Methodological Issues of the 'More Economic Approach' to Unilateral Exclusionary Conduct. Proposal of Analysis Starting from the Treatment of Retroactive Rebates

41 Pages Posted: 26 Sep 2011

See all articles by Leonardo S. Borlini

Leonardo S. Borlini

Bocconi University - Department of Law; BAFFI Center on Economics, Finance & Regulation Research Paper Series

Date Written: September 1, 2009

Abstract

At the outset of this paper, I address the treatment of retroactive loyalty-inducing rebates from an economic angle by first considering specific models put forward by scholars who have severely criticised the Commission’s practice and the Luxemburg-based Courts’ case law on target and retroactive rebates. In the process, I highlight their common assumptions and the policy implications they entail vis-à-vis rather diverging approaches. I then move on to question whether or not the 82 Guidance’s analytical framework regarding the conduct under discussion is likely to satisfy those who have repeatedly criticises the Commission for not discarding an overly restrictive and formalistic case law on Article 82.

By a typical inductive process, this leads me to critically consider the current role of economics within the context of competition policy and, in particular, with regard to unilateral allegedly exclusionary conduct by dominant firms. Accordingly, I examine the economic theoretical basis of EC competition policy and the primary goals the Commission has recently indicated as yardsticks for the ongoing effect-based review. The results of this analysis are somewhat counter-intuitive. Despite the apparent clarity of the Commission’s policy declarations, the foremost aims it explicitly pursues (ie consumer welfare and allocative efficiency) might be competing.

The fact that the main aims might be competing is not the only counter-intuitive outcome. Even the expression “more economic approach” is susceptible to various (and diverging) interpretations that do not necessarily fit with one another. Furthermore, even though the current economic models advocating for grounding the review process of EC Competition policy are claimed to represent a reasonably solid anchor for the future application of Article 82 to exclusionary conduct, they still present inherent problematic aspects renowned economists and legal scholars have systematically highlighted.8 Therefore, in the third section of this paper, I attempt to outline the mainmethodological issues intrinsic to the so-called “modern economic approach”.9 My analysis is carried out keeping in mind what sometimes seems to be, at best, implied: the economic paradigms supposed to underpin the review process of abuse doctrine are not the most modern.10 Neoclassical microeconomic theories and industrial organisation’s tenets could be prolifically integrated with the fundamental insights of even-more-modern approaches, namely: information economics, economics of innovation and behavioural economics.

Finally, I ponder whether the “more economic approach” orientating the internal review process of the abuse doctrine can be properly integrated with basic legal values and the peculiar aims assigned to competition policy by the EC Treaty. In other words, I question whether the privileged position lately accorded to (a certain meaning of) economic efficiency and consumer welfare can be conciliated with a richer synthesis between Community policies and legal principles preserved by the European Courts.11 As a matter of clarification, I would also like to state that it goes beyond the scope of this work to propose definitive solutions as to what extent economic analysis should be employed and which shape it could end up taking. However, I aim at making it clear that any argument in favour of “the more economic approach” is remarkably vulnerable insofar as it does not explicate how it solves the inevitable trade-offs it faces. For instance, assuming consumer welfare as a guiding objective, any model has to show how regularly (and the standard length of the period over which) firms’ surplus is expected to be attained without affecting consumer welfare. The latter explanations represent the minimal contents of any system claiming to constitute the orientating paradigm even within the borders of traditional microeconomics. Hardly any relevance can be attributed to any arguments against the treatment of alleged foreclosing conduct by the Commission and European Courts—this holds true irrespective of how well articulated the pars destruens is—if the competent authorities are left without any solid parameter for carrying out their activity.

My take is that any economic theory deployed for revising the abuse doctrine reflects a particular viewpoint of competition policy and, ultimately, represents a peculiar political choice. Formulated in slightly different words, the positivistic view of thinkers who deny an inherent and natural character of the marketplace permeates this study.

Keywords: more economic approach, Art, 102 TFEU, Abuse of dominant position, Unilateral Exclusionary Conduct, Loyalty-inducing rebates

Suggested Citation

Borlini, Leonardo Sergio, Methodological Issues of the 'More Economic Approach' to Unilateral Exclusionary Conduct. Proposal of Analysis Starting from the Treatment of Retroactive Rebates (September 1, 2009). Available at SSRN: https://ssrn.com/abstract=1894799 or http://dx.doi.org/10.2139/ssrn.1894799

Leonardo Sergio Borlini (Contact Author)

Bocconi University - Department of Law ( email )

Via Roentgen, 1
Milan, Milan 20136
Italy

BAFFI Center on Economics, Finance & Regulation Research Paper Series ( email )

Via Roentgen 1
University Bocconi
Milan, Milan 27010
Italy

HOME PAGE: http://didattica.unibocconi.it/docenti/cv.php?rif=49517

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