The Proper Scope of Economics: An Application to Antitrust Ruling
Richard Posner has claimed for an economic analysis of law approach, and more specifically in antitrust enforcement (e.g., Posner 2010). As the Chicago School tends to consider that judges' decisions are matter of economic efficiency and that the basic principle of competition law is to maximize consumer welfare, judges' reasoning must be more structured in terms of economic assessments rather than legal categories. Such an economization of competition law enforcement is particularly striking if one considers the decision criteria that the US Supreme Court has implemented since 1977 (White, 2010). The burden of proof must be fulfilled by the plaintiffs and its standards have become more stringent in order to avoid 'false positive' cases particularly harmful in terms of welfare. Effects-based antitrust ruling principles have also become an essential part of the European Commission's enforcement of competition law, in the vein of a more-economic approach implemented since the middle of the last decade (Gual et al., 2006; Petit, 2009). All the National Competition Authorities of the European Union have followed the movement and commit themselves to implementing such economics-based reasoning in their decisions when qualifying market practices, or assessing welfare damages and thus determining the level of fines, and to a lesser extent evaluating the proper scope of remedies (e.g., proportionality) both for anticompetitive practice cases and for merger control (e.g, Lasserre, 2009). However, this trend -making antitrust as an applied science deriving from law and economics- brings serious concerns. A first one deals with its administrability (Fox, 1986; Baye and Wright, 2011). Concisely, economic models- and especially post-Chicago ones- do not lead to clear-cut decisions, to univocal assessments of the welfare consequences of any market practices or of future effects of a merger between two firms (Fisher, 1989). Not only such models lead to a case-by-case assessment (whose results depend crucially on the selected assumption) but also they are particularly complex to use in judicial decision-making, even by an administrative body (Fisher, 2007). Such characteristics may produce inconsistent decisions from similar cases and may impair firms' capability to forecast the final ruling and create by the way a harmful legal uncertainty. The risk is all the more significant that the market operators are increasingly led to assess the compliance of their own practices with antitrust rules and to forecast what type and what scope of remedies could satisfy the competition agency in commitment procedures and- even more important- the framework of merger notifications so as to avoid an always costly Phase II review. The importance of the economic approach is put into question both in terms of legal certainty and -paradoxically- in terms of judges' margin of interpretation. In other words, on one hand, economics fails to produce univocal results. On the other hand, it could be seen as a tool aiming at reducing judges' discretion. One may wonder to what extent the use of economics in antitrust could induce a kind of restriction, comparable to the Classical Legal Thought in the US 20th century. In order to assess to what extend such difficulties arise in competition law enforcement, we will consider both the European and the French case law. We will analyze the degree of economization of competition decisions by considering successively four of its dimensions: i) the qualification of practices (legal categories versus effects-based reasoning); ii) the balance between the impact on competition of given practices and its welfare consequences; iii) the assessment of the damage to the economy and the deriving definition of the level of fine; and iv) the definition of necessary and proportionate remedies and the assessment of their potential effects on the market and on consumer welfare. We will consider three areas of competition law implementation: i) the coordinated practices, ii) the unilateral practices and, iii) merger control.
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|Date of creation:||26 Oct 2012|
|Publication status:||Published in Prague Conference on Political Economy,, Oct 2012, Prague, Czech Republic|
|Note:||View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00752238|
|Contact details of provider:|| Web page: https://hal.archives-ouvertes.fr/|
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