Judicial Review in Competition Cases: An economic perspective Giorgio Monti
Outline Context • Judicial review of economics-based decisions 1. Depth of judicial review in the General Court/ECJ • Article 6 ECHR • Case study: Airtorus 2. Judges shaping economic rules in the US Supreme Court and the ECJ • Leegin – active shaping • Intel – passive?
The ‘more economic approach’ in EU antitrust • Since 1990 • Systematic use of economic evidence and economic reasoning in competition law • Appeals increasingly are about the way the competition authority uses economics. • Reasons • Shift in the objective of competition law: consumer welfare • Criticism of form-based reasoning in competition law • Competition authorities do not address the real competition problems (under-enforcement) • Competition authorities apply the law in a way that harms market functioning (over-enforcement)
Context: inexpert judges (OECD, 2017) • Issue • Judges often lack the expertise and resources available to competition agencies, and as a result have difficulties when assessing complex economic evidence. Courts in a significant number of jurisdictions face serious difficulties when faced with economic matters, and often seek to resolve cases on procedural grounds. • Recommendations • Increase judicial expertise • Specialised courts • Advantage: judges are experts • Disadvantage: absence of link to the legal system/appellate judges without expertise • Burden on lawyers to present economics clearly • Expert evidence (methods to optimize expert evidence)
Issue 1: the changing depth of judicial review by the ECJ • Consten & Grundig(1966) • ‘The exercise of the Commission’s powers necessarily implies complex evaluations of economic matters. A judicial review of these evaluations must take account of their nature by confining itself to an examination of the relevance of the facts and of the legal consequences which the Commission deduces therefrom.’ • Concern • Marginal review of ‘complex economic assessment’ • What is complex? • Inability of defendant to challenge Commission decisions
Towards deeper review: Tetra Laval (2002) • 39 Whilst the Court recognises that the Commission has a margin of discretion with regard to economic matters, that does not mean that the Community Courts must refrain from reviewing the Commission’s interpretation of information of an economic nature. • The Court must examine : • Accuracy reliability and consistency of evidence • If evidence has all relevant information to assess a complex situation • If evidence is capable of substantiating conclusions drawn from it
Why review gets deeper • European Convention on Human Rights • …everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law, Art 6 • ECJ • Uses Convention as a basis for developing EU Law • Charter of Fundamental Rights (Art 47) • Menarini v Italy (2011),  test for whether judicial review is sufficient: • Can the court test the foundations and proportionality of the choices of the authority? • Can the court verify technical assessments?
The potential for in-depth review: Airtours • Facts: merger of two travel agents in the UK • Theory of harm: • 4 to 3 competitors in the market for short-distance package holidays • Risk of tacit collusion on prices between the three • Criteria for testing risk: • Transparency • Sustainability • Entry barriers
Some Commission errors according to General Court • Evidence of tendency to collective dominance: inadequate • Market volatility: ignored • Low demand growth: incomplete and incorrect assessment of data • Fast and effective entry potential of new players: not taken into account ‘a series of errors of assessment as to factors fundamental to any assessment of whether a collective dominant position might be created.’
Thinking about judicial review • Analytical steps a competition authority takes • Select legal basis (Article 102, merger regulation) • Identify the legal test that applies • E.g. factors that indicate collective dominance • E.g. factors that point to an abuse of dominance • Examine if the conduct in question infringes the law based on the legal test • Airtours is about 3: evidence does not match theory of harm • Can a court intervene at stage 2?
Judicial law-making in the US: Leeginv PSKS (2007) • Question: is resale price maintenance alays illegal? • Answer: • Dr Miles (1923) – yes • Evolution since 1923: • ‘economics literature is replete with procompetitive justifications for a manufacturer’s use of resale price maintenance.’ • ‘justifications for vertical price restraints are similar to those for other vertical restraints: stimulate inter-brand competition’
Law and economics in the dissent Breyer J Economic discussion, such as the studies the Court relies upon, can help provide answers to these questions, and in doing so, economics can, and should, inform antitrust law. But antitrust law cannot, and should not, precisely replicate economists’ (sometimes conflicting) views. That is because law, unlike economics, is an administrative system the effects of which depend upon the content of rules and precedents only as they are applied by judges and juries in courts and by lawyers advising their clients. (914)
Article 102 and rebates DomCo: ‘if you buy vitamins exclusively from me, you will receive a discount at the end of the year.’ • Abuse if: DomCo, without tying the purchasers by a formal obligation, applies a system of loyalty rebates, that is to say, discounts conditional on the customer’s obtaining all or most of its requirements — whether the quantity of its purchases be large or small — from the undertaking in a dominant position • Hoffmann La Roche (1979) 
Rebates and economics • Rebates allow seller to increase sales, which benefits the consumer • Rebates allow seller to exploit economics of scale • Rebates allow the buyer to plan purchases • Rebates may be anti-competitive if: • They exclude from the market other, efficient, market actors • Predatory pricing analogy • Rebates cannot be forbidden without an analysis of effects • Hoffmann La Roche sets out a very aggressive standard – reconsider!
Intel (2017, Grand Chamber) However, that case-law must be further clarified in the case where the undertaking concerned submits, during the administrative procedure, on the basis of supporting evidence, that its conduct was not capable of restricting competition and, in particular, of producing the alleged foreclosure effects. 
On the facts • If so, COM must look at [139-140] • the extent of the undertaking’s dominant position on the relevant market • the share of the market covered by the challenged practice • the conditions and arrangements for granting the rebates in question • their duration and their amount; • the possible existence of a strategy aiming to exclude competitors that are at least as efficient as the dominant undertaking from the market • Any countervailing efficiency which may outweigh anticompetitive effects • Commission had carried out an as-efficient competitor test…it follows that, in the decision at issue, the AEC test played an important role in the Commission’s assessment of whether the rebate scheme at issue was capable of having foreclosure effects on as efficient competitors. [141-2]
Therefore • General Court & ECJ are able to challenge: • GC – the factual analysis to test if it supports the economic theory proposed by the Commission • GC and ECJ – the legal analysis and test how far the legal standard applied is accurate • Intel shows that incremental movement is possible Caveat – do not expect to find in the Court’s case-law a monolithic body of jurisprudence obeying a single pattern of decision-making or a unique conception of the law JL. Cruz Vilaça (2018) JAE 173