Miguel Sousa Ferro
In recent years, leading EU Competition scholarship has tended, I find, to take one of two approaches. A classical approach focuses primarily on statute and case law. It is first and foremost concerned with applying the legal method of interpretation of the law and understanding what the law in force is, so that it may then, potentially, criticise certain solutions. Another line of thought, visibly influenced by an American-style approach to Antitrust scholarship, focuses predominantly on policy, and is more concerned with discussing what the law should be than with what the law is today. The goal here is not so much to argue for a correct interpretation of the law according to hermeneutics, but to defend a certain outcome which should be arrived at by the law. In my view, this book, which is the result of the author’s PhD research, falls squarely within the second group.
In Chapter 1, the author begins by describing what he refers to as the ‘process paradox’ of Article 102 TFEU. The argument is that it is paradoxical to state that the goal of the law is to protect the competitive process, and then to disregard the origins of dominance (the process which led to it) when applying competition law. The book then distinguishes seven ‘conventional origins of dominance’: statutory, historical, natural, investment, intangible, accident and luck and anti-competitive behaviour.
The next seven chapters are dedicated to each of these ‘origins of dominance’. Each chapter addresses, to some extent, relevant case law for that type of factor which led to the position of dominance. This analysis of the case law is meant, primarily, to emphasise the author’s diverging positions. Indeed, as the author points out, there is only one case – Post Danmark – which could, possibly, be pointed to as ‘an explicit departure from the long-established principle in Article 102 TFEU enforcement that the reasons for which a firm enjoys dominance are irrelevant’ (p. 283). The quote the author refers to seems to be an isolated obiter dictum, and it is not obvious what impact – if any – it had on the conclusion of the Court of Justice concerning the anti-competitive effects of the behaviour in that case. The Opinions of Advocates General Kokott and Poiares Maduro in Post Danmark II and KPN Telecom are also mentioned, but these Opinions, in my view, simply show that, for certain exclusionary abuses, the characteristics of the market (which include an understanding of how dominance was arrived at) need to be taken into account in order to identify the possibility of exclusion. This seems fairly straightforward and stays far shy from the author’s proposal.
The author’s central thesis is that ‘analysing why the dominant firm comes into existence [i.e., achieves its dominance] is critical to assess the effects of unilateral firm behaviour under Article 102 TFEU’. Not because the case law says it is – quite the contrary –, but because to do otherwise would lead to results the author deems undesirable.
While my understanding of the author’s position may be imperfect, it seems to rest on fundamental disagreements with current EU Competition law and policy for unilateral practices, both about the goals to be achieved and about the requisites for a behaviour of a dominant company to be deemed unlawful.
As I understand it, Article 102 TFEU rests on the idea that dominance, in itself, is not the problem. The problem is that, once an undertaking achieves such a position of strength in the market that allows it to behave largely independently from its customers, suppliers and competitors, it is capable of adopting a large range of practices which increase prices and reduce output or quality, to its benefit and to the detriment of others. The first step is to identify whether an undertaking has such a degree of market power. If it does, it is then deemed to have a special responsibility, and prevented from adopting many types of profit-maximising behaviour which would otherwise be lawful.
The author seems to believe, primarily, that Article 102 TFEU should not work like that. Or, at least, it should only work like that when dominance was not achieved through efficiency or merit.
As I understand it, the author starts from the premise that Article 102 TFEU is meant to protect the competitive process, and that the reason why we go after Article 102 cases is because we believe the competitive process has not led to the right degree of competition. This is a surprising starting point, which, in my view, distorts all the subsequent analysis. Without going into the endless debate about the goals of Competition Law, it seems reasonable to say that Articles 101 and 102 TFEU are ultimately aimed at protecting consumers and enhancing consumer welfare. Thus, for example, to argue that Article 102 TFEU should mostly stay clear of practices by natural monopolists, because the market structure is inevitable (see e.g. p. 284), misses the point entirely. The author argues that, in the case of natural monopolists, ‘use of market power is generally not an abuse, but rather the most efficient way a firm can provide and keep on discovering new needs and wants’ (p. 285).
We do not have Article 102 TFEU because we want to correct the structure of the dominated market. We have Article 102 TFEU because, faced with a given market whose structure and characteristics give a company extraordinary market power, we believe we need to control the exercise of that market power, to prevent it from using it, on the one hand, to further strengthen its position, but also to harm other undertakings and consumers in a way which we, as a society, have deemed undesirable. The issue is not whether the natural monopoly leads to economically efficient results, it is whether we as a society are prepared to live with those results. Otherwise, we may as well go ahead and do without ex ante sectoral regulation, while we are at it.
Of course, the author is well aware of this. He simply does not agree with it. This is evidenced by his apparent view that exploitative abuses should, as a rule, not be forbidden: ‘exploitative abuses should investigate whether the position of dominance has been anticompetitively acquired. (…) Article 102 TFEU enforcement should establish a causal link between ex ante exclusionary conduct leading to a position of dominance and the ex post exploitation of that position’ (p. 287). This seems to mean that, unless dominance had been acquired unlawfully or by State intervention, undertakings should be able to exploit their position as they see fit. If dominance was achieved meritoriously, the author seems concerned only with exclusionary abuses, with the ‘locking in’ of the position. This is not a proposal for reinterpretation of Article 102 TFEU. It is a rejection of the ordoliberal philosophy behind Competition Law and a defence of a neo-liberalism with very few limits.
The author explained his view through a metaphor based on the field of medicine (p. 19), by arguing that a doctor needs to understand the clinical and physical history in order to be able to treat the patient appropriately. But of course, this only works if you reduce ‘treatment’ under Article 102 TFEU as being focused on structural concerns. Let me add my own metaphor, to explain what I perceive to be the consequences if the author’s views were to be accepted. Competition Law would be like going to the doctor because you’re sick, and the doctor saying: ‘Yes, I can see you’re sick. But now, how did you get sick? Were you dancing outside in the rain? If you got sick because you were silly, you’re not getting any medicine’.
There are, of course, a lot of details and caveats to this. One thing I wasn’t entirely clear on is that the author seems to distinguish between the types of abuses and the way they should be treated. But he structured his analysis according to the types of origins of dominance, and tried to make general conclusions which probably do not apply to all the types of abuses. He distinguishes, for example, between object and effects restrictions of Article 102 TFEU. I would personally have benefited from an analysis broken down by type of abuse, so as to better understand the author’s views on the impact of the origins of dominance for each type of abuse.
I also think the analysis would have been clearer if greater attention had been paid to the segmentation between the requirements for the determination of dominance and the prohibition of its abuse. Often it felt as though the author, while obviously knowing this not to be the case, moved forward as though market share proxies inevitably led to findings of dominance, rather than being irrefutable presumptions that serve merely as the beginning of the discussion. Another example was the author’s reference to the need to consider how statutory advantages gradually fade in time. I wonder whether the fading of these advantages would not be more likely to exclude the existence of dominance, rather than to have an impact on the assessment of the effects of unilateral conduct.
I am a big fan of intellectual debates and of challenging long-established premises. Such debates are indispensable to change society for the better, moving it away from erroneous assumptions which have solidified in its world view. That being said, a proposal for such a revolutionary change to our understanding of what should be forbidden under Article 102 TFEU should be carefully justified. And I do not see that justification in this book. It seems to me that the author arrives at his conclusions because of ideological assumptions that are at odds with the ideological assumptions of the current dominating line of thought, rather than by demonstrating that these assumptions are wrong. As an example: why shouldn’t we, as a society, prevent a firm which became dominant thanks to its meritorious competition on the market, use that power to charge excessive prices or to discriminate between clients? To assume that Article 102 TFEU is about economic efficiency is to misunderstand that it is also based on concerns of fairness and of protection of the weak, which are alien to Economics.
I was personally unpersuaded that ‘the legal consequences that derive from holding a dominant position cannot be dissociated from its causes’ (p. 2). This cannot be an argument in law, because the author’s approach is not based on hermeneutics. As for an argument in policy, I did not find support for this view, other than the author’s belief that a dominant firm should be free to act, unless the origins of its dominance are worthy of censure.
This book is definitely an important contribution and a must for anyone interested in lively debate about EU competition policy on unilateral anticompetitive practices. Whether one is persuaded by it or not, you are sure to come away with a better understanding of the arguments and concerns that can be brought to this fundamental debate.
Miguel Sousa Ferro is a Professor at the University of Lisbon Law School and at the European University in Lisbon, and Managing Partner of a law firm in Lisbon. His recent publications include ‘The EU Antitrust Damages Directive: Transposition in the Member States’ (Oxford University Press), and ‘Market Definition in EU Competition Law’ (Edward Elgar).