EUROPEAN ANTITRUST POLICY: An Empirical Analysis of Commission Decisions and their Appeals Histories, 1964 - 20011 Preliminary version for EARIE 2004, Berlin Maarten Pieter Schinkel Martin Carree and 2 Andrea Günster Abstract Competition policy is both an active and much debated area of government intervention in market processes. This paper surveys European antitrust policy since the grounds for its implementation were laid in 1962. To that end, it presents a number of summary statistics on European antitrust policy based on data collected from official records on all published antitrust decisions by the European Commission's Directorate-General Competition, the first being from 1964. These statistics include key figures such as the total number of cases per year and their duration over time, the nature of infringements, the level of imposed fines, and the commissioner responsible for the decision. Subsequently, those decisions of DG Competition to which an appeal was lodged with the Court of First Instance / Court of Justice of the European Communities are studied in more detail. Considered are issues such as the grounds for appeal, revisions, and probabilities of success depending on characteristics such as the type of infringement originally found, the duration and length of the appeals proceedings and the president of the appeals court. Findings include some remarkable significant effects on the probability of revision, as well as some comforting neutrality results. Keywords: Antitrust, European Commission, Directorate-General Competition, appeals procedures, Court of First Instance, European Court of Justice. JEL Classification: L40, K21, D40 1 We are indebted to Ida Wendt for her overall legal guidance in the collection of our data, and her extensive comments to earlier drafts of this paper. For her kind provision of insight into the documentation management of the DG Competition, we thank Corinne Dussart-Lefret of the European Commission. Financial support from METEOR in initiating the collecting of the data is gratefully acknowledged. 2 Maarten Pieter Schinkel is at Department of Economics and ACLE, Universiteit van Amsterdam, The Netherlands. Martin Carree is at the Department of Organization and Strategy and METEOR, Universiteit Maastricht, The Netherlands and Andrea Günster is master student at Universiteit Maastricht. Schinkel is corresponding author at: Roetersstraat 11, 1018WB Amsterdam, or by e-mail: [email protected]. 1 1. Introduction Europe's competition policy is a very visible and much debated part of European Union policy. In the drafting of the Treaty of Rome of 1957, competition policy was assigned a key role in the unification of Europe for its potential to reduce barriers of trade between the member states. Gradually, it was recognized that much good for welfare can be expected from competition policy in a unified Europe as well, and today the Directorate-General Competition responsible for implementing European Competition law guards, in close cooperation with national antitrust authorities in the member states, over the rules set to protect the European competitive processes from anticompetitive conduct to the benefit of consumer welfare at large. In 2002, the DG decided in 363 antitrust cases – including ten prohibition decisions, imposing fines totaling more than EUR 1 billion – 268 merger cases and 652 state aid cases, opened a total of 1019 new cases. It issued more than a thousand press releases, and evaluated and reorganized itself with numerous guideline drafts, control rules and by establishing a new position of Chief Economist.3 The Commission's investigations and opinions have far reaching implications. They are daily news in international media and followed by consumers at large, as well as numerous firm representatives, competition lawyers, economic consultants and academics. It is fair to say that European competition policy is big business. Despite the fact that the enforcement of European competition law has such weight, surprisingly little statistical survey studies on its history of more than forty years have been done. In its more recent annual reports, the DG itself produces some concise summary statistics on trends in the number of decisions and notification a yearly basis, going back about five years. Yet, a consistent empirical analysis covering a longer period of time is, to the best of our knowledge, currently not available. Such a study could, however, potentially be very interesting. The history of competition policy enforcement in the United States, for example, has been a very rich source of empirical analysis and learning. With the publication of Richard Posner's seminal paper on federal antitrust enforcement in 1970 started a fruitful research branch from which papers sprang, such as Gallo, Craycraft, et. al. (1985, 1986), Corwin (1992), Gallo, Dau-Schmidt, Craycraft and Parker (1994, 2000), Lin et al. (2000), and Ghosal and Gallo (2001). As a result, the more than one hundred years of federal US antitrust policy since the Sherman Act of 1890 is well documented, as Posner concludes in his review of the empirical literature in Chapter 2 of the new 2001 edition of his Antitrust Law. A few isolated empirical analyses have been performed, though, on the enforcement of competition laws in EU member States. Davies, Driffield and Clarke (1999) determine the probability of receiving an adverse finding against firms investigated by the UK Monopolies and Mergers Commission (MMC), on the basis of data from 1973 to 1995 collected from MMC reports. They find divergent probabilities for different types of alleged anti- competitive behavior. Inspired by this analysis, Lauk (2002) did a similar study into the decisions of the German Bundeskartellamt (BKartA) on abusive practices and cartels. Lauk explores the explanatory value of a number of characteristics on the probability of an adverse finding on data collected on decisions taken between 1985 and 2000. Finally, there is a recent working paper by Duso, Neven and Röller (2003) that uses stock market data to evaluate whether the EU merger control decisions to allow or block mergers between 1990 and 2002 were correct in hindsight. This paper surveys the enforcement history of the European Directorate-General Competition, from its earliest case decision dating from 1964 up until 2002. It presents 3 Cf. European Commission, Directorate-General for Competition (2003). 2 summary statistics on the original decisions of DG Competition, and traces the appeals histories of those cases to which an appeal was lodged, either with the Court of First Instance (CFI) or the European Court of Justice (ECJ), or both. The survey is based on a substantive data set, put together from the officially published decisions of the DG Competition, the CFI, and the ECJ. In total, this set contains 587 separate DG Competition decisions, to which a total of 159 appeals cases were brought. On each of these EU antitrust cases, a number of variables were collected and analyzed, such as the number of months that passed between opening and closing of the case, the names of the parties to which the allegations were brought, the nature of the alleged and/or found offence, the level of fines imposed, and the name of the Commissioner that signed the decision. The appeals data include any revision of the fine, the break-down of litigation costs over the various parties, including the Commission, and the name of the President of the Court, for example. The review analysis aspires to be complete on published European antitrust cases up to 2001 (and up to 1998 for the complete appeals histories). It does not consider merger control decisions, nor state aid cases. Also, the analysis here does not relate the enforcement efforts of DG Competition to over-all magnitudes such as the level of economic activity in the Union, or the political climate in Europe. Instead, the focus is solely on summary statistics and simple probit analyses of appeals decisions. The balance sheet of European competition policy thus drawn up may, at the dawn of the implementation of modernized EU competition law, serve as a benchmark for future evaluations thereof. The paper is organized as follows. In the next section, some key figures of European Antitrust enforcement are presented. Where possible, trends and breaks are related to historical developments and policy changes within the DG or the Commission at large. Section 3 surveys the 159 existing appeals decisions, their histories and consequences. Some revisions on appeal have been based mainly on legal grounds. Others have been the result of applied economic insights that led the court to a different assessment of the alleged anticompetitive effects of the defendants’ behavior. Some of these cases have become landmark cases, in that they had ramifications for DG Competition’s enforcement policy. Recently, several revisions on appeal of merger decisions by the Commission, most flagrantly in GE/Honeywell, have been visible in this respect. Yet, a gradual process of ‘economizing’ EU competition policy by implementation of increasingly more sophisticated economic argument into the handling of antitrust cases can be observed as well. In part, this development is based on feedback from the appeals courts. The section identifies several of these landmark cases, which are set out in somewhat more detail. In Section 4, a probit analysis of a number of possible causes for reversals of Commission decisions on appeal is presented. Section 5 draws up