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August 10, 2006
Article 82 Review yielding no results


EU Commissioner Neelie Kroes

The EU Commissioner in charge of competition, Neelie Kroes, noted at the Korean Competition Forum earlier this summer that a Discussion Paper issued by the EU's competition directorate on December 19th regarding the application of Article 82 EC Treaty to exclusionary practices has "met with wide interest" in the antitrust community and has generated more than 120 formal responses.

Unfortunately, none have had any impact; Kroes repeated many of the same substantive policy observations she made prior to the Paper's release -- in September. For example:

Basing antitrust on economics

Before:

As an economist, I want an economically sound framework. But as an enforcer, I need a workable and operational tool for making enforcement decisions.

After:

As an economist, I want an economically sound framework. As an enforcer, I need a workable tool for making enforcement decisions...So any conclusions we reach on use of economics must also ensure the rules can be enforced effectively.

Translation:

Kroes is saying even though competition authorities shouldn't intervene unless harm to competition can be shown, they will do so anyway when it is convenient.

Facts versus Conjecture

Before:

We need to take into account not only short term harm, but also medium and long term harm arising from the exclusion of competitors,. I am well aware of the difficulty associated with predicting medium or long term harm. But I believe that we should focus not only on, for instance, the short-term price effects of a certain form of conduct, but also take into account the medium to long-term effects should residual competitors be foreclosed. Consumer prices may fall in the short-run but end up being higher in the medium to long-term because of the likely foreclosure effects. We cannot just wash our hands of responsibility and say that competition law cannot or should not protect the consumer against negative medium to long term effects, just because it is difficult to assess.

After:

Exclusionary abuses often lead to customer exploitation later. The Discussion Paper focuses on this as a clear enforcement priority. Looking at exclusionary abuses, we need to prevent medium and long term harm arising from the exclusion of competitors. Predicting medium or long term harm can be difficult. But we can't just look at the short term price effects of a certain form of conduct.

Translation:

Kroes is saying competition authorities are smart enough to predict the future and that we should trust their superior intelligence and foresight. It's great when you can base decisions on facts, but the political process can't stand still in the absence of clear facts. In politics, things like intuition, speculation and even paranoia matter.

Advantages not available to smaller or newer competitors

Before:

"Competition on the merits" takes place when an efficient competitor that does not have the benefits of a dominant position, is able to compete against the pricing conduct of the dominant company.

After:

"Competition on merit" takes place when an efficient competitor who does not have the benefits of a dominant position is able to compete against the pricing conduct of the dominant company.

Translation:

Kroes is saying things like hard-earned reputation and scale and scope economies are illegitimate.

Kroes also commended the Korean Fair Trade Commission for its actions agains their joint target, Microsoft. "The KFTC's determined action in the Microsoft case...demonstrates that there will be fewer safe havens for companies engaging in abusive activities affecting competition." It's interesting, one searches in vain for evidence of any benefits to competition or innovation at all since the EU began investigating Microsoft in the late 1990s and the KFTC subsequently piled on. Not even Kroes alleges any.

See:"Preliminary Thoughts on Policy Review of Article 82," Speech at the Fordham Corporate Law Institute New York, 23rd September 2005, by Neelie Kroes, Member of the European Commission in charge of Competition Policy

See: "The Commission's Review of Exclusionary Abuses of Dominant Position -- Speech before the Korean Competition Forum organised on the occasion of the Fourth Annual Bilateral Meeting on 26/27 June 2006 in Seoul," by Commissioner Neelie Kroes

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