Article 82 and Structural Remedies After Microsoft International Competition Forum St Gallen 22-23 May, 2008

1. Article 82 and Structural Remedies After MicrosoftInternational Competition ForumSt Gallen22-23 May, 2008 Dr Philip Marsden Director and Senior Research Fellow Competition Law Forum

2. What structural remedies? • Unbundling? • Disclosure? • Fine? Neelie Kroes: April 2007 "It could be reasonable to draw the conclusion that behavioral remedies are ineffective and that a structural remedy is warranted”.

3. Remedy or Punishment? • Fines punish • Remedies restore competition • Case finished • Remedies complied with • Interoperability principles added • Still a concern with structure?

4. “That paragraph” (664) • “Article 82 EC covers not only practices which may prejudice consumers directly but also those which indirectly prejudice them by impairing an effective competitive structure. • In this case, Microsoft impaired the effective competitive structure on the work group server operating systems market by acquiring a significant market share on that market.”

5. Is acquiring market share now an abuse? • Traditional ordoliberal concerns • Historical concerns with structure • 82 DP: new economic approach? • But new legal approach too! CFI: • focus on market share • ‘risk’ of impairing competitive structure • dominant firms must ensure rivals remain ‘viable’

6. Kroes’s interpretation on judgment day • “one producer has 95% of the market, we are talking about a monopoly …and that is not acceptable, you cannot expect that a competitor can be interested in entering into such a market, and that is really what we have seen. And we have complaints from those competitors • so how can you measure whether things are working better. Well, a market share of much less than 95% would be a way of measuring success. Now you cannot draw a line and say, well, exactly 50 is correct, but a significant drop in market share is what we would like to see.”

7. Increased threat of structural remedies • Energy unbundling • E.On divestiture offer • Access remedies - linking networks • Are they structural? • Giving up IP - is this structural? How effective are structural remedies anyway?

8. Structural remedies in US (1890-1996) • Crandall research on 423 monopolisation cases • Remedies: 172 behavioural (51.2%)･69 compulsory licensing (20.5%)･95 divestment (28.3%)…Alcoa, Standard Oil, AT&T • Lessons - structural remedies rarely work: • Market moved on • Sacrifice efficiencies • Can be price raising • Can operate as a cartel

9. Policy issues • Not problematic in principle • Issue is in practice • When structural remedies work best: • Defendant in distinct business units • Robust demand • Create new competitors not just smaller monopolies • Don’t require monitoring

10. Remaining concerns • Chilling innovation • Safeguards Remedy must be • Effective • Necessary • Proportionate

11. Final issue • Access and Information • Prime areas for 82 remedies • Behavioural or Structural? • Does it matter?

12. It does matter • Affects burden of proof • Behavioural remedies: conduct (prevent or provide); ongoing; monitoring • Structural remedies: change to market structure; transfer assets; irrevocable; no ongoing monitoring

13. Result • Mandated access: conduct, ongoing, monitoring - thus, behavioural remedy, thus lower burden of proof more common • Information sharing: irrevocable, property, one-off: structural remedy- thus very high burden of proof, rare Disclosure IS divesture

14. A final word • Do no harm • Abuse must harm consumers/competition • Remedy must solve that, without harming consumers/competition

15. Article 82 and Structural Remedies After MicrosoftInternational Competition ForumSt Gallen22-23 May, 2008 Dr Philip Marsden Director and Senior Research Fellow Competition Law Forum