Christopher Townley

The Relevant Market: An Acceptable Limit to Competition Analysis?

Imagine that an agreement affects two separate markets. In market A, the agreement causes small (but appreciable) consumer welfare losses. In market B, the agreement generates massive consumer welfare benefits, dwarfing the losses in market A. Should one aggregate these costs and benefits across markets (‘Aggregate Across Markets’) when assessing the agreement under Article 101, or should one demand that the benefits outweigh the costs in each relevant market? This was one of three themes discussed at a breakfast roundtable that the OFT organised in May 2010. The focus of the debate 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 (Department for Environment Food and Rural Affairs and the Department for Business Innovation and Skills), academia, businesses and law firms. The OFT compiled a synopsis of the roundtable’s discussion (Synopsis). The OFT Discussion Paper asks whether we should Aggregate Across Markets. The relevant Commission notice says: “The assessment under Article 81(3) [now Article 101(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 agrees that this is how the law currently stands. It claims that this issue is increasingly important, as two-sided markets become more prevalent. This paper starts with some preliminary observations on the OFT Discussion Paper, Section 2; then it shows that the EU Courts Aggregate Across Markets, so has the Commission, Section 3. Given how much it undermines legal certainty, the Commission needs strong justifications for deviating from the EU Courts’ case law in its guidance. The paper then discusses the advantages of Aggregating Across Markets, Section 4; and the disadvantages, Section 5. Section 6 concludes that, in addition to following the EU Courts’ case law; the arguments in favour of Aggregating Across Markets outweigh those against. I recommend that EU competition authorities that are not already Aggregating Across Markets, should start soon. As the techniques involved are no different from those used when one does not Aggregate Across Markets, decision-makers will easily be able to modify their behavior. This material was first published by Sweet & Maxwell in the European Competition Law Review, 10, 2011 and is reproduced by agreement with the Publishers.

Inter-Generational Impacts in Competition Analysis: Remembering Those Not Yet Born

Imagine an agreement between two engineering companies, which produce vehicle components. They set up a joint venture to combine their R&D efforts to improve the production and performance of an existing component. The companies pool their existing technology licensing businesses in the area. The R&D is paid for out of current profits and will, in part, be funded by an agreed price increase; so current consumers pay for it. If the R&D is successful, only future consumers will benefit. The OFT Discussion Paper asks whether ‘consumers’, in Article 101(3)’s second condition, only refers to current consumers (that is, those currently purchasing the product) or does it extend to future consumers (who do not purchase the product now, perhaps because they are not yet alive, but will do so in the future). In other words, the OFT Discussion Paper notes that over a longer time period: “…benefits can be inter-generational. Here the consumers who effectively paid for the benefits do not receive them. Instead, future generations of consumers benefit. Currently, this appears to be the threshold above which we infer that the Commission no longer considers them relevant benefits…�? This was one of three themes discussed at a breakfast roundtable that the OFT organised in May 2010. The focus of the debate 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 (Department for the Environment Food and Rural Affairs and the Department for Business Innovation and Skills), academia, businesses and law firms. The OFT compiled a synopsis of the roundtable’s discussion (Synopsis). Section 2 presents some preliminary observations; then Section 3 examines some legal, moral and economic issues. Next, the paper discusses the advantages and disadvantages of aggregating costs to current consumers with benefits to future consumers in the same market (Aggregating Across Generations), Sections 4 and 5, respectively. Section 6 concludes, in favor of Aggregating Across Generations. This material was first published by Sweet & Maxwell in the European Competition Law Review, 11, 2011 and is reproduced by agreement with the Publishers.

Co-ordinated Diversity: Revolutionary Suggestions for EU Competition Law (and for EU Law too)

The overwhelming view is that the EU competition rules should be applied uniformly. By placing the competition rules in a wider EU context, specifically Article 101 TFEU (anti-competitive arrangements), this paper argues that the national competition authorities (NCAs) should be able to diverge in their application of Article 101. This better respects the EU legal order’s substantive and procedural diversity. It also helps learning. There are limits, however. The paper then suggests co-ordinating this diversity in networks where the NCAs and the Commission can share policy solutions and ideas (the ECN). This network can be replicated to help in other areas of EU law. Take the network of national and EU bodies that discuss proposed technical regulations’ compatibility with Articles 34 and 36 TFEU under Directive 98/34, as amended. The paper explores how insights from the ECN can improve policy learning in this free movement network too.