La propuesta de Borja (1996)

18 However, economic theory and practical experience over the past 30 to 40 years have shown that competitive dynamics can function well even if a market has some very large players who can improve competitive dynamics. Niels, G. and Jenkins, H. (2005) ‘Reform of Article 82: Where the Link between Dominance and Effects Breaks Down’, European Competition Law Review, 26(11), p.605.

19 The Chicago School supplanted the reigning antitrust orthodoxy in an antitrust revolution beginning in the mid-1970s. The triumph of the Chicago School was a revolution in ideas, developed and spread by a collection of economists and lawyers, associated with the University of Chicago, including Robert Bork, Frank Easterbrook, Richard Posner and George Stigler. See generally Baker, J. B. (2002) “A Preface to Post-Chicago Antitrust”, in Cucinotta, A., Pardolesi, R. and Van den Bergh, R. (eds.), Post-Post-Chicago Developments in Antitrust Law, Edward Elgar Publishing, Great Britain, p.65.

20 See infra “2.1.3. The Way to the Concept of Efficiency”.

21 Marsden, P. (2010a) “Exclusionary Abuses and the Justice of ‘Competition on the Merits’”, in Lianos, I.

and Kokkoris, I. (eds.), The Reform of EC Competition Law: New Challenges, Kluwer Law International, Great Britain, p.415.

22 ibid at p.414.

market is assumed to turn into more competition in the market, at least in the short run.

Accordingly, the higher the number of competitors in a market, the more competitive the market becomes.

Proponents of the consumer welfare objective view competition as an outcome, providing consumers with a variety of cheaper and better products. In line with this line of thought, what matters are the outcomes for consumers that competition in a particular market delivers, not the particular form that the competitive process takes.²³ Whilst the competitive process is important as an instrument, its protection is not an aim in itself; the ultimate aim is the protection of consumer welfare, as an outcome of the competitive process.²⁴ When competition is understood as an outcome, the number of competitors in the market will not be a necessary indication of competition. Reduction in the number of players in the market is not deemed as anti-competitive in itself; the observation that the absence of a sufficient number of competitors can lead to consumer harm is now ‘trite’.²⁵

It has been argued that in line with the idea of competition being a process, the Commission and the EU Courts have firmly believed that there is no effective competition where there are no competitors.²⁶ In their decisions and judgments thus far, they seemed to have been inclined to protect competition in the market as a process, through protecting the structure of the market or structure of competition.²⁷ In this respect, in her oft-quoted opinion in British Airways, Advocate General (AG) Kokott regarded competition as an

“institution”. When British Airways raised the objection that the Commission had to prove that the allegedly abusive conduct had actual effects on competition, AG Kokott opined that:

23 Bishop, S. and Walker, M. (2010) The Economics of EC Competition Law: Concepts, Application and Measurement, 3^rd Edition, Sweet & Maxwell, Great Britain, p.20-21.

24 Lowe, P. (2007) Consumer Welfare and Efficiency - New Guiding Principles of Competition Policy?, Speech at 13^th International Conference on Competition and 14^th European Competition Day, Munich 27 March 2007, <http://ec.europa.eu/competition/speeches/text/sp2007_02_en.pdf> [accessed 30/09/2014], p.9.

25 O’Donoghue, R. and Padilla, J. (2013) The Law and Economics of Article 102 TFEU, 2^nd Edition, Hart Publishing, Great Britain, p.274.

26 Ahlborn and Padilla (2008), p.59.

27 ‘[T]the concept of an abuse within the meaning of that article is an objective one, implying inter alia behaviour which is prejudicial to the structure of competition.” Case T-11/96 ITT/Promedia v Commission [1998] ECR II-2937, para.44 (emphasis added). See also Odudu, O. (2006) The Boundaries of EC Competition Law: The Scope of Article 81 EC, OUP, Great Britain, p.15 as the author argues that competition as a process has heavily influenced the EU’s perception of competition law.

‘Article [102]… is not designed only or primarily to protect the immediate interests of individual competitors or consumers, but to protect the structure of the market and thus competition as such (as an institution), which has already been weakened by the presence of the dominant undertaking on the market.

In this way, consumers are also indirectly protected. Because where competition as such is damaged, disadvantages for consumers are also to be feared.’²⁸

As can be seen, Art.102 has been thought by the AG Kokott to protect competition as a process or an institution. Clearly, competition is not protected as an outcome which benefits consumers. Consumer interests are almost considered as a by-product while the real focus of the Art.102 is to protect the process of rivalry in the market, or competition as such. Rivalry is assumed to bring benefits and by protecting rivalry, consumers are thus indirectly protected. Evident from this Opinion, competition is thought to be weakened by the mere presence of a dominant undertaking, which is a clear indication of the economic freedom objective. This Opinion was delivered in 2007 before the Guidance, while the modernisation was still underway. Some judgments after the Guidance still show the emphasis on the protection of competition, sometimes without competition being referred to as an institution, but apparently with more consideration of the position of consumers.²⁹

To sum up, the answer to the question as to whether competition is a process of rivalry or an outcome is not theoretical; on the contrary, it will determine the approach towards abusive conduct under Art.102. Traditionally, the Commission and the EU Courts have regarded competition as a process and intervened when the allegedly abusive conduct in question threatened the structure of the market in the absence of any detailed assessment on possible benefits of the conduct on consumer welfare. A shift from the doctrine of special responsibility towards the concept of efficiency requires, and will eventually result in, competition to be viewed as an “outcome”. The Guidance now states that the Commission will direct its enforcement to ensuring that ‘consumers benefit from the

28 Opinion of AG Kokott in Case C-95/04 British Airways v Commission [2007] ECR I-2331, para.68.

(emphasis original) (citations omitted). See Case C-501/06 GlaxoSmithKline Services Unlimited v Commission [2009] ECR I-9291, para.63 for a similar line of thought.

29 In Teliasonera, AG Mazák held the view that ‘[t]he primary purpose of Article 102 TFEU is to protect competition and to safeguard the interests of consumers rather than to protect the position of particular competitors.’ Opinion of AG Mazák in C-52/09 Konkurrensverket v TeliaSonera Sverige AB [2011] ECR I-0527, para.30. The view taken by AG Mazák in this judgment seems to be more consumer welfare-friendly and takes into account the interests of consumers not as an indirect outcome in contrast to AG Kokott’s Opinion in British Airways.

efficiency and productivity which result from effective competition between undertakings’.³⁰

2.1.3. The Way to the Concept of Efficiency

The rise of the concept of efficiency in the assessment of abusive conduct first took place in the US. Starting from 1980s, the US courts have relied almost exclusively on their assessment of whether conduct reduces efficiency and the analysis of claims of exclusion focused overwhelmingly on efficiency consequences.³¹ The US Supreme Court’s reasoning in Aspen unequivocally put the emphasis on this concept. The Court held that ‘[i]f a firm has been “attempting to exclude rivals on some basis other than efficiency,” it is fair to characterize its behavior as predatory.’³² Accordingly, when exclusion is the result of the firm’s efficiency, the allegedly abusive conduct constitutes lawful pro-competitive conduct.

Equally, when the conduct is ‘not motivated by efficiency concerns’ or ‘not related to any apparent efficiency’ or the dominant firm in question fails to ‘offer any efficiency justification’, then it will amount to an abuse.³³ Also, Microsoft suggests that pro-competitive conduct involves ‘greater efficiency’, whereas abusive conduct involves no or less efficiency, but the decisive factor is efficiency in any case.³⁴

The concept of efficiency has almost become a ‘basic antitrust principle’ in the US.³⁵ By contrast, both the Commission and the EU Courts have historically taken a very sceptical view in response to efficiency arguments.³⁶ This is due to the predominantly pursued objective of economic freedom which regards efficiency as a by-product rather than an aim in itself. The modernisation of Art.102, however, appears to have brought

30 Guidance, para.5 (emphasis added).

31 Kovacic, W. E. (2007) ‘The Intellectual DNA of Modern U.S. Competition Law for Dominant Firm Conduct: The Chicago/HarvardDouble Helix’, Colombia Business Law Review, 1(1), p.19-20.

32 Aspen Skiing Co. v Aspen Highlands Skiing Corp., 472 US 585 (1985), para.605 (emphasis added) (citations omitted).

33 ibid.

34 In Microsoft, while discussing the burden of proof in the case at hand, the Court of Appeals held that if the monopolist asserts that ‘its conduct is indeed a form of competition on the merits because it involves, for example, greater efficiency or enhanced consumer appeal-then the burden shifts back to the plaintiff to rebut that claim.’ United States v Microsoft Corp., 253 F.3d 34, 346 (D.C. Cir. 2001), para.355 (emphasis added).

35 Kirkwood, J. B. (2013) ‘The Essence of Antitrust: Protecting Consumers and Small Suppliers from Anticompetitive Conduct’, 81 Fordham Law Review, p.2432.

36 Bellis, J. F. and Kasten, T. (2010) “Will Efficiencies Play an Increasingly Important Role in the Assessment of Conduct Under Article 102?”, in Etro, F. and Kokkoris, I. (eds.), Competition Law and the Enforcement of Article 102, OUP, Great Britain, p.131.

efficiency to the fore in the assessment of abusive conduct. Even before the publication of the Discussion Paper, the former Competition Commissioner Kroes stated from the outset that the Commission ‘must find a way to include efficiencies in [its] analysis.’³⁷ Evidently, the modernisation process has been instrumental in the move towards efficiency in the EU, in spite of some references to this concept in some decisions and judgments before the modernisation process started.

Although efficiency was discussed in EU competition law before the modernisation, it was not at the centre of the assessment, at least not in the US sense of this concept. As early as 1985, the Commission in AKZO decided that ‘[t]he maintenance of a system of effective competition does however require that a small competitor be protected against behaviour by dominant undertakings designed to exclude it from the market not by virtue of greater efficiency or superior performance but by abuse of dominance.’³⁸ According to this finding, if conduct is not the result of ‘greater efficiency’, it should constitute an abuse.

Similarly, in Irish Sugar, the GCEU held that in order for the protection of commercial position of a dominant firm to be lawful, it must be at the very least based on ‘criteria of economic efficiency’.³⁹ In the context of rebates, the GCEU explained that principally a dominant firm ‘can give discounts that relate to efficiencies, but cannot give discounts or incentives to encourage customer loyalty’.⁴⁰

There has been an increasing trend among both American and European commentators in favour of efficiency. Hovenkamp argues that antitrust enforcement should be designed in such a way as to prohibit conduct ‘precisely to the point that it is inefficient, but to tolerate or encourage it when it is efficient.’⁴¹ Posner puts forward that only when market power is used to ‘perpetuate a monopoly not supported by superior efficiency

37 Kroes, N. (2005) Preliminary Thoughts on Policy Review of Article 82, Speech at the Fordham Corporate Law Institute New York, 23 September 2005,

<http://europa.eu/rapid/pressReleasesAction.do?reference=SPEECH/05/537&format=PDF&aged=1&languag e=EN&guiLanguage=en> [accessed 30/09/2014], p.5.

38 Case IV/30.698 ECS/AKZO [1985] OJ L 374/1, para.81 (emphasis added). See also Case IV/34.621, 35.059/F-3 Irish Sugar plc [1997] OJ L 258/1, para.134.

39 Case T-228/97 Irish Sugar plc v Commission [1999] ECR II-2969, para.189 (emphasis added).

40 Case T-219/99 British Airways v Commission [2003] ECR II-5917, para.262 (emphasis added). Here the GCEU implied that for the allegedly abusive conduct, efficiency is a justification in the absence of which it could be held as an abuse.

41 Hovenkamp, H. (1985) ‘Antitrust Policy after Chicago’, 214 Michigan Law Review, p.229 (emphasis added).

should the law step in.’⁴² Whish contends that ‘if a firm ends up as a monopolist simply by virtue of its superior efficiency, this should be applauded, or at very least not be condemned.’⁴³ Waelbroeck stresses that dominant firms are not prohibited to compete even aggressively ‘provided this is the result of this greater efficiency’.⁴⁴ Nazzini takes a further step and insists that the definition of abuse as laid down in Hoffmann La Roche ‘establishes the general principle that conduct is abusive when it restricts competition by means other than behaviour based on efficiency’.⁴⁵

Efficiency analysis in competition law is scientific and well-grounded in economics.

It is often used to indicate specific situations such as “productive efficiency”, “allocative efficiency” and “dynamic efficiency”.⁴⁶ In all of these situations, the underlying idea is the same: They indicate a situation where a dominant firm have achieved success (and excluded its competitors) through its “hard work” and by doing better than its competitors.

The fact that competitors’ businesses have been impaired, their competitiveness have been reduced or they have been driven out of the market, all of which are a central concern for the economic freedom objective, is disregarded under the consumer welfare objective due to the countervailing efficiency of the dominant firm which has brought consumers desirable outcomes such as lower prices, new or improved products, high quality goods or services and so on. As can thus be seen, where the emphasis is put on efficiency, competition will be ipso facto regarded as an outcome.

To conclude, the concept of efficiency has gained greater prominence in the assessment of abusive conduct with the Chicago School which postulates that the objective of competition law should be efficiency and the maximisation of consumer welfare, and

42 Posner, R. (2001) Antitrust Law, 2^nd Edition, University of Chicago Press, Chicago, p.196 (emphasis added).

43 Whish, R. (2011) “National Competition Law Goals and the Commission’s Guidance on Article 82EC: The UK Experience”, in Pace, L. F. (ed.), European Competition Law: The Impact of the Commission’s Guidance on Article 102, Edward Elgar Publishing, Great Britain, p.154 (emphasis added).

44 Waelbroeck, D. (2010) “The Assessment of Efficiencies under Article 102 and the Commission’s Guidance Paper”, in Etro, F. and Kokkoris, I. (eds.), Competition Law and the Enforcement of Article 102, OUP, Great Britain, p.118 (emphasis added).

45 Nazzini, R. (2011) The Foundations of European Union Competition Law: The Objective and Principles of Article 102, OUP, United Kingdom, p.171 (emphasis added).

46 For the definition of those different types of efficiencies, see Brodley, J. F. (1987) ‘The Economic Goals of Antitrust: Efficiency, Consumer Welfare and Technological Progress’, 62 New York University Law Review, p.1020-1053.

any other objective is therefore irrelevant. While some references were made to this concept in the case law of the EU Courts albeit not in the US sense of this concept, the modernisation of Art.102 appears to be instrumental in the shift towards this concept from the economic freedom objective. The adoption of efficiency in the EU normally implies a rejection of the economic freedom objective and its doctrine of special responsibility, which has been gaining ground among a vast majority of European commentators.⁴⁷ Throughout the Guidance, the Commission now makes numerous references to efficiency and efficiency-related arguments.⁴⁸