MY ACCOUNTIn all these projects, the creation of a new competition tool by the Commission appears particularly worrying and intrusive for ordinary businesses. The recurring issue of the structural remedy narrowly avoided a few years ago in France is once again on the table at European level.
The temptation of the competition authorities to seek to control the degree of market concentration independently of any positive action by one or several undertakings , whether it is a proposed merger or an abuse of a dominant position, through the power to impose structural remedies enabling them for example to force an operator to sell certain assets or adopting certain behaviors is a constant in the history of competition law (for a demonstration of the continuous economic reasoning cycle of the authorities to control concentration through antitrust law and/or the law on abuses of dominant position, then through merger control and finally through the control of the degree of market concentration, see Louis Vogel’s comments in Droit de la concurrence et concentration économique, Economica, 1988).
Direct control of the level of market concentration has sparked intense debate in the US which is the most advanced country in the world with regard to antitrust law. Following various doctrinal recommendations, several legislative proposals were tabled in the United States Senate, notably the Harris bill in 1971 and the Hart bill in 1972 (on the detail of those bills, see Louis Vogel, cited above)
The Commission’s current project to create a new dominance-based competition tool with a horizontal scope which would enable the European Commission to impose behavioral or structural remedies across all sectors of the economy before a dominant company successfully forecloses competitors or raises their costs or to intervene when a structural risk for competition or a structural lack of competition prevents the internal market from functioning properly corresponds exactly to those proposed American bills.
The US proposals took exactly the same view: after having defined a market as an oligopoly or having established monopoly power in the event of a lack of sufficient competition or a certain level of market concentration, the authorities would to be able to order, inter alia, the modification of contracts or the de-concentration of the market.
The commentaries of American economists and lawyers on those projects are extremely interesting. They resulted in them being rejected due to the many objections that can be made to them in principle and in their implementation.
In principle, direct control of the market structure is open to criticism from both the economic and the legal point of view.
From the economic standpoint, well-known economists (VRH Bork, Separate Statement, Report of the White House Task Force on Antitrust Policy, Antitrust L & Econ. Rev. 1968.53) pointed out that high prices from dominant firms, if they were not to fall under competition law, would attract competition from current or potential competitors unless the dominant firm is able to sell cheaper than its competitors because it is more efficient. The existence of barriers to entry which is often levelled against that theory can be explained by legitimate objective reasons (cf. Posner, Antitrust Law, An Economic Perspective, The University of Chicago Press, p. 93).
Importantly, from the legal point of view, the application of competition law has always been conditional on a deliberate act to trigger the rule, either a concentration, an abuse or an anticompetitive agreement. This condition of deliberate action completely disappears in the case of control of market concentration by means of a structural injunction. Companies are considered to be at fault and are subject to drastic measures going so far as to impose behavior or structural remedies on them not on the grounds of conduct they may have adopted but solely because of their presence on the market (see Louis Vogel, cited above ).
Such an approach is highly damaging to legal certainty, and the market assessment authorizing intervention carries a significant risk of arbitrariness and is very difficult to control.
The implementation of structural injunctive measures is also likely to undermine the economic efficiency of undertakings by leading to a reduction in economies of scale.
Finally, experience has shown that de-concentration measures are particularly difficult to implement, in particular when the situation of the undertakings concerned is the result of their internal growth (see, W. Adams, Dissolution, Divorce, Divestiture: The Pyrrhic Victories of Antitrust, 27Ind. LJ 1 (1951).
All of these reasons led to the rejection of proposals for structural injunction remedy in the United States.
After some countries integrated such schemes, such as the United Kingdom and Greece, it was introduced in France for certain overseas territories relating to retail trade (Law No 2012-1270 of 20 November 2012) and in New Caledonia and then in French Polynesia without much success. The scheme has since been repealed in French Polynesia.
The Law of 6 August 2015 had provided for the introduction of a structural injunction in mainland France following the request of the Competition Authority (Opinion No 12-1-01 of 11 January 2012, para. 192) although legal commentators (M. Malaurie-Vignal, L’injonction structurelle et le projet de loi Macron, D. 2015.690; D. Bosco, Une nouvelle injonction structurelle décomplexée, CCC 2013, Repère 1) and legal practitioners have expressed their opposition to this new instrument.
The Constitutional Council (Conseil constitutionnel) in Decision No 2015-715 DC of 5 August 2015 (E. Claudel, La loi Macron au crible du contrôle de constitutionnalité : feu l’injonction structurelle ?, RTD Com. 2015.699), judged this instrument to be excessively prejudicial to entrepreneurial freedom and to property rights insofar as it may lead to the disputing of prices or margins or lead to asset disposals when the dominant position may have been acquired on their merits and no abuse was found. The draft was therefore rejected by the Constitutional Council.
The current European project is even more problematic in that, among its various, it envisages imposing it in all sectors of the economy (options 1 and 3). The more limited options are not much better since they target all sectors considered as problematic, such as the digital sector which is very broad.
The Commission would appear to on the verge of repeating the error committed under French law in having imposed a general law on restrictive and abusive practices to combat abuses by the mass retail sector, but which has been generally applicable and has complicated the life of French businesses for 50 years, specifically in terms of the terminations of commercial relationships, to such an extent that the EGalim Ordinance of April 2019 even had to introduce a capping scheme to limit the pernicious effects on the country’s economy. A particular problem cannot be not solved by a general provision that goes beyond its scope without creating significant perverse effects.
A structural injunction should therefore certainly not be introduced at European level. It would make more sense to use the many instruments available to the competition authorities by means of faster and more voluntary procedures.
