting process of competition law provisions in the Treaty in order to illuminate – with more or less success – the current debate.
I would like to make two very brief points. The first one relates to the value of the historical approach in the study of competition law. Even if it certainly help us understand the different discourses that have influenced the drafting, enforcement and judicial review of competition rules from its origins to our days, and in this way illuminates decisions that would otherwise remain obscure once the economic and theoretical context in which they were taken is forgotten, I think its value is nevertheless more limited when it comes to inform the direction competition law should take, unless we believed that the original objectives of compeititon law – which meanwhile remain disputed – must be considered inmutable.
Secondly, the readings have drawn my attention to the question of the distribution of competences in economic legislation between the European and national levels, and how this distribution impacts the enforcement of competition law. Following Tuori, ordoliberalism sees competition as a substantially legitimate system, ‘anchored in the values of freedom and equality’. Input and out legimitacy are not parameters under which competition law is to be judged. As for input legitimacy, because this legitimacy is only possible at the national level, social policies are to be left to national legislators. This could explain why Regulation 1/2003 allows for more stringent national rules on unilateral conduct – such as rules on relative dominance of economic dependence, the objectives of which seem closer to the protection of contractual parties from unfair terms resulting from unequal bargaining power -, or for rules pursuing an objective different from that of competition law – such as national unfair trading laws, which often combine among their objectives the protection of consumers and the protection of smaller competitors -. Requiring competition law output legitimacy, instead, would entail subordinating to efficiency or other policies the protection of competition based on a ‘rules and rights orientation’.
The ordoliberal account is nonetheless challenged. From an output perspective, it is challenged by a more economic approach that justifies restrictive agreements when they contribute to efficiency, and efficiency gains are passed on to consumers. Competition law cannot be read any longer as protecting competition as a ‘system’. And from an input perspective? I am struggling to see how the judgements of the ECJ in Plus and Wamo, striking down national unfair competition rules regulating certain methods of sales promotion, such as sales at a loss, fit this puzzle. The Court, through a wide interpretation of commercial practices, understood that these national rules, jointly aimed at the protection of consumers and competitors, fall within the scope of the Unfair Commercial Practices Directive (regulating b2c relations). Because the national rules established a general prohibition on sales at a loss, a practice not contemplated in the black list of the Directive, the Court concluded that national legislation was contrary to the maximum harmonization purpose of the Directive. The UCPD was used to deregulate national legislation which covered, not only b2c practices, but also b2b (so maybe the judgement would have been different if the national legislation at stake exclusively listed among its purposes the protection of smaller competitors?). On the one hand, this move by the court could be seen as a modern way of negative integration in b2b commercial relations, under the umbrella of a consumer protection directive. On the other hand, I wonder to what extent it entails meddling with the level of protection of competitors (which we could consider part o the ‘social dimension’) chosen by the national legislator (with input legitimacy) under the haven of article 3(3) of Regulation 1/2003.
On the value of history – indeed there is a limit if the interpretative method for today is not looking at the intent of the legislator. but perhaps we should also learn about the dynamics of how concepts evolved and what this may teach us.
I am not sure how far Article 3 of Regulation 1/2003 actually fits with the ordoliberal vision, although are 3(2) may well strengthen this by allowing stricter rules, while 3(3) weakens it by allowing other objectives.
the legitimacy of the ordoliberal is substantive legitimacy accoriding to Tuori… what might this mean?
Looking at Behrens paper, it seems that ordoliberalism is more present than we think in EU competition law, and perhaps all the debate about the alignment with mainstream economics misleads our conception of the EU competition system. I think that Behrens is successful in trying to break down some assumptions.
Now, there are a couple of questions about ordoliberalism that I would like to clarify. Behrens says that ordoliberalism considers that a restraint of competition may be found when 1) the number of freely competing producers is artificially reduced in ways that do not result from the normal process of competition itself, and 2) where this reduces the scope of alternatives among which consumers may freely choose (p. 11). I understand that these two conditions are cumulative, so first, for instance, we need a firm that excludes rivals. That would meet the first criterion. And second, given this exclusion, there should be a limitation of consumers’ choice. This would be the second criterion. But what if the incumbent has a wider offer than the rivals that have been excluded? In this case, the second criterion would not be met. Does this mean that ordoliberalism tolerates certain level of exclusion?
The second question that I have is related to the concept of ‘special responsibility’ (p. 18 onwards). I do not see the application of this concept, since Art. 102 applies to undertakings with more than 40 percent of market share, and the consequences are the same, no matter the incumbent has 40 or 80 percent.
Now, concerning the historical approach as a methodology to competition law, I would like to focus on Chirita’s paper because I think that she intends to go one step further than Behrens. In my opinion, Behren’s paper is quite nice because he challenges some assumptions on the role of ordoliberalism on the conception of ‘abuse’. But he does not want to go further. As Behrens’ says at the very beginning of his paper, ‘whether or not the notion of ‘abuse’ is rooted in ordoliberal thinking is not necessarily determining the question whether or not the jurisprudence of the Commission and specially of the CJEU has been and still is informed…’ (p. 1) Thus, as said, he only aims to break down some solid assumptions from an historical perspective. However, Chirita wants to go one step further and, apart from explaining the drafting of EU competition rules (as Behrens does), she intends to explain some contemporary problems (p. 281). In particular, she poses some direct questions (p. 282) and I am not sure whether she answers them properly.
As an example, see the question on the concepts of restriction by object and by effect (p. 291). She essentially says that the distinction between object and effect needs to be seen from a civilian point of view (p. 294). I must say that I found her arguments a bit confusing.
She says first that the concept of ‘agreement’ is wider than the concept of ‘contract’ for French, civilian lawyers, and I am not so convinced (p. 294). My civilian lawyer colleagues would correct me if I am not right, but, to me, under civilian theory of contracts, the concept of ‘contract’ is really broad, so an agreement of information exchange is considered as a contract. Now, she seems to say (unless I got it wrong) that the purpose/object of an information exchange agreement would be illicit, so there would be no contract, because under Civil Law a contract needs a licit object and a cause. Therefore, Art. 101 could not apply if it only refers to (existing) contracts. But if this is her argument, again is wrong to my understanding. Civil and Competition Law cover two different spheres. One agreement or contract can be licit under Civil Law, and illicit under Competition Law. So an information exchange agreement, even if the information is really important and restricts competition, would be a valid contract under Civil Law, as it has an object and a cause. At the same time, if this agreement or contract restricts competition because it fixes prices, it would be a restriction by object and it would be void by Art. 101(2).
Then she continues her argument with a confusing discussion on relative versus absolute nullity in order to analyse the structure of Art. 101. She says that Art. 101(1) implies an absolute nullity for any restriction by object from Art. 101(1)(a)-(e); and Art. 101(3) is a relative nullity (p. 298). I am not sure if she still has in mind the meaning of absolute and relative nullity according to Civil Law, and if so, the argument is misleading. What she tries to say, I think, is that the presumption of restrictions of competition are more rebuttable if Art. 101(3) applies. Indeed, she seems to say this when she analyses the Mastercard case (p. 303). But, again, I am not sure whether her argument casts some light on the object/effect dichotomy. Furthermore, I do not think that her analysis of Glaxo and Mastercard links well with her previous historical account.
This question is just one of the examples that shows that the historical approach seems to have some limitations in order to explain contemporary problems. However, it may be useful to explain classical ideas such as ordoliberalism as Behrens does.
I see your point with the Chirita paper, but maybe the point is that if there is a contract then art 101 merely provides one for grounds to render it void, but it does not encompaass other forms of aagreement.
on the test for anticompetitive effects: your example is a little faar fetched because it is easy to motivate the oppsiite argument that the consumer wants two brands to pick from and not two versions of the same brand. but this just suggests to me how problematic it is to find competitive harm under the ordoliberal approach.
on the 40 to 80 per cent market shhare, do note that if there is a natural monopoly then the ordoliberals might agree to stricter measures, for the range, then this can be slotted into the test, I think so a refusal to deal by a firm with 40 per cent of the market would not be attacked.
24/11/2016 at 12:40 am
Behrens clarifies that Ordoliberalism is wider than the first generation of scholars that wrote about it (also known as Freiburg School). Because this clarification comes too late to some of the authors that have been writing about the influence of Ordoliberal ideas when drafting the Rome Treaty, Behrens discloses some doctrinal examples where misunderstandings have been made. This author argues that, under an accurate and extensive understanding of the German Ordoliberal approach, one could not argue against the fact that it played an important role in defining the content of the Rome Treaty (pp.20/29).
By pinpointing the main elements of Ordoliberalism (p. 12), Behrens takes the opportunity to analyse how in concrete was current Article 102 TFEU influenced by these ideas. One interesting point is the fact that the concept of “abuse” was unknown by Freiburg School liberals (p. 14), who developed this idea alongside with the help of examples of exclusionary and exploitative practices.
Finally, the idea that a dominant firm must not engage in conducts that are only possible due to market dominance is the key to interpret correctly what is set forth by Article 102 TFEU, since it leads to the conclusion that, under this Treaty provision, a dominant firm may be prohibited from acting in a way which would be acceptable for non-dominant firms (pp. 17/18).
Chirita’s main point is that the Rome Treaty cannot be judged based on the Spaak Report only, but rather through the lens of the Paris Treaty. From this starting point, the whole article is about explaining the interpretations (or at least attempts to do it) of currently ambiguous questions/terms, that preceded the Rome Treaty negotiations. It also clarifies that Competition was the means to achieve the Common Market establishment (foreseen by the Schuman Plan).
To discuss in class (if possible) – I am not so sure of the author’s effects/object analysis, especially when referring to it as a Civil Law problem – the same agreement object can be considered valid under Civil Law rules, but unlawful from a Competition Law perspective. According to Charita, what shall Competition Law do? Consider the agreement lawful because it is so under Civil Law? I guess that is not the case, but I did not understand what point she tries to make out of it.
How far do you think that Behrens’ interpretation helps apply art 102? for example to state that conduct is allowed if you are not dominant but teh same act may be forbidden if you are dominant — how helpful is this?
if as you rightly state Chirita’s main point is that the Paris aggreement is the better source, then one might ask why she diid not look at the preparatory works of that Treaty instead.
In reading Behren’s article, I compared his description of ordoliberalism to the Chicago School in the United States. Both believe in competitive markets, and both were influenced by Adam Smith to the extent they believed “competitive economic system to be necessary for a prosperous, free, and equitable society” (Behren, p. 10). However, the Chicago School is much more willing to embrace the laissez-faire approach to markets. The point of Easterbrook’s filters was to make sure that the courts didn’t interfere in the natural behavior of markets; interference by judges was considered much more dangerous than just allowing markets to take their course, and so they should only even use the rule of reason if a monopoly was extremely likely. In contrast, ordoliberalism allows that the government has a role, at very least in determining the “rules of the game.” Ordoliberals believe “…competitive markets must be based on the rule of law, more specifically on competition rules which the state must enforce by administrative and adjudicative means” (Behren, p.10).
The emphasis on consumer choice reminded me of the pre-Chicago School Brown Shoe decision, which also emphasized consumer choice, and made me wonder if this approach to antitrust was closer to ordoliberalism. The ordoliberal approach to efficiency also seems to require many competitors, so that consumer preference can be displayed and efficiency reached.
The difference between the approach developed in America and the ordoliberal approach is also reflected by the different acts (assuming one accepts Behren’s argument that 102 TFEU was influenced by an ordoliberal understanding of abuse). For example, Section 7 of the Clayton Act focuses on acquisitions which might lessen competition or create a monopoly. In contrast, Article 102 TFEU focuses on the actual behavior of competitors in the market. Does focus on behavior make more sense than focus on whether or not a monopoly is being created or competition lessened? Is it easier to determine whether behavior falls into one of the abusive categories than it is to explain why a behavior is or isn’t anti-competitive? Hans Schweitzer’s quote in Behren’s article indicates to me that the two approaches might face much the same challenge: the difficulty of “distinguish[ing] those acts with exclusionary effects that result from legitimate competition on the merits from exclusionary acts which cannot be justified as normal acts of competition but which, to the contrary, exploit the special power that a dominant firm possesses so as to entrench the firm’s position in the marketplace” (Behren, p. 28).
24/11/2016 at 12:48 pm
it’s interesting to try and compare the ordoliberliasm with the pre-Chicago approach to antitruust. as you suggest it is arguable that there are some similarities between the two. the laissez faire stance of Easterbrook is clearly one feature that distinguishes it from ordoliberlaism but I wonder if it is the central one. The test for anti competitive conduct may also differ.
you are right that both chicagoan and ordo-liberals would struggle to distinguish between aggressive but lawful conduct and conduct which is aggressive and unlawful.
1. Competition Theory – Constitutional Theory
Tuori does a great work in using legal theory and EU law to disentangle the process of economic constitutionalization (p. 127-150). His thought-provoking and learned chapter intends to reconstruct European constitutionalism and simultaneously develop a general constitutional theory. He carefully presents various aspects of the ordoliberal thought. However, after a point he reduces ordoliberals to Hayek or to the Austrian School (even though he underlines the difference in p. 135). This is understandable since for instance even Behrens approves Hayek’s thesis that competition law cannot be prescriptive, or other contemporary ordoliberals ike Streit and Mussler are against integration by intervention or favor the minimalistic state. Yet, I am not sure whether the justification of state intervention solely on microeconomic reasons is inherent to the ordoliberal thinking. I have also the feeling that Tuori does not differentiate between early and late Hayek. Law, Legislation, and Liberty, was written in the 70s while the Road to Serfdom (1944), could be more ordoliberal in 1944. Even though these comments may look as the byproduct of excessive scholasticism, I think that they may address a broader problem of the chapter.
Specifically, I think that Tuori misses one important distinction: he does not distinguish between the ordoliberal competition theory and the ordoliberal economic-constitutional theory. Of course, there is a connection between the two. Yet, as I argue here this connection is not necessary. Behrens gives a fair account of ordoliberal competition theory. Competition results from individual freedom of producers to choose what to offer and of consumers to choose what to buy; it is a dynamic process of interaction between choice-making individuals and it relies on a system of private law. The ordoliberals pose a question of distributive justice (‘the problem of allocating scarce resources’) and support decentralized economic planning. However, they do not agree with the classical laissez-faire liberalism; they do not share Adam Smith’s expectations of a harmonious system of natural liberty; or minimalists’ argument about State’s incapacity to regulate competition (the whole false positive vs false negatives debate). Even though they advocated in favor of a free market economy based on performance competition and the primacy of the Rule of Law, it is not clear if they were in favor of a social market economy or an open economy based on undistorted competition.
Many of them have been using the killer phrase ‘social market economy’, and have rejected neoliberalism in many ways (I understand neoliberalism as libertarianism). This term was used to demonstrate a third way between collectivism and laissez faire liberalism. In Germany, they governed in coalition with the social democrats in many occasions. Their political platform brings them closer to the New Labours in the UK or the Democrats in the US. Eucken for instance has said that ‘social security and social justice are the greatest concerns of our time’. It is true though that some ordoliberals seek to constitutionalize a specific economic policy. This economic policy (a) rejects the Keynesian macroeconomic demand management and suggests that (b) monetary policy should be the responsibility of an independent central bank committed to monetary stability and inflation, (c) while fiscal policy belongs to the government. This economic policy is similar to a neoliberal policy and would be supported by Hayek and Friedman. For instance, the ordoliberal economist Hans Werner Sinn argues that the Eurozone bailouts have created moral hazard, (Ordoliberalism Revisited, Economist 2014). Mestmaker, though, was not satisfied with the Court’s holding in the Gauweiler case. In light of the above, it could be argued that the ordoliberal economic-constitutional theory is not so clear-cut and its clear-cut version is not crystallized as part of European economic constitution.
Not distinguishing between ordoliberal competition theory and economic-constitutional theory has two direct implications. First, in the area of competition law Tuori fails to see that the ordoliberal approach is more interventionist than the minimalist, Chicago-inspired More Economic Approach (p. 161).
Secondly, using the ordoliberal constitutional theory as a benchmark creates several tensions in the discussion about European economic constitution. Tuori argues that ‘disagreements on the underlying constitutional theory are not so much about the microeconomic basis but, rather, about the nature and degree of public interventionism; about the respective organizing tasks of the market and centralized European or decentralized national public intervention’ (p. 152). On the other hand, he suggests that the European economic constitution is neutral (p. 164). Then he comes back in p. 165 saying that ordoliberals will be satisfied with the power restrictive function of the free movement provisions and competition law, as well as with the general microeconomic orientation of economic constitutionalization. If this is true, then the European economic constitution is not neutral. Then he argues that for ordoliberal constitutional theory competition law is primus inter pares (p. 160). However, I am not sure that this thesis is shared among all ordoliberals. Be that as it may, the piece boils down to an attack to ordoliberals, rather than as a clarification of the European economic constitution, of its precise content and boundaries. To me a better option would have been to conduct his analysis just by using models like Snell or theories like Maduro (pp. 154-155).
To my understanding the European economic institution is not neutral. As Pashukanis has shown, exchange presupposes legal forms that appear as pure. ‘Both exchange-value and the law of property are generated by one and the same phenomenon: the circulation of products which have become commodities. The formation of a stable market invoked the necessity of regulating the question of the right to dispose of commodities, and accordingly, of the right of ownership’ (The General Theory of Law and Marxism, pp 83-84). In this sense the Treaty makes an explicit choice. More than this, it favors of a social market economy that allows various types of state intervention. The common market is organized under the principles of freedom and competition. Otherwise, there would be no market and this would be a non-neutral decision.
Nonetheless, the Treaty leaves plenty of possibilities for state intervention. The negative, legal, juridical type of integration pursued so far does not exclude the possibility of positive, political, Commission- or Council-led intervention. Tuori is right in saying that there is an asymmetry afflicted by the free movement jurisprudence (non-economic interests are treated as derogations from economic ones). Yet, he does not tackle a more challenging question: what type of intervention should be preferred within the broad limits prescribed by this not-neutral yet wide economic constitution. This question calls for a framework of intervention that currently does not exist. For instance, Tuori seems to disagree with policy vs. principle methodology (p. 169) or the expert-dependent restrictions on fundamental freedoms (p. 173). However he does not propose an alternative (even though he seems to prefer national constitutional systems he is not at all hostile to federalization, while he does not really talk about de-constitutionalization).
2. The Quest for a Normative Justification of Competition Law
Insightfully, Tuori points out that ordoliberals provide a more comprehensive justification of competition law compared to other schools of thought. This normative approach may be more successful than an efficiency approach in claiming legitimate political authority for competition law. Given that the law is the by-product of an authority, the main normative question that arises is under what conditions could such an authority be normatively justified. Since each person has a duty to act autonomously on the basis of her own moral assessment of right and wrong, it should be always asked how it is possible to follow authoritative commands, namely directives coming from an heteronomous source (Wolff, In Defense of Anarchism). To me a legal system, an institutional arrangement or state of affairs could claim legitimate authority if (a) it could be endorsed by all citizens considered as free and equal and acting in the light of principles and ideals acceptable to their common human reason (Rawls, Political Liberalism 137) or if it (b) shows equal respect and concern to every citizen (Dworkin, Taking Rights Seriously 206).
For ordoliberals, competition law should prevent economic freedom from destroying its own prerequisites (Möschel, ‘Competition Policy from an Ordo Point of View’). Competition is justified as an institution of liberty based on the precondition that all subjects are free and equal. The Economic Constitution shapes competition in the market by providing the rules of the game, whereas private law society gives to everyone the legal means to compete. Subsequently, the principle of competition guarantees that the market players will remain unhindered in exercising their economic freedom and that they will be enjoying equality of opportunity. Most people confuse ordoliberals with neoliberals because they understand economic freedom in Hobbesian terms as an unconstrained right to act without obstacles in the marketplace. However, I think that ordoliberals understand freedom as a virtue of the basic structure, as the possibility to act under a universalizable norm and that norm could be a norm based on addressing each person as free and equal (I think Behrens and Gerber do a great job in clarifying this point). From the equality of all before the law follows that equal freedom of each constitutes a limit for the freedom of every other individual. By circumscribing the scope of legitimate private action and by imposing the rule of law on the state and on all private market players, the ‘Economic Constitution’ protects the institution of competition, as well as the economic freedom of the market participants. In this regard, the ordoliberal approach may be more successful than an efficiency approach in justifying competition law.
3. Short comment on Akman
I think Behrens and Gerber do a great job in clarifying these points, while Akman essentially misrepresents the ordoliberal competition theory in her attempt to provide a Borkian-originalist argument in favor of Kaldor-Hicks efficiency. Behrnes explains several of Akman’s misunderstandings (eg. ordoliberals are not against the accumulation of power per se). I want to make just one point. Akman states that ordoliberals see individuals as ends in themselves and not as the means of another’s welfare. ‘This would imply that no one’s welfare could be preferred over or sacrificed for anyone else’s welfare’ she writes. Kantian elements are well embedded in the ordoliberal thought (as Tuori nicely shows in p. 167). However, it seems that Akman follows Poppers summary of some of Kant’s philosophy: ‘always recognize that human individuals are ends, and do not use them as means to your end’ (The Open Society p 102). This translation though is problematic. According to Kant you have a moral duty to always recognize that human individuals are ends, and do not use them as mere means to your end. This ‘mere’ makes a huge conceptual difference. This can explain why Bohm distinguishes between human rights protecting individual freedom as an end in itself and economic freedom protected because of their value for the community. This may also explain why Akman cannot understand how could ordoliberal thinking can accommodate consumer welfare considerations and in general welfare trade-offs.
On certain points Akman seems to argue that even the French delegates where more ordoliberals than the German ordoliberals delegates. In addition, she reduces the whole school of thought to the complete competition concept and the as if standard. If as she argues complete competition is similar to perfect competition the difference between ordoliberals and the Chicago School is just a difference of emphasis. Posner uses competition as a proxy for efficiency and ordoliberals vice versa. Also Akman’s total welfare approach is actually at odds with the More Economic Approach that declares consumer welfare the ultimate goal of Art. 102 TFEU, while it cannot explain the existing case law.
point 1: a lot there, but I think very valuable your question about what the chapter actually wants to deliver – as you suggest it feels more to be about ordoliberalism and its relationship with the EU than about the EU as an entity and what ideas influence it. so I agree a different analytical paradigm might have been more helpful.
indeed there are two ordo liberalism discussions: the one about the organisation of society and the more granular one about competition law
point 2: yes, good idea but is it worth trying to explore whether the more economic approach could also benefit from your justificatory efforts?
point 3: ” you write: Posner uses competition as a proxy for efficiency and ordoliberals vice versa.” who says this Akman or you? and what does it mean vice versa? I don;t see it reflecting the ordoliberal line.
Beyond the specific intricacies, these week’s readings converge on an appealing hermeneutic debate about the foundations of EU Competition Law regime. On the one hand, there are those who understand this regime as grounded in the ordoliberal conceptions of the German/Friburg School (i.e. Gerber) or in an evolution of it (i.e. Behrens). On the other hand, this understanding has been challenged by studies concerning the history about the enactment of those provisions (i.e. Chirita) and their continued operation/application by the CJEU and the EC policies (i.e. Tuori).
These latter approaches develop an understanding of the EU’s Competition Law regime that could be fairly termed as “existential”: there is no inherent “nature” [neither ordoliberal, nor any other specific one] within regime’s provisions [they are deliberatively abstract, explained as part of a political compromise], hence their substance is [and should be] contingently defined through periodic speech acts issues by the competent authorities. In this way these latter interpretations open further space for politics and discretionary policies in the development and application of the EU’s Competition Law regime. The debate is appealing because it shows the extent to which this ‘theoretical’ controversies does have an important impact in real-world doctrinal categories such as the concept of ‘abuse’, the distinction between ‘object’ and ‘effect’, or the notion of ‘distortion’ and thus huge relevance for actual case-law.
From the standpoint of this hermeneutic debate its hard to determine whether German Ordoliberalism or US Welfarism is really progressive or conservative. I guess the debate shows is very much ‘a matter of perspective’. In Tuori’s narrative, US Welfarism is presented as a kind of progressive development for EU Competition Law. However, Behrens makes a strong argument to defend German Ordoliberalism as a way to avoid the kind of value judgments about consumer preferences that welfare antitrust implicitly make by reducing them only to variables of ‘price’ and ‘output’. A few open questions for our discussion: Is Behrens argument persuasive?; Its German neo-ordoliberalism [which seems to mix with Austrian School, in Behrens evolutionary account] really an alternative to the Chicago School? Are we necesarilly trapped between the US and Germany? Could the French visions of antitrust currently be an attractive alternative? What about the UK?