Article 82 ECT and Section 2 of the Sherman Act: Convergences, Divergences, and the Impact of Economics: When Economics Does Not Answer the Question
Files
Description
Section 2 of the US Sherman Act prohibits monopolization and attempts to monopolize. Article 82 of the EC Treaty of Rome prohibits abuse of a dominant position. Both provisions were informed by a mixed set of socio-political-economic goals. Section 2 was adopted as a means to combat aggregations of power that left the “little man” helpless before them. Article 82 (then 86) was adopted to regulate dominant firms lest they harm powerless market actors - buyers, suppliers, competitors, consumers, or undermine the quest to achieve an integrated common market. Both provisions had the possibility to protect inefficient competitors at the expense of consumers, efficiency and competitiveness; and at times they did. For many years and especially in the 1960s, the United States antitrust law respected diversity, dispersal of power, economic opportunity for firms and entrepreneurs without power, and governance by markets, not powerful firms. The law did much to cultivate robust markets by keeping channels open to mavericks, discounters, and others who challenged tradition and the stodgy status quo. But the law also handicapped efficiency, requiring dominant firms to pull their punches lest they trample upon their smaller rivals. The 1980s was a time for change. The question was the form that change would take. The change was dramatic. A new paradigm was introduced for antitrust. The old eclecticism was replaced by an economic model that led the way to a much reduced antitrust purview for all but cartels. There was to be no antitrust enforcement unless the conduct or transaction diminished consumer surplus and (in most cases) had no good business justification. Pre-1980s US antitrust law was roundly criticized as ‘protecting competitors, not competition’; and the charge “You protect competitors, we protect competition” was soon to be leveled, disparagingly, at the EU. The development of Article 82 (ex 86) has had many similarities with the development of the Sherman Act. Article 86 was adopted against a background of numerous state-owned firms that had reached their positions of power by privilege not merit. Case law applying Article 86 was even more explicit than US law in placing a special responsibility on dominant firms to refrain from distorting the playing field to the detriment of less advantaged players. Many violations entailed acts of dominant firms that tended to exclude smaller firms from “free” access to markets, and violations were often found without regard to the efficiency of the acts. Moreover, regarding refusals to deal and duties to deal, the EU law was always less reluctant than US law to require “dealing.” EU law took on board the tradition of a number of continental European countries to condemn refusals to deal with traditional customers, absent justification. Globalization and the imperative of competitiveness pressured changes in EU law, just as it had in the United States, but with a difference. Goals of fairness to smaller firms were squeezed out by goals of efficiency. Tough questioning of EU precedents by prominent US officials may have played some role in sounding a wake-up call to assure that, in competition analysis, ‘sound economics’ is applied. More importantly, several reversals of European Commission decisions by the Court of First Instance, particularly in Airtours, was a spur to the Competition Directorate to hire a chief economist and to set up a system for vetting proposed initiatives and decisions for their economic soundness. The Competition Directorate's review of Article 82, the commissioning of a report by an economic advisory group, and the Fordham speech by Competition Commissioner Neelie Kroes (23 September 2005), all reflect the determination to bring EU law in line with sound economics. As is now well known, Commissioner Kroes declared that Article 82 analysis must be based on ‘effects in the market’; that ‘Enforcement Agencies should be cautious about intervening in the functioning of markets unless there is clear evidence that they are not functioning well’; that EU needs ‘an economically sound framework’; and that, just as Section 2 of the Sherman Act moved from fairness concerns to consumer welfare concerns, there is ‘no reason why a similar development could not take place in Europe’. Commissioner Kroes said: ‘First, it is competition, and not competitors, that is to be protected. Second, ultimately the aim is to avoid consumers harm’. Does this mean that Article 82 is becoming a shadow or mirror of Section 2? Not necessarily. Article 82 has its own footprint.
Source Publication
Competition Law and Economics: Advances in Competition Policy and Antitrust Enforcement
Source Editors/Authors
Abel T. Mateus, Teresa Moreira
Publication Date
2007
Recommended Citation
Fox, Eleanor M., "Article 82 ECT and Section 2 of the Sherman Act: Convergences, Divergences, and the Impact of Economics: When Economics Does Not Answer the Question" (2007). Faculty Chapters. 1240.
https://gretchen.law.nyu.edu/fac-chapt/1240
