The preceding 4 steps have resulted in abusive conduct displayed by a dominant firm that is being investigated by the CA. In practice, the CA assesses which firms are dominant, and which strategies constitute an abuse. Each CA has some discretionary leeway in this respect.23 Authorities may assess potentially abusive conduct in varying ways. Authorities may have their own views on market power, market definition and abuse. Their methods to assess abuse-of- dominance may also differ. This means that a particular conduct in a particular economic context could be judged as an infringement by one authority, while another authority might conclude otherwise. For the sake of exposition, we use the term ‘enforcement practice’ to refer to all elements of leeway a CA has. Due to European legislation, the scope for variation in enforcement practices is limited. Appeal and review by courts also limit the discretionary leeway for interpreting and applying competition law.
Even when two jurisdictions adopt equal enforcement practices, they may obtain different outcomes for a given case. One authority could sanction the specific conduct, while the other authority does not sanction the exact same given conduct. This is due to the fact that an authority may make mistakes. Mistakes result in over-enforcement (when legal behaviour is prohibited) and under-enforcement (when illegal behaviour is not punished).
These types of mistakes are known in the literature as type I and type II errors. When legal conduct is prohibited, a type I error has taken place (over-enforcement); conversely, when illegal conduct is not detected a type II error has occurred (under-enforcement). Hence, the more type I errors a CA makes, the higher the number of cases. The more type II errors a CA makes, the lower the number of cases.
The distinction between error and enforcement practice can unfortunately not be made in this report. Suppose a CA prohibits conduct that would arguably not violate Art 102 TFEU,24 this could either be a type I error, or the result of stricter enforcement practice. This distinction cannot be analysed with the available data. In this study, the distinction between mistake or error on the one hand and idiosyncratic enforcement practice on the other will therefore not be made. How can these issues explain the infrequency of interventions in the Netherlands? The analysis partly overlaps with the analysis of differences in detection in Step 4 above. First, if Dutch
23 Moreover, legislation may differ between jurisdictions.
legislation permitted strategies that would be regarded as infringements in other jurisdictions, it would explain the low number of cases. Second, if legislation is equal between countries, the NMa may use its discretionary leeway such that enforcement is lax. Third, the NMa may have diverging opinions on what behaviour constitutes an abuse-of-dominance. Fourth, the NMa may make type II errors.
Box 4 Discretionary leeway: assessment of economic effects may vary between CAs An illustration of discretionary leeway is whether an authority assesses and weighs up the effects of particular conduct on consumer welfare. A jurisdiction’s enforcement practice can be characterised as being either form or effects-based (see also ICN, 2009). A form-based approach to conditional rebates, for example, would check whether the rebate scheme meets criteria such as the size of the discount, the time period and whether it is loyalty inducing. If the criteria are met, the conduct is considered abusive. The effects-based analysis would analyse the competitive structure of the market and whether customers would be worse off as a result of the rebate scheme.
Whether an authority acts in a form or effects-based manner is therefore an important determinant of the number of interventions. There are three remarks to consider in this respect. First, an effects-based approach is more complex and requires more analysis. When resources (or data) are limited, an effects-based approach might not be feasible and this could mean a case is not pursued. Second, adopting a form-based approach may imply prohibiting behaviours that are not anti-competitive but nonetheless meet the form-based criteria (resulting in over-enforcement, or type I error). Third, adopting a form-based approach could lead to allowing anti-competitive behaviour that does not meet the form-based criteria (resulting in under-enforcement, or type II error). The form-based criteria are imperfect indications of anti-competitive effects, hence, it is difficult to ascertain whether a form-based authority could be expected to challenge fewer or more cases.
Source: SEO Economic Research Method
These issues are analysed as follows in this report. First, on basis of desk-research, the legislation and enforcement practices in the five jurisdictions are reviewed. Second, the cases challenged in other countries are studied. The case-studies provide indications of how the enforcement practice in the four jurisdictions compares to the Netherlands.
Table 11 Summary explanation 5: The CA considers fewer cases as anti-competitive
Variable Relevance Method Data
Differences in legislation High, effect unknown Literature Country
Discretionary leeway: High, effect unknown Literature and case studies Country and case
Diverging views on
concepts High, effect unknown Literature Country
Form- or effects-based
approach High, effect unknown
Literature and case
studies Country and case
Type I and type II errors Type I errors: higher no. of cases, type II errors: lower no. of cases
n/a n/a