Day-to-Day Competition Law E-Book

Patrick Hubert

• Herausgeber: Bruylant
• Kategorie: Fachliteratur
• Serie: Competition Law/Droit de la concurrence
• Sprache: Englisch

Seitenzahl: 541

Veröffentlichungsjahr: 2014

Beschreibung

Companies today must consider and comply with competition law in their daily business management. The financial and reputational risks for breaching such rules are severe and the success of many merger and acquisition projects depends very much on it. While competition law rules become increasingly sophisticated, business people are still expected to comply with it. Rather than giving a theoretical approach that can be found in a typical practitioner’s book or textbook, «Day-to-Day competition law: a practical guide for businesses» is genuinely a practical book.

The interaction between theory and practice is the main feature of the book. Major competition law issues are explained in a jargon-free manner and summarized in a nutshell at the end of each chapter. Not only will the reader gain an understanding of competition law rules, but also will gain a better understanding on how a company can behave and what to do if it is subject to an investigation by the competition authorities. This practical guidance may serve as a platform for designing internal in-house rules governing behaviour in relation to competition law, and may also trigger a revision of such rules in light of some of the issues raised by the authors. While a particular focus is drawn on the EU – as the EU competition law system is replicated in a large number of countries around the world – reference to differing rules and other key jurisdictions such as the United States is also made.

This book is written to appeal to business people, as well as non-specialized in-house lawyers, and all those who wish to understand competition law in a clear and practical way. The authors’ experience in the field of competition law ranges from leading investigations on behalf of competition authorities to applying competition law in a major global company in its daily activities, and advising multinational clients of one of the world’s leading law firms. It is this professional insight which provides the reader with an invaluable inside view of all aspects of competition law, from the way authorities think to the impacts competition law has on businesses.

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2e tirage 2014

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Il est interdit, sauf accord préalable et écrit de l’éditeur, de reproduire (notamment par photocopie) partiellement ou totalement le présent ouvrage, de le stocker dans une banque de données ou de le communiquer au public, sous quelque forme et de quelque manière que ce soit.

ISBN : 978-2-8027-4632-4

La collection « Competition Law/Droit de la concurrence » rassemble des ouvrages dans cette matière particulièrement évolutive et concrète, à la croisée de plusieurs disciplines, qu’est le droit de la concurrence.

Elle a pour vocation d’accueillir quatre types d’ouvrages : des collectifs issus des meilleurs colloques dans la matière, des travaux de recherche impactant la pratique, des monographies sur des thèmes précis à finalité professionnelle et des manuels spécialisés.

***

The collection “Competition Law/Droit de la concurrence” contains books in competition law, mixed material from several disciplines.

The Collection “Competition Law/Droit de la concurrence” consists in four series of books : best Conference papers, Research works for practice, Monographs on professional subjects and Manuels for specialists.

Parus dans la même collection

New frontiers of antitrust 2011, Edited by Frédéric Jenny, Laurence Idot and Nicolas Charbit, 2012.

Abus de position dominante et secteur public. L’application par les autorités de concurrence du droit des abus de position dominante aux opérateurs publics, Claire Mongouachon, 2012.

Reviewing vertical restraints in Europe. Reform, key issues and national enforcement, Edited by Jean-François Bellis and José Maria Beneyto, 2012.

Droit de la concurrence et droits de propriété intellectuelle. Les nouveaux monopoles de la société de l’information, Jérôme Gstalter, 2012.

L’action collective en droit des pratiques anticoncurrentielles. Perspectives nationale, européenne et internationale, Silvia Pietrini, 2012.

Le contentieux privé des pratiques anticoncurrentielles. Étude des contentieux privés autonome et complémentaire devant les juridictions judiciaires, Rafael Amaro, 2013.

Table of contents

Preface

Introduction

List of abbreviations

Chapter 1. Why, who and how?

Section 1. Competition law through history and geography – Here to last

§ 1. The origins of competition law

§ 2. The additional features of modern competition law

§ 3. From the US to further afield

§ 4. The hidden history: competition authorities are “fashion victims”

Section 2. The basics of competition law

§ 1. How economic theory can explain the basics of competition law

In a nutshell: Why, who and how?

Chapter 2. The implementation of competition law

Section 1. Competition authorities – Who are they?

Section 2. The long arm of competition law

§ 1. Competition authorities’ reach extends beyond their borders

§ 2. Which competition authority will you face?

§ 3. Dealing with investigations by multiple competition authorities

§ 4. How do competition authorities deal with companies’ international activities?

§ 5. How should companies deal with the multinational aspects of competition law?

Section 3. How do competition authorities work?

§ 1. Opening cases

§ 2. Dawn raids, visits and requests for information

§ 3. Investigations

§ 4. The statement of objections

§ 5. The outcome

§ 6. Interim measures

Section 4. What are the penalties?

Section 5. Who pays the bill?

§ 1. Parent companies are generally liable

§ 2. Liability of successor companies

Section 6. The risks of follow-on claims and private enforcement

Section 7. Remember, enforcers are human beings after all!

In a nutshell: The implementation of competition law

Chapter 3. Cartels and other collusive behaviours – A no entry zone

Section 1. One golden rule: Never get involved!

§ 1. The damages caused by cartels

§ 2. The hefty consequences of participating in cartels

§ 3. Individual risks: it can get personal!

§ 4. Detection and Prosecution – There is no escaping

A. How cartels are proved

B. Now more than ever, it is easy to uncover cartels

Section 2. What are cartels about?

§ 1. Cartels are not just about prices

A. Price-fixing

B. Market-sharing

C. Limiting output or sales

D. Bid-rigging (also known as collusive tendering)

§ 2. Cartels can take many shapes and forms

Section 3. How to avoid cartels

Section 4. How to terminate cartels

In a nutshell: Cartels and other collusive behaviours

Chapter 4. A danger zone – Exchange of sensitive information

Section 1. Another type of cartel: Exchanges of information relating to the present or the future

§ 1. Exchange of information: a new serious infringement

§ 2. Why are some exchanges of information treated like cartels?

§ 3. When is an exchange of information akin to a cartel?

Section 2. Do not assume that exchanges of past information are always safe

§ 1. Market structure

§ 2. Characteristics of past information exchanged

Section 3. Practical tips

§ 1. The main dangers

§ 2. What to do?

§ 3. Mistakes to be avoided

§ 4. How to discuss an intended exchange of information with your lawyers

Section 4. Trade associations

§ 1. The dangers of “mission-creep”

§ 2. Danger also lies in the normal missions of a trade association

§ 3. What to do in practice?

Section 5. “Hub and spoke” arrangements: using a third party to exchange information is not always safe

§ 1. Getting information about your competitors from third parties can be dangerous

§ 2. Some practical tips

In a nutshell: Exchange of sensitive information

Chapter 5. How to behave as a market leader

Section 1. The treatment of monopolies/dominant companies under competition law

Section 2. An outline of the key rules and the consequences of infringement

§ 1. The concept

§ 2. Investigating abuses of dominant position

§ 3. Consequences of being found guilty

Section 3. When is a firm dominant?

§ 1. The challenge of identifying a dominant position

§ 2. Market shares: the invaluable indicator of dominance

A. What is the relevant product market?

B. What is the relevant geographic market?

§ 3. Market structure

§ 4. Barriers to entry and expansion

§ 5. Countervailing buying power

§ 6. Collective dominance

§ 7. Some practical guidance

Section 4. How to behave when you are dominant – avoiding exclusionary abuses

§ 1. Why should you avoid abusing your market power?

§ 2. Do not unfairly exclude your competitors from the market

§ 3. Non-pricing practices

A. Exclusivity obligations

B. Tying or bundling

C. Refusal to supply

§ 4. Pricing practices

A. Predatory pricing

B. Rebates

C. Margin squeeze

Section 5. How to behave when you are dominant – avoiding exploitative abuses

Section 6. Practical guidance for market leaders

In a nutshell: How to behave as a market leader

Chapter 6. Resale price maintenance

Section 1. Resale price maintenance: What is it all about?

Section 2. Potential anti-competitive effects of RPM agreements and why companies might still seek to conclude them

§ 1. Potential anti-competitive effects of RPM agreements

§ 2. Why companies might seek to conclude RPM agreements

Section 3. The prohibition of RPM agreements

§ 1. The European approach

§ 2. How the EU deals with recommended and maximum resale prices

§ 3. Prosecution of RPM agreements by competition authorities

Section 4. Avoiding RPM agreements

§ 1. Being indifferent to the price at which your products are resold

§ 2. Influencing the resale price of your products without an RPM agreement

§ 3. Controlling the entire commercial chain by not using distributors

Section 5. How to terminate an RPM agreement

§ 1. Approaching the competition authorities

§ 2. Acting jointly

§ 3. Acting unilaterally

In a nutshell: Resale price maintenance

Chapter 7. Commercial contracts – The realm of pros and cons

Section 1. Why must contracts comply with competition law?

Section 2. Restrictive clauses: it is all about finding a balance

Section 3. When do contracts between non-competitors trigger the alarm?

§ 1. Supply agreements

§ 2. Distribution agreements

A. Exclusive distribution

B. Selective distribution

C. Single-branding distribution

D. De facto single-branding

E. Franchise agreements

Section 4. Cooperation between competitors

§ 1. Overview of agreements with competitors: problems and solutions

§ 2. Joint commercial activities with competitors

A. Joint purchase agreements

B. Joint production agreements

C. Joint commercialisation agreements: only if they are necessary

D. Buying, selling and exchanging with competitors

§ 3. Other types of agreements

A. Research and Development (“R&D”)

B. Transfer of intellectual property

C. Standardisation

Section 5. What happens in real life?

§ 1. The safe harbours

§ 2. De minimis rule and agreements of minor importance

§ 3. Your company can establish its own safety rules for its most common contracts

In a nutshell: Commercial contracts

Chapter 8. Winning the antitrust wars – Fighting side-by-side with your lawyers

Section 1. How to behave during dawn raids

§ 1. An unwelcome surprise at dawn

§ 2. Keeping one’s nerve despite the anxiety

§ 3. Interviews and document management

Section 2. Risks assessment

§ 1. Risk assessment after a dawn raid

§ 2. Risk assessment in general

§ 3. Anticipatory detection of risks

Section 3. Life under investigation

Section 4. Compliance policies

Section 5. Competition law as an offensive weapon

§ 1. When your company is a victim of an infringement

§ 2. How to react as the underdog?

§ 3. When competition does not seem to work

Section 6. Lobbying competition authorities and governments

In a nutshell: Winning the antitrust wars

Chapter 9. Mergers, acquisitions and joint ventures – To proceed or not to proceed

Section 1. Identifying a “merger” for the purposes of the merger control regime

§ 1. Mergers: not what you might expect

§ 2. The different types of notifiable transactions

A. Acquisition of a full control by a single company

B. Acquisition of an influence by a single company

C. Acquisition of a joint control by several companies

D. Creation of a joint venture

Section 2. Why do competition authorities control notifiable transactions?

§ 1. Prevention is better than cure

§ 2. What are authorities looking at when analysing future transactions?

A. Horizontal transactions

B. Vertical transactions

C. Conglomerate effects

Section 3. How to obtain authorisation

§ 1. Notifying the relevant competition authorities

§ 2. Suspension of the transaction

§ 3. Timetable of the merger control process

Section 4. How do the competition authorities assess the transaction?

§ 1. Market definition

§ 2. Competitive effects

§ 3. Problematic effects

A. Unilateral or non-coordinated effects in a horizontal transaction

B. Coordinated effects in a horizontal transaction

C. Vertical effects (non-coordinated or coordinated)

D. Conglomerate effects

Section 5. Addressing the authorities’ concerns

§ 1. Forms of remedy

§ 2. Structural commitments

§ 3. Behavioural commitments

§ 4. Commitments are intended to hurt

Section 6. What happens if you implement a transaction without permission?

Section 7. Practical implications of merger control

§ 1. Uncertainty

§ 2. Upsides and downsides of merger control

In a nutshell: Merger control

Chapter 10. How to behave in relation to merger control

Section 1. Involving your lawyers from the outset

Section 2. Deciding where to notify your transaction

§ 1. The horrors of multi-filing

§ 2. Checking whether the planned deal is a “notifiable transaction”

§ 3. Identifying the relevant thresholds

§ 4. The complexity and costs of multi-filing

§ 5. Variable time frames

§ 6. The European Union – love it or hate it

§ 7. Optional notification – the dilemma

Section 3. The risks of exchanging information between competitors

§ 1. Information exchange in the context of a merger with a competitor

§ 2. Information sharing in the context of joint ventures

Section 4. Other merger control compliance risks faced by business people

§ 1. The dangers of gun jumping

§ 2. Being too candid about the rationale behind dangerous mergers

§ 3. Providing false information to the authorities

Section 5. The positive role played by business people

§ 1. Preparing the notification form

§ 2. Calculation of turnover(s)

§ 3. Defining the relevant product market

§ 4. Defining the relevant geographic market

§ 5. Defining the market shares

§ 6. Rationale of the transaction and efficiencies

Section 6. Dealing with difficult cases

§ 1. Identifying the problem at an early stage

§ 2. The pre-notification period

§ 3. Interaction with the authorities

§ 4. Keeping one’s nerve

In a nutshell: Business people, risks, and sanctions – behaviour in the context of merger control

Chapter 11. Waving, not drowning: how best to navigate the antitrust sea?

Section 1. Judicial review: it’s not over till it’s over

Section 2. Antitrust economics: a new tool in the armoury

§ 1. The evolving role of economists

A. Application of econometric tests: A simple answer to a practical question

B. Theoretical economic approach: old horses, new tricks?

C. New economic thinking: forging new paths

In a nutshell: How best to navigate the antitrust sea?

Conclusion

Bibliography

Preface

When I joined Saint-Gobain twenty-five years ago, international businesses had little regard to competition law, in particular in Europe. With the exception of United States where antitrust rules were already well implemented, markets were still characterised by “amicable relationships” between competitors and dominant inheritors of previously State-owned monopolies. Large companies were free to merge to strengthen their positions, irrespective of their market shares, and contacts with competitors were still a feature of business life.

It was not long before I witnessed the growth of competition law regimes across the globe. In Europe, the reach of competition authorities expanded and greater incentives to denounce cartels were introduced. Such development was very much linked to the development of the belief in free-market economics, leading to fair competition between companies and the liberalisation of markets and international trading.

Unfortunately, people within business organisations did not understand that the world had drastically changed and companies were not always quick to respond to these developments. Many of them learnt first-hand the intrusive nature of competition authorities’ powers to investigate and impose unprecedented fines. My company was no exception: the fine it received came as a shock.

The dawning of this new reality led companies to reconsider their business practices and their interaction with one another. Against this backdrop, it was an opportunity for Saint-Gobain to not only reinforce its compliance but to instill a top-to-bottom compliance culture in every area; no exception, no one spared. I had a formidable challenge ahead of me.

Putting the spotlight on competition compliance within Saint-Gobain has involved raising awareness, not only of the ‘stick’ of penalties for non-compliance, but also the ‘carrot’ of greater economic efficiency. I had to encourage new institutional compliance culture at the heart of the company. Putting in place a compliance programme is not enough; we do not only tell our business people to comply; but the reasons why they must comply. However, implementing a compliance culture is not an easy task: it requires on-going efforts.

Despite our belief in the purpose of competition law, dealing with competition authorities on a daily basis is not without frustrations. Authorities can, at times, seem to be out of touch with global business reality in particular when assessing acquisitions of companies.

Further frustrations also arise from the manner in which competition authorities reach their decisions regarding the outcome of their investigations. This is the very reason why business people react and challenge disproportionate fines, and question the role of authorities as “prosecutor, judge and jury”.

What I like about this book is the focus on the interface between theory and practice, taking competition law out of the circle of specialists and applying it to day-to-day business challenges, in a clear, practical and unambiguous manner.

Furthermore, it gives the reader a much better understanding of competition authorities. It also provides guidance as to how a company should behave in its everyday activity, in order to avoid or to mitigate risks.

Last but not least, a feature that I found most interesting was the authors’ guidance as to the necessary level of knowledge required by business people and when one needs to seek advice from a specialist.

Pierre-André de Chalendar

Chairman and Chief Executive Officer of Compagnie de Saint-Gobain

Introduction

Today competition law is present in every aspect of your business, and affects the way you manage your business on a daily basis. The reason why it affects your business in such manner is because companies face fines of an amount that do not exist in other fields of the law and because the success of many merger and acquisitions projects depends on competition law. Mastering such area of law is a formidable task; its rules are various, complex and subject to constant evolution and development. But this is a task for lawyers, and very often for very specialised lawyers.

That being said, when a company faces serious problems due to competition law infringements, it is seldom because its legal service has failed to understand a particular concept. On the contrary, it is often because its commercial executives have violated the law, sometimes knowingly and sometimes not. A solid understanding of the main requirements of competition law is thus essential for any business person. It is an extremely important area of law, affecting the conduct of the company in every market in which it operates. No major commercial decision should be made without some regard being had to the requirements of competition law, even if it is only a quick check to ensure that no significant issues are raised. Supply agreements, joint ventures, assessing the state of the market in which you operate – each of these activities features a potential pitfall, be it the risk of imposing anti-competitive conditions on your suppliers, failing to get the appropriate authorisations from competition authorities, or obtaining commercially sensitive information from your competitors.

Competition law is now so far-reaching and such a vital part of company life that any business strategy has to incorporate it. It is clear that it comes after your clients, suppliers, competitors and many other economic factors in a list of your immediate priorities. However, it retains an extremely important role, in particular when building your company’s strategic vision. Decisions as to which markets to enter, which competitors to purchase, which suppliers to partner with – all these decisions require great care, and a keen awareness of your legal obligations.

Yet, competition law remains very theoretical, abstract and obscure for many business people – even for us lawyers! So how can we say that you should have a good understanding of this area of the law, and yet say that this field is too complex to be mastered by a non-specialist? The problem is that such a view is not just ours: the authorities who enforce (and largely invent) competition law have themselves created this dilemma: they tend to sophisticate the law to a point that makes it difficult to grasp but they expect all business people within all companies to comply with it. So you and we have no choice: since you must comply with the law, you also must understand it.

We believe that to comply with the law, a business person must understand three subjects:

• The general logic of competition law, in order to be able to develop one’s own reasoning when facing a new situation;

• The simplest rules, which are also the most important ones: what you must never do or what you must always do, whatever the circumstances.

• When you must involve a lawyer. Since you cannot have one at your side 24/7, it is important to detect not only the exceptional but also the day to day situations that need an in-depth legal assessment before you can go ahead with your initial business plan.

A first challenge we lawyers face every day is how to explain why it is important for business people to comply with competition law. Their general reaction tends to be a yawn within the first 5 minutes of us talking and then proceed by falling asleep within 10 minutes. Can we blame them? Not at all! Lawyers love talking and pondering endlessly about legal theories and their consequences.

All this is well but what does it really mean in practice? The answer is an easy one: breaching competition law can affect your company’s reputation, financial stability and sometimes may lead it to bankruptcy. But it is not just about your company, it is also about you. Your reputation, your career, your future prospects may all go up in smoke. If this all sounds a bit melodramatic, let us tell you a real life story – the Marine Hose cartel.

This cartel was considered one of the most sophisticated cartels in the history of competition law for a number of reasons. It operated in the specialized market for the production and supply of marine hoses used to transfer oil and petroleum products into and out of tankers. There were six companies involved, which produced 95 percent of the marine hoses sold worldwide. These companies, namely Parker ITR, Dunlop Oil & Marine, Bridgestone Corporation, Trelleborg Industry, Manuli Rubber Industries and Yokohama Rubber Co cooperated, over ten years and in a deliberate and organized manner, to rig tendering for contracts, fix prices and communally decide on allocating geographic markets.

The cartel’s worldwide reach and the complexity with which it operated cannot be underestimated. It was orchestrated to such a degree that a full time coordinator was used to keep the cartel in check. In practice, under this particular cartel scheme, any member of the cartel who received an inquiry from a customer would report it to the cartel coordinator, who, in turn, would allocate the customer to one member of the cartel who was supposed to win the tender, while other members of the cartel would submit cover bids (i.e. bids that were too high to be accepted by the buyers). The agreement was concealed through the use of private e-mail accounts, private telephone numbers and code names. The result was that the cartel was able to artificially increase prices (believed to be by up to 18% on global orders of up to €90 million a year) with disastrous effects for the consumer – in other words, the competition authorities’ worst nightmare.

The authorities were tipped off by an unhappy cartel member, who had identified the risky nature of this activity, in exchange for immunity.

The FBI, who conducted the investigations on behalf of the US authorities, did not hold back in making use of aggressive enforcement techniques (including informants, wiretaps and police raids). Informants were used to record phone conversations with members of the cartel and the FBI obtained court approval to covertly audio and videotape a meeting of the cartel members that took place in a hotel room in Houston, Texas, about which they had previously been informed. Simultaneously, in a closely coordinated action involving the U.S., European and British competition authorities, dawn raids were carried out in business premises but also in private homes.

The businesses involved were ultimately subject to staggering fines (when you compare them to the revenues of marine hose sales), mounting to €131.5 million by the EU Commission and $40 million by US courts.

The authorities were not limited to penalising the business involved, either. The day after secretly recording the Houston meeting, eight company directors, including three British nationals, were arrested by the police who searched their hotel rooms. The three British citizens agreed to plead guilty to the charges in order to serve out their sentences in the UK. Upon their arrival on British soil, the three men were arrested by the Metropolitan Police. In proceedings before the Southwark Crown Court, attendees watched the secretly-filmed footage showing the directors reaching various agreements on prices and geographic markets. They were ultimately sentenced to over eight years’ imprisonment, nineteen years’ disqualification from holding directorship positions, and £25,000 pounds in costs between them.

The moral of the story? The incentive for cartel members to tip-off the authorities and the aggressive techniques authorities have at their disposal have dramatically increased the risks faced by companies and individuals – reputational, financially, and personally. The risks that your company could potentially face are not theoretical; they are real, as real as they can be.

Unfortunately, the role of ensuring compliance with competition law is, however, increasingly allocated to operational business people, who may find themselves unknowingly violating the rules and suffering the consequences. In response, large companies have almost universally set up compliance policies, the goal of which is to train business people and raise their awareness levels. However, one-off training sessions and short compliance guides often fail to persuade employees or managers that competition law really matters and it is not just another boring regulation to be acknowledged only by specialists. Moreover, complying with competition law does not only mean avoiding secret agreement on prices with competitors (something that, after all, is not too difficult to remember after having been trained). There are many other rules whose implementation depends upon complex circumstances.

This book is therefore unlike anything previously produced – a thorough explanation of the relevant competition law rules, pitched at an appropriate level for business people and in-house lawyers rather than being aimed at competition lawyers and regulators. It is not a competition law textbook nor is it a practitioner’s book. Its aim is to be relatively jargon-free. A few lawyers might even be shocked by certain parts of what they are about to read – surprised, perhaps, by the lack of detail provided in relation to some of the more complex legal issues. That is because, as a business person or an in-house lawyer, you do not require a detailed knowledge of the relevant pieces of legislation and case law – that is a job for your antitrust lawyers.

The aim of this book is that the subject of the next sobering tale of competition law infringement will not be you.

In light of this, we consider the foundational economic, legal and political theories upon which competition law is built – helping you understand why the authorities consider competition law to be important, and the role it plays (according to them) in ensuring vibrant and innovative economies. We outline in appropriate detail the relevant competition law rules, with a particular focus on the European Union. This is because the system presided over by the European Commission is replicated in a large number of countries around the world – not least, in the national systems of the EU’s Member States. Reference is also made to differing rules and key investigations in other jurisdictions, and in particular the antitrust regime found in the United States.

We also provide practical guidance, suggesting how you and your company can behave to ensure that you do not fall foul of competition law’s restrictions – and what to do if you do find yourself subject to an investigation by the competition authorities.

Needless to say, every large company has internal rules governing behaviour in relation to competition law. Whilst those rules will doubtless take priority over anything you read here, you might discover that they can actually be improved in light of some of the issues raised and advice provided in this book: if it is the case, please speak with your legal service, this is a decision you cannot take on your own.

The authors of this book are competition lawyers. We are experienced in providing advice in-house, as external advisors, and as former employees of competition authorities. We have seen time and again the need for business people to have a greater awareness of competition law, and a greater sensitivity to when care must be taken. If, as a result of this book, you feel that you have a clearer idea about when to call in the lawyers, when to take a step back and consider whether there is a competition law issue – then, we will be the happiest competition lawyers of them all.

List of abbreviations

AAC

Average Avoidable Cost

ASEAN

Association of Southeast Asian Nations

ATC

Average Total Cost

AVC

Average Variable Cost

CA 1980

Competition Act 1980

CA 1998

Competition Act 1998

CAT

UK Competition Appeal Tribunal

CADE

Brazil’s Council for Economic Defence

CC

UK Competition Commission

CDDA

UK Company Directors Disqualification Act 1986

CDO

Competition Disqualification Order

CFI

Court of First Instance

CMA

Competition Market Authority

COA

England and Wales Court of Appeal

DG COMP

Directorate General of the Commission for Competition Policy

DOJ

US Department of Justice

EA 2002

Enterprise Act 2002

EC

European Community

ECC

European Economic Community

ECJ

European Court of Justice

ECMR

European Community Merger Regulation

ECN

European Competition Network

ECSC

European Coal and Steel Community

EEA

European Economic Area

EFTA

European Free Trade Association

ETSI

European Telecommunication Standards Institute

EU

European Union

HC

England and Wales High Court

FRAND

Fair, Reasonable and Non-discriminatory

FSA

Financial Services Authority

FTC

US Federal Trade Commission

GUPPI

Gross Upward Pricing Pressure Index

HHI

Herfindahl - Hirschman Index

ICN

International Competition Network

JFTC

Japan Federal Trade Commission

MLATs

Mutual Legal Assistance Treaties

NCAs

National Competition Authorities

OECD

Organisation for Economic Cooperation and Development

OFCOM

Office of Communications

OFGEM

Office of Gas and Electricity Markets

OFT

Office of Fair Trading

OFTEL

Office of Telecommunications

OFWAT

Office of Water Services

ORR

Office of Rail Regulation

RAND

Reasonable and Non-discriminatory

R&D

Research and Development

RPI

Retail Price Index

RPM

Resale Price Maintenance

SFO

Serious Fraud Office

SIEC

Significant Impediment to Effective Competition

SLC

Substantial Lessening of Competition

SMEs

Small and Medium-sized Enterprises

SSNIP

Small but Significant Non-transitory Increase in Price

TFEU

Treaty on the Functioning of European Union

UNCTAD

United Nations Conference on Trade and Development

US

United States of America

WTO

World Trade Organisation

Chapter 1Why, who and how?

Today competition policy plays an important role on how businesses behave in many countries around the world. Over the last few decades, these countries have adopted anti-monopoly laws and established corresponding regulatory bodies. There are over 100 systems of competition law globally and many more to come. During the past decade, competition policy has been conducted within the framework of broad economic reforms. Indeed, such policy has had to evolve with economic changes such as privatisation and demonopolisation policy, protection of intellectual property rights, protection of consumer rights, and liberalisation of foreign trade and investment regimes. It applies to all economic activities including areas that were once protected from competition such as energy, transport and telecommunications, sports and media.

Rather than starting with an abstract explanation of what competition policy is, Section 1 of this chapter introduces you to competition issues by using a historical approach whilst Section 2 describes the main characteristics of competition law and its theory. Section 3 looks at how competition law is enforced and the emergence of new players in its implementation.

Section 1Competition law through history and geography – Here to last

§ 1. The origins of competition law

Interest in the issue of monopolist abuses and agreements between competitors to increase prices arose well before the twentieth century. In actual fact, the business practices of market traders and guilds have always been subject to scrutiny, and sometimes severe sanctions. Adam Smith, the founding father of free-market economics, in his book The Wealth of Nations (1776) made the famous comment that “people of the same trade seldom meet, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices”. Smith warned against the negative effects of monopoly, whether private or sponsored by a government. Smith thought it would be impossible to stop businesses from colluding to fix prices.

From there derived two main features of competition law: monopolies must be avoided or tamed, but having various competitors acting together in the same way is just another kind of monopoly: if not by name, at least in fact.

History has long referred to attempts by governments to regulate competitive markets for goods and services, leading up to the modern competition or antitrust laws around the world today. The earliest records trace back to the efforts of Roman legislators to control price fluctuations and unfair trade practices. Through the Middle Ages in Europe, Kings and Queens repeatedly struck down monopolies, including those created through state legislation, English and American history being of the greatest significance as they paved the way to modern competition law.

In English law, restraint of trade was based on two balanced concepts: prohibiting agreements that ran counter to public policy, unless the reasonableness of an agreement could be shown. For example, in Nordenfelt v The Maxim Nordenfelt Guns & Ammunition Co Ltd. [1894] AC 535, Thorsten Nordenfelt, a Swedish arms inventor promised, on sale of his business to an American gun maker, that he would not make guns or ammunition anywhere in the world, and would not compete with Maxim in any way, for a term of 25 years. Nordenfelt later entered into an agreement with another gun company and broke the covenant alleging that it was unenforceable as being in restraint of trade. Although the House of Lords held that “The public have an interest in every person’s carrying on his trade freely: so has the individual. All interference with individual liberty of action in trading, and all restraints of trade of themselves, if there is nothing more, are contrary to public policy, and therefore void. That is the general rule.”, it did recognise that there are some exceptions and found in favour of Maxim. Interestingly, modern competition law still accepts that the seller of a business commits not to compete with the purchaser, because it is a way to protect the value of the business that has been sold, although 25 years would now be considered too long.

The English common law doctrine of restraint of trade became the precursor to modern competition law. But it was in the US that a modern and systematic approach of competition law developed, essentially as a reaction to the way private companies attempted to monopolise the markets and increase prices.

Although it may appear strange to some people who see the US as the country where huge corporations thrive, the American tradition was initially very reluctant to accept even the notion of corporation: the quintessential American economic agent was supposed to be an individual entrepreneur. Corporations were initially specially authorised by the States. Although they could be freely created, it was still prohibited for one corporation to buy another, rendering it extremely difficult to achieve a market concentration.

In the second half of the nineteenth century, the US experienced a number of events that led to industrial transformation, the most important changes being in the transportation and communication sector. The railways extended rapidly throughout the US territory as did the telegraph and telephone services. Such changes resulted in the emergence of a large single market giving a powerful incentive for firms to exploit economies of scale and scope. The second half of this century was characterised by low and unstable prices. The fall in transportation and communication costs not only led to a large single market but also to a rise in competition. Investments made by large corporations further lowered costs and prices.

Faced with this situation – and given that it was impossible for companies to buy each other – the solution was found through pools and later through trusts, a common law concept that here allowed, for instance, several railroads to apply high prices on services provided to consumers. Various trusts soon dominated different industries such as fuel oil, lead and whiskey. However, final consumers were not the only ones harmed by higher prices. Producers, such as farmers and small industrial firms that used products from cartelised sectors as input, complained of unfair business practices adopted by their large competitors.

The Sherman Act of 1890 attempted to outlaw the restriction of competition by large companies, who co-operated with rivals to fix outputs, prices and market shares. It outlawed anti-competitive practices, codifying the common law restraint of trade doctrine. Section 1 of the Sherman Act declared illegal “every contract, in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations”. Thus was born the modern concept of competition law and also the name, “antitrust”, which is still in use today even if “trusts” are rarely part of modern anti-competitive practices. Section 2 of the Act prohibited monopolies, or attempts and conspiracies to monopolise.

However, the Act was not very strictly enforced as its real meaning was not clear and therefore was applied inconsistently by the courts throughout the first decade of its enactment. In 1897, a Supreme Court decision on a trust of 18 railways, which fixed the fares for the transport of goods, established the key feature of competition law: the illegality of price agreements between competitors (the so-called “cartels”). This decision was then followed by another crucial decision rendered by the Supreme Court that applied the Sherman Act’s prohibition of price restriction to relationships between suppliers and distributors as well. The Court held that a resale price maintenance clause, whereby the manufacturer obliges retailers to sell above the minimum price that is set, was illegal and contradictory to the Act. The main goal of competition law was to protect consumers – and this involved prohibiting certain kinds of commercial behaviour, and in particular agreements on prices that harmed consumers.

John D. Rockefeller and Standard Oil (1911)

In 1882, John D. Rockefeller joined with his partners to create the Standard Oil Trust, which controlled a large number of companies that allowed Standard to control refining, distribution, marketing and other aspects of the oil industry. Standard Oil eventually gained control of nearly 90 percent of the country’s oil production.

The Department of Justice (“DOJ”) filed a federal antitrust lawsuit against Standard in 1909, contending that the company restrained trade through its preferential deals with railroads, its control of pipelines and by engaging in unfair practices like price-cutting to drive smaller competitors out of business

In 1911, the Supreme Court found that Standard Oil was in violation of the 1890 Sherman Antitrust Act because of excessive restrictions to trade, and in particular its practice of buying out the small independent refiners or that of lowering the price in a given region to force bankruptcy of competitors. The court ordered the Standard Oil Company (New Jersey) to dismantle 33 of its most important affiliates, giving the stocks to its own shareholders and not to a new trust. From these offsprings will come Exxon, Conocco, Amoco, Mobil and Chevron.

The aims of competition law have remained fairly consistent and constant from then on. The prohibition of two kind of practices arose:

• A company with strong market power may not use this power to further strengthen its position by unfairly driving its weaker competitors out of the market; and

• Several companies cannot agree to artificially fix prices.

A second milestone in the development of antitrust law occurred shortly thereafter. Whereas up to this point, the law had operated primarily to protect consumers from harmful commercial behaviours, the emphasis now shifted to include a focus on protecting companies from the anti-competitive behaviour of their competitors. The leading case in the implementation of this approach was that of American Tobacco (1911). In this case, five tobacco manufacturers had merged into the American Tobacco Company and engaged in a campaign of purchasing minor competitors, controlling stock interest in other corporations, and starting price wars to increase its power and drive other manufacturers out of business. Although mergers and acquisitions had by that time became legal, this trust was condemned and dismantled.

§ 2. The additional features of modern competition law

Despite its partial success, the Sherman Act did not cover mergers and acquisitions which were until then considered legal unless formed with the intention of creating a monopoly. Consequently, firms wishing to fix prices had the option of merging into one single firm. In 1914, the Clayton Act was therefore introduced to extend the scope of antitrust laws to (among other things) mergers capable of reducing competition. This led to the emergence of what remains one of the most significant tools used by competition authorities: merger control. The Clayton Act was modernised by a more recent law, the Hart-Scott-Rodino Act, which is the reason why merger control in the US is often called “HSR”.

That same year, the US “invented” another feature of modern competition law: the notion of an independent competition authority. The Federal Trade Commission Act created the FTC, an independent agency responsible for the regulation of unfair trade practices that would share with the DOJ the responsibility of enforcing the antitrust laws in the US. The establishment of the FTC was a major development in that it marked the start of a proliferation of specialised antitrust authorities across the world. Most of these authorities, such as the UK’s Office of Fair Trading (“OFT”), the German Bundeskartellamt, the French Autorité de la Concurrence (“FCA”), the Brazil’s Council for Economic Defence (“CADE”) and many others are politically independent. A minority, such as the DOJ, are very much a part of the governmental machine and operate under political control.

§ 3. From the US to further afield

Competition law gained some recognition outside the US in the inter-war years, but it was essentially after the end of World War II that it began its expansion in Europe. United Kingdom and Germany, following pressure from the US, became the first European countries to adopt fully-fledged competition laws. At a regional level, the first European framework was created in 1951; but a more significant event happened in 1957. This was when competition rules were included in the Treaty of Rome, also known as the EC Treaty, which established the European Economic Community (which has since been rebranded as the European Union or EU).

The two central provisions of EU competition law on companies were established in Article 85, which prohibited anti-competitive agreements, subject to some exemptions, and Article 86, prohibiting the abuse of a dominant position: the main features of traditional American competition law were thus present. In addition, the Treaty contained a rule that was not part of the American tradition: Article 92 prohibited State Aid.

Regulations on mergers were not included; how European competition law was to be implemented remained unclear. But in 1962, an European regulation gave to the European Commission the powers to become a competition authority with the ability to prosecute and punish offenders. Later, in 1989, a European merger regime, again in the hands of the European Commission, was put in place.

Even if all this looks like a pure import of American law into Europe, there is a striking difference: in Europe competition law is embedded in the Treaty on the Functioning of the European Union (TFEU) itself, which is the constitution of Europe, putting competition law far above any other law (national or European) that may exist in Europe. This makes it extremely unlikely that competition law will be eliminated in the foreseeable future – or even extensively reformed.

Today, the TFEU prohibits anti-competitive agreements, including price fixing, in Article 101(1). Article 102, on the other hand, prohibits the abuse of a dominant position, such as price discrimination and exclusive dealing. The numbers have changed, but not the substance. This is still a “constitutional treaty”.

In the meantime, all 28 countries that are Member States of the European Union have also put in place their own competition laws and their own competition authorities. This trans-European system is characterised by its dual enforcement of rules: at the European level, by the European Commission, and at the national level by the relevant national competition authorities. Together, these various European authorities make up the European Competition Network. Mergers may be authorised or prohibited at either (or both) the European or national levels. The functioning of this complex system will be further examined in later chapters.

Europe was not the only place where competition law was developed after World War II; Japan for example also put in place a competition law system.

There are today over 150 countries which enacted competition laws, out of which 81 have adopted their competition laws in the past 20 years. Competition law has thus become global. Historically, there has not been one single, unifying, policy that bound the development of EU and US, and other national competition law together.

There is presently neither a worldwide competition authority nor an international code of competition. There is only the International Competition Network (“ICN”) whereby national authorities can come together to coordinate their own enforcement activities, largely by way of “pick-up-the-phone” relationships. Some bilateral cooperation between authorities has also been institutionalised.

The main result of this international expansion is that the risks of condemnation have multiplied and that competition authorities must be informed of mergers in many countries. The lack of a unified international approach means that different rules are found in different national competition regimes. For example, different countries have imposed different thresholds for the reporting of mergers to the competition authority, with similarly variable consequences for failing to report in this manner.

§ 4. The hidden history: competition authorities are “fashion victims”

Putting aside some regional variation, competition law may seem a very simple body of rules: prohibition of agreements (mainly on prices), prohibition of abuses by powerful companies and control of mergers. The basic rules are more or less the same in all countries and have not really changed since 1890 and 1914.

However, this straightforward account of the development of competition law hides what is in fact a dynamic history, of constantly evolving economic and legal thought as one intellectual fashion overwhelms another. This dynamism derives from a key characteristic of competition law: it is a body of law that increasingly sees itself as an instrument used to implement economic theory. The history of economic thought, of course, is rich and characterised by its practitioners switching from one school of thought to another.

In the nineteenth century, neo-classical authors such as Augustin Cournot and Alfred Marshall laid the basis for modern microeconomics with the development of simple models of perfect competition, monopoly and duopoly. The model of perfect competition was particularly useful for developing theory on general equilibrium for the whole of the economy. However, these models were not adequate to explain market developments at the beginning of the twentieth century, in particular with market concentration, the emergence of trusts, the non-pricing competition, and advertising.

At around the time of the World War II, a number of economists such as John Clark, Edward Mason and Joe Bain, not satisfied with these limited and simplistic models, started to look for more empirically supported explanations of market phenomena which led to the so-called structure-conduct-performance theory of the Harvard School.

This theory states that market structure determines companies’ market behaviour, which in turn determines market “performance”. Performance must be seen from the consumer’s point of view: low prices (and hence low profits) are a good performance. Market structure, being the basis of the explanation, is seen as of paramount importance. Studies were done for several sectors collecting market structure data such as concentration ratios and the height of entry barriers. The general conclusion of these studies was that concentrated markets showed above average profitability, especially when it was difficult for new competitors to enter the market, thereby constituting barriers to new entrants (often referred to as “entry barriers”). Despite being beneficial for companies, it was not for their clients.

The main policy conclusion flowing from this approach has been that competition policy should concentrate on the structure of markets, ensuring that markets do not become concentrated. Competition authorities and courts took the view that in particular mergers between competitors were generally not beneficial for the economy.

A number of scholars, also known as the Chicago School, questioned that framework and argued that competition policy should be less concerned with market structure and should focus more on the concept of economic efficiency (i.e., welfare) in evaluating business conduct or mergers. They argued that the causal link was not between high concentrations on the one hand and high profits on the other. Instead, they argued that the causality was as follows:

Their reasoning was based on the role of economies of scale and scope, and a general belief that competition forces companies to become superior in terms of efficiency. The companies that succeed in this way will grow faster than others who may even go out of business which may in turn lead to higher market concentration. But if this is the product of the market process, which seeks and obtains efficiency, this is thus desirable from a general point of view. It leads to more efficient firms, even when it would also result in profits in excess of the competitive norm.

These scholars also thought that monopoly prices would unlikely rise and would certainly not last as entry barriers were rarely high and could be overcome in time: even if the consumers were not to benefit immediately from the increased efficiency, they would finally pocket their benefits when new entrants would push prices downward.

The Chicago School’s methodology brought back a greater reliance on the self-correcting forces of competition as it favoured free market policies and little government intervention. This fitted well with the general trend in the 1970s and 1980s of seeing limits to the effectiveness of and scope for government intervention.

This focus on efficiency influenced competition authorities that became less aggressive on abuse of market power and market concentrations, focusing instead on prosecuting price agreements between competitors. Courts followed this trend, leaving no choice to competition authorities but to adopt the new fashionable ideas, whose influence quickly spread beyond the mere question of market concentration.

The Chicago school argued for example that a restrictive agreement between a supplier and its distributor (also known as “vertical agreement”) that increased sales of a brand enhanced competition, and courts finally adopted this new approach.

GTE-Sylvania Case (1977)

Faced with declining sales, GTE Sylvania attempted to improve its market position by reducing the number of the competing retailers that were selling its products. It did so by setting a limited number of retail franchises granted for any given area of the country and requiring each retailer to sell his/her products only from the location or locations at which he/she was franchised.

The US Supreme Court held that vertical restraints could be used to promote an upstream seller’s product and that this promotion could enhance competition.

Since then, scholars have again returned in part to the deductive approach of the microeconomic models and recognised that a wide array of other basic factors such as consumer preferences and technological developments influence market structures and market behaviours.

The main trace left by this battle of ideas is that economic theory has since played a central role in antitrust matters. Several classical rules of competition law have been deeply changed accordingly, and not only in the US. For example, vertical agreements were once very strictly controlled in Europe, where “exclusive dealing” for instance was very often considered as illegal. The rules are now much more relaxed. Even the “resale price fixing”, so severely prohibited by the US Supreme Court at the beginning of the twentieth century, has now been judged by the same court not being illegal in itself but only under certain conditions.

It is now standard practice to discuss competition cases in terms of economic concepts and to evaluate cases according to their effects on the market. Case law and decisional practice have focused increasingly on economic questions. Economic theory and empirical methods can help answer those questions and economists are often called on to do so by the agencies, the parties, and sometimes even the courts.

Section 2The basics of competition law

§ 1. How economic theory can explain the basics of competition law

Competition law is an “anti-monopoly” law

The basis of competition law is the idea that monopolies are “bad”; this basic idea was then broadened to include not only true monopolies but also any firm with significant market power. One of the main concerns is that a firm with market power is able to harm consumer welfare, for example by raising prices, degrading the quality of products on the market, suppressing innovation and depriving consumers of choice. Competition law is therefore here to protect the process of competition in order to maximise consumer interests (“consumer welfare”).

From this basic idea come two of the main tools of competition law:

• Merger control, ensuring that no harmful monopoly or “near-monopoly” will be created when two firms merge. We will see that merger control has now moved beyond this simple approach and also pursues other goals – but that limiting market concentration remains is fundamental aim.

• Prohibition of abuses of dominance, ensuring that no existing monopoly or near-monopoly (also known as a “dominant firm”) will use its market power to eliminate weaker competitors or create barriers to entry.

Those two tools work very differently. Merger control is what lawyers call an ex-ante control (in other words, before one firm buys another): before merging, two firms must inform competition authorities and wait until they receive the green light before completing the operation. The prohibition of dominance abuses is enforced through an ex-post control: a dominant firm must take care not to abuse its power otherwise it will be prosecuted and heavily punished.

For business people, two very different consequences thus arise.

When they are planning to buy another company, the most important thing is for them to know when and from whom they should seek authorisation: this is purely technical information that should be provided by their legal advisers.

However, if their company is dominant, they must be aware of the substance of the law. It is important for them to be able to determine what constitutes a fair commercial practice and what practices are abusive – this is not a straightforward question. A full chapter of this book is dedicated to this question but you can get a first idea from the American Tobacco case, discussed above at Section 1, § 1.American Tobacco was sanctioned for having lowered its prices in order to push smaller competitors out of the market. However, this does not mean that low prices are always abusive and that high prices are not. Rather, fixing too high a price for a “dominant” product may also be abusive in certain circumstances. Clearly, this is a difficult topic, and one that should hopefully be somewhat clearer after reading this book.

Competition law is also an anti-cartel law

As discussed in Section 1, real monopolies (or quasi-monopolies) are not the only problems. As per Adam Smith’s observation, if several competitors agree to set a common (and high) price, the result is comparable to a monopoly: if everybody sticks to the high prices, consumers have no choice, they must pay this price, exactly as if they were facing one monopolist instead of several competing suppliers. It is, in a way, a “monopolisation”.

Hence the third major tool of competition law is cartel prohibition, that is agreements between competitors. This prohibition aims at ensuring that competitors do not agree on their commercial practices. This tool has further been used beyond “cartels”. In Section 1, we noted that as early as 1911, resale price agreements between a manufacturer and its retailers were prohibited. Anti-competitive agreements are enforced ex post: it is up to firms to decide how to behave; if they infringe the rule, they will be prosecuted and punished.

Competition law is also about any kind of agreements between companies

From the above, one could be inclined to assume that competition law is only about dominant companies behaviour or agreements between competitors that create in fact the equivalent of a dominant entity. But in practice, competition authorities have gone further and have set up rules that apply to other kind of agreements, in particular the so-called vertical agreements between suppliers and users/distributors. This area is also generally enforced ex post, with some exceptions (some authorities would review contracts before they are signed).

Competition law is a balancing exercise

However, things are not that simple. Competition can be defined as a struggle for or conflict of superiority, thus striving for customers and businesses. The UK Competition Commission described it as “a process of rivalry between firms... seeking to win customers”. From that, it is clear that active competition does not (and should not) guarantee that all existing competitors will thrive or even survive. If competition authorities are too active in keeping successful companies in check, they will end up killing rather than protecting competition.

In Section 1, we saw how this kind of problem led some scholars to challenge the first established wisdom about competition, the so-called “structure/conduct/performance” theory. Economic discussions of this kind are endless, but there is at least one key feature of competition law, which results from this debate. Many commercial practices will not be outright prohibited; their possible downsides will be balanced against their possible upsides. For instance, if a dominant company practices a very low price, it may kill its competitors – however, it may also be very attractive for its customers.

In reality, some practices are almost always prohibited, like cartels, whilst others can often be permitted if they have sufficient economic upsides. In the following chapters, we identify which practices are always prohibited and which must be analysed by balancing pros and cons.

Another consequence is that competition law does not forbid a company from fighting its competitors. On the contrary, companies are expected to fight tooth and nail, and to view their competitors as “enemies”. However, those companies are permitted to fight only relying upon “their own merits”. For instance, a telecommunication firm can compete by offering a better product than its competitors – but it cannot eliminate a smaller competitor by refusing it access to its network.

Finally, if and when you are accused of harming competition, the best way to defend yourself is to argue that in reality this potential harmful behaviour was in actual fact beneficial to consumers, despite having negative effects on your competitors.

In a nutshell: Why, who and how?

A lasting part of the landscape:

– Some of the concepts used in competition law – such as regulating and at times prohibiting – monopolies can be traced back to Roman times and the Middle Ages

– English common law doctrine of restraint of trade became the precursor to modern competition law

– Modern competition law was invented in the US in 1890 and expanded globally since the twentieth century

– After World War II, competition law developed in Europe. It is now part of the “constitution” of European Union

Today, competition law has been adopted in more than 150 countries

Foundations of US antitrust law:

– Sherman Act 1890:

• Illegal for competitors to seal anti-competitive agreements

• Illegal for a business to be a monopoly if it is cheating or not competing fairly

• Corporate executives who break this law could face huge fines or prison

– Clayton Act 1914:

• Prohibits anti-competitive mergers and acquisitions

– Federal Trade Commission Act 1914:

• Established FTC, with authority to investigate and prevent unfair methods of competition and deceptive practices

• FTC shares responsibility with Department of Justice for enforcing US antitrust laws

Foundations of EU competition law:

– Treaty of Paris 1951 (establishing the European Coal and Steel Community):

• Established first multi-lateral regional agreement relating to competition law

• Banned cartels, and contained provisions on mergers and the abuse of dominant positions

• Has since been revised and supplanted by subsequent European treaties

– Treaty on the Functioning of the European Union:

• Article 101(1): prohibits anti-competitive agreements between companies

• Article 102: prohibits abuse of a dominant position

– EU Merger Regulation:

• Regulates mergers – aims to prevent mergers that might significantly impede competition in the EU

The emerging role of economics

– The Harvard School’s “structure-conduct-performance” paradigm:

• Market structure determines companies’ market behaviour which in turn determines market performance

• Concentrated markets with entry barriers showed above average profitability

• Therefore: competition policy should concentrate on the structure of markets and on structural remedies, ensuring that markets do not become concentrated so as to avoid monopoly profits

– Chicago School:

• Competition policy should focus on economic efficiency rather than market structure

• Competition drives companies to grow – and may drive others out of business – but this leads to economic efficiency

• Typically low barriers of entry prevents risk of monopoly profits

• Favours free market policies and little government intervention

• Recognition that many factors such as consumer preferences and technological developments influence market structure – and these factors may vary over time