Is the Commission abandoning the effects-based approach in antitrust enforcement? And do the latter’s strict requirements led to the DMA proposal?

A few days ago, Global Competition Review announced that Carles Esteva Mosso, Deputy-Director General at DG Competition, would leave the Commission to join Latham & Watkins in Brussels.

The article contained various quotes from Latham partners bracing themselves for their new recruit, but also the following comment from a well-known member of the Brussels competition bar:

“Esteva Mosso’s departure shows how much DG Comp has changed over the last few years … From an agency that espoused the effects-based analysis and the consumer welfare standard in the Monti and [Neelie] Kroes years, we have moved to a new era. I don’t think this is ‘his’ DG Comp any more.”

This comment is rather intriguing in that it suggests that the reason that Mr. Esteva Mosso is leaving the Commission is that he got sick and tired of an institution abandoning the effects-based analysis and consumer welfare to turn to antitrust populism (to use terms mentioned in the article). 

I would be surprised if this is a reason that led Mr. Esteva Mosso to leave DG Competition (and even more surprised if he had confided that reason to the lawyer in question as he is a careful man). More prosaically, Mr. Esteva Mosso, like many other officials before him may be looking for a financially rewarding new challenge, which he cannot be blamed for after 25 years of exemplary civil service.

But regardless of the true reason behind Mr. Esteva Mosso’s departure from the Commission, does the comment mentioned above make sense? Is DG Competition an institution that is abandoning the effects-based analysis and consumer welfare (first question) and, if yes, would this be necessarily bad (second question)?

As to the first question, I am convinced the answer is no. There is no evidence that the Commission is no longer paying sufficient attention at the effects of investigated practices and has abandoned consumer welfare for a more amorphous standard. As far as I know, the Commission’s most recent decisions contained lengthy discussions of the effects of the practice in question (think of Google Shopping for example), even if the outcome of the analysis was not to everyone’s taste. In fact, one of the reasons why Article 102 TFEU decisions tend to be very narrow in scope is precisely because it is easier for the Commission to show effects in a narrowly defined case than in a broad one. In any event, the Commission analyses the effects of the practices it investigates because it knows that if it failed to do so, its decisions would not survive judicial scrutiny. Thus, even if the Commission intended to abandon its effects-based approach, it would not be at leisure to do it.

As to the second question, would it necessarily be bad if the Commission abandoned the consumer welfare standard and the effects-based approach? I think that 99% of EU competition lawyers would say yes, and I agree. But I would still like to make some observations to bring some nuance to the answer.

I do not see why anyone would like to move away from the consumer welfare standard in Europe as it has proved to be flexible. This is a subject of debate in the United States because that standard is alleged to have been interpreted narrowly to focus on price effects. But this has never been the case in Europe and whether the consumer welfare standard should be maintained or abandoned is not a hot topic here or I have missed an important debate.

Most EU competition lawyers also support the effects-based approach that the Commission has pursued since the turn of the century. I was among the competition lawyers pushing for that approach when the Commission was working on its Guidance Paper on Article 102 TFEU, which eventually encapsulated that approach. The effects-based approach was necessary to put an end to the formalistic analysis that prevailed in some areas of abuse of dominance law, such as for instance loyalty rebates.

While the effects-based approach improved the quality of decision-making, it had one possible negative impact, which was to make investigations longer and more complex, especially in areas such as digital markets which are characterized by significant asymmetries of information. This had several consequences.

First, some experts – including those commissioned by DG COMP to draft a report on competition policy in a digital era – started to suggest it may be time to reverse the burden of proof in some circumstances, precisely because it may be very hard for the Commission and other competition authorities to show anticompetitive effects in tech cases considering the asymmetry of information. I am not generally favourable to the reversal of the burden of proof, but I can see the logic of that recommendation.

Second, this indirectly led to the DMA proposal, which has been in part justified by the fact that competition law investigations are too slow, a problem in digital markets prone to tipping. Now, when you ask competition officials why investigations are slow, they often respond that it is because they have the burden of proof and need to show effects, which is a complex and time-consuming task.

It might thus be asked whether the adoption of the effects-based approach has not reduced the effectiveness of competition law because it has made the instrument excessively heavy. There is of course a trade-off between speed and the quality of decision-making in complex areas of the law, and speed should not trump sound reasoning. You can also question the view that the effects-based approach necessarily slows down investigations. Other factors may also be at play, such as lack of resources, inadequate management, etc.; and one must admit that defense lawyers (and mea culpa I am on the defense side from time to time) are also contributing to delays.

Now, when it comes to digital markets, the paradox of the adoption of the effects-based approach in antitrust enforcement is that it may in fact have led the Commission to shift to ex ante regulation in order to do away with the strict requirements this approach imposes. The obligations contained in Articles 5 and 6 of the DMA proposal do not indeed require the showing of effects to kick in. Is it a bad thing? I do not think so if these obligations cover practices whose anticompetitive effects have already been established.

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