Antitrust Law Amidst Financial Crises

ANTITRUST LAW AMIDST FINANCIAL CRISES ANTITRUST LAW AMIDST FINANCIAL CRISES IOANNIS KOKKORIS AND RODRIGO OLIVARES-CAMINAL cambridge university press Cambridge, New York, Melbourne, Madrid, Cape Town, Singapore, São Paulo, Delhi, Dubai, Tokyo, Mexico City Cambridge University Press Th e Edinburgh Building, Cambridge CB2 8RU, UK Published in the United States of America by Cambridge University Press, New York www.cambridge.org Information on this title: www.cambridge.org/9780521194839 © Cambridge University Press 2010 Th is publication is in copyright. Subject to statutory exception and to the provisions of relevant collective licensing agreements, no reproduction of any part may take place without the written permission of Cambridge University Press. First published 2010 Printed in the United Kingdom at the University Press, Cambridge A catalogue record for this publication is available from the British Library ISBN 978-0-521-19483-9 Hardback Cambridge University Press has no responsibility for the persistence or accuracy of URLs for external or third-party internet websites referred to in this publication, and does not guarantee that any content on such websites is, or will remain, accurate or appropriate. To our families, for providing us with moral support during our academic and professional endeavours . CONTENTS Foreword by Philip Lowe, Former Director General, DG Competition, Director General for Energy, European Commission x Foreword by Frederic Jenny, Professor of Economics, ESSEC; Chairman, OECD Competition Committee xii Preface xiv Table of cases xvi Table of treaties and other international instruments xxx Introduction 1 1 Introduction to competition law: EU, US and UK 14 1.1 Introduction 14 1.2 European Union 18 1.3 Th e United States of America 46 1.4 United Kingdom 61 1.5 Concluding remarks 70 2 Some notes on crises 72 2.1 Introduction 72 2.2 What is a crisis? 73 2.3 What are the diff erent types of crisis? 74 2.4 How do we know that we are in a crisis? 81 2.5 Some fi nancial and economic crises of the twentieth and twenty-fi rst centuries 81 2.6 Business opportunities in a crisis period 92 2.7 Overregulation aft er the crisis? 97 2.8 Concluding remarks 102 3 Failing-fi rm defence 103 3.1 Introduction 103 3.2 Corporate restructuring 107 3.3 Failing-fi rm defence 108 vii viii contents 3.4 Th e European Union perspective 110 3.5 Derogation: removing the suspension 131 3.6 Failing-fi rm defence cases before the UK competition authorities 138 3.7 Failing-fi rm defence cases before other national competition authorities 161 3.8 Derogation: removing the suspension 194 3.9 Refl ections from theory and practice 195 3.10 Concluding remarks 203 4 Effi ciencies 214 4.1 Introduction 214 4.2 A primer on effi ciencies 217 4.3 Th e European Commission’s approach towards effi ciencies 222 4.4 European Commission decisional practice 228 4.5 Th e UK approach towards effi ciencies 232 4.6 Th e US approach to effi ciencies 245 4.7 US case law on effi ciencies 248 4.8 Concluding remarks 256 5 Crisis cartels 259 5.1 Introduction 259 5.2 Germany 262 5.3 Th e European Union 274 5.4 Th e United States of America 307 5.5 Crisis cartels in other jurisdictions 324 5.6 Financial -constraints defence 334 5.7 Concluding remarks 347 6 State aid (Phedon Nicolaides) 349 6.1 Introduction 349 6.2 How much state aid? 350 6.3 Th e concept of state aid 352 6.4 Possible exceptions (compatible aid) 363 6.5 Conclusions 369 7 Competition enforcement in periods of crisis 389 7.1 Introduction 389 7.2 Experience of other crises 391 7.3 Th e objectives of competition law 397 7.4 Welfare standards 401 contents ix 7.5 Merger enforcement amidst crises 403 7.6 Crisis cartels amidst crises 455 7.7 State aid amidst crises 471 7.8 Concluding remarks 492 8 Conclusion 499 8.1 Control of state aid 500 8.2 Merger control 502 8.3 Crisis cartels 506 Index 510 FOREWORD philip lowe, former director general, directorate general competition, currently director general for energy, european commission Th e recent fi nancial and economic crisis has created signifi cant challenges for the economy and for business, as well as for policy-makers. Competition policy has a central role to play in responding to the crisis and, as Dr Kokkoris and Dr Olivares-Caminal discuss in their extremely timely book, competition authorities around the world have faced their own specifi c challenges. In the face of wholesale government intervention in the market, the European Commission’s objective in ensuring compliance with EU competition rules, and specifi cally the rules on state aid, has been to help maintain a level playing fi eld in the European financial sector, and to help preserve the achievements of the single market. At the outset of the crisis we sought to ensure that rescue measures respected fundamen- tal competition principles by setting out how we would apply state aid rules in the Commission’s four Communications on rescue and restructuring of the fi nancial sector. And the introduction of the Temporary Framework for state aid provided member states with the necessary fl exibility to act to target specifi c problems within their territory by facili- tating programmes of access to fi nance for the real economy. These measures were key in ensuring the coherence of rescue and recovery measures across the EU and, crucially, helped keep any disruptions to the level playing fi eld to an absolute minimum. And as we consider how to create the right conditions for recovery and economic growth, the long-term benefi ts of pursuing an eff ective competition policy have become more, and not less, relevant. Looking ahead, a strong competition policy will help increase our economic fi tness and create the competitive and effi cient markets that encourage innovation, boost productivity and create jobs. Th e European Commission’s fi rm stance on the importance of main- taining competition rules and principles has also held true for our approach to antitrust rules and merger control, in spite of some pres- sure to set aside or amend our rules. To diff ering degrees, we have seen x foreword xi failing-fi rm defences in merger control, attempts to justify cartels, and calls for more state aid to remedy crisis-related market failures. However, I believe we have the right rules in place to deal with the crisis. Th e Commission has been able to show fl exibility on procedure in order to respond to crisis conditions, while at the same time standing fi rm on the principles. Th e EC Merger Regulation is a good example of where recent reforms have stood us in good stead in terms of ensuring that merger control instruments are based on sound economic principles and are fl exible enough to take account of evolving market conditions. And the Commission has maintained a strong focus on cartel enforcement during the downturn in view of the serious harm cartels cause to the whole economy. Indeed, as Neelie Kroes, the outgoing Commissioner for Competition, recently put it, no matter what the rate of economic growth, cartels are harmful to the consumer. Th is book tackles many of the issues I have mentioned above and raises interesting questions about how fl exible competition enforcement should be in view of the diffi culties faced by companies in the global downturn. In this unprecedented situation of economic diffi culty, I am sure many of my colleagues in Directorate General Competition would agree with me that it is important to look at all sides of the debate; it is only through a lively exchange of views that we can determine the best set of policy tools to continue to respond eff ectively to the crisis and create the conditions for future sustainable growth. For this reason, I welcome Dr Kokkoris and Dr Olivares-Caminal’s contribution to this discussion and I hope that they will agree with my belief that ultimately the way out of this crisis – for the fi nancial sector and the wider economy – lies in making sure that markets remain competitive, with a robust enforcement of the competition rules but with an approach which is informed and realistic on what can be achieved. FOREWORD frederic jenny, professor of economics, essec; chairman, oecd competition committee Th e fi nancial crisis has had a considerable impact on competition policy and competition law enforcement. First, questions were raised about the trust that one could put in free and competitive markets. It was recognized that for markets, such as the fi nancial markets which have a systemic risk component, strict pruden- tial regulation is a necessary complement of competition. Inadequate regulation or regulation which did not keep up with innovation in the fi nancial markets was considered to be at the heart of the fi nancial crisis. Th e political rhetoric of the 1990s against regulation was replaced by a more pragmatic approach to regulation. Second, questions arose about whether and how competition law enforcement should be modifi ed in a time of financial and economic crisis. A consensus had emerged toward the end of the twentieth century that the enforcement of competition law should move toward an ‘eff ects-based approach’. Th is approach requires that the competitive and effi ciency eff ects of business practices or transactions be analysed in the context in which they are implemented to determine whether they should be prohibited.

Load more