Economics and Competition Law

“Economics is the study of how society decides what, how and for whom to produce.”

Begg, Fischer and Dornbusch

“A lawyer who has not studied economics…is very apt to become a public enemy.“

Justice Brandeis (1916)

“To abandon economic theory is to abandon the possibility of rational
antitrust law.“

Judge Robert Bork (1978)

 

It is undoubted that economics has come to play a crucial role in competition law assessments.

This might represents a natural evolution of the area, as competition policy rests on the economic idea that it is appropriate to limit the exercise of market power in the interest of economic efficiency and welfare. And economics goals are at the heart of modern competition law regimes, i.e. society/consumer welfare.

At the most fundamental level economics is concerned with the implication of a rational choice, hence it is an essential tool for figuring out the effects of legal rules.

Economics studies how markets work, how they allocates goods and services to different consumers. Competition law is concerned with how markets work; its general objective is to ensure that there is competition between market players, and that this competition benefits consumers.

Economics can help understand how markets operate, how firms (will) behave, and whether their behaviour will eventually benefit consumers; it helps answering questions that are central to competition law cases.

But, if on the one hand economics has helped clarify some of the debated issues, on the other hand it might have brought also some non-sense. Why? “[a]lthough economic theory is indispensable to our task, clear-cut answers are often impossible. The complexities of economic life may outrun theoretical tools and empirical knowledge. We often will remain uncertain about the economic results of the particular practice or market structure under examination. Nor can we always predict the consequences of prohibiting some particular behavior. Thus, we shall time and again meet this question: How far must we search for economic truth in a particular case when the economic facts may be obscure at best, when the relevant economic understanding may be controversial or indefinite, and when the statute does not give us a clear-cut value choice?” ( P. Areeda, L. Kaplow and A. Edlin, Antitrust Analysis, Problems, Text and Cases, Aspen
Publishers, 6th Edition, 2004, p. 105)

Glossary of Industrial Organisation Economics and Competition Law – OECD

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Italian Annual Competition Law Bill: the NeverEnding Story

Article 47 of Law n. 99/2009 obliges the Italian Government to submit to the Parliament, a competition law bill to stimulate competition in the Italian market. The bill should be submitted on a yearly basis, taking into account the Annual report that the Italian Competition Authority submits every summer to the Parliament.

In February 2015, the Council of Ministers adopted, for the first time, a draft of the competition law bill…which still awaits for the Parliament’s approval.

The Government’s draft was not as bold as expected (and announced), and received a rather cold welcome by the Italians. For example, the provision favouring Uber and similar services disappeared. The provision extending to para-pharmacies the ability to sell Class C medicines (i.e. those not reimbursed by the National Health System) suffered a similar faith. The only actual pro-competitive article seemed to be the one that takes away, from Poste Italiane, the monopoly  for the notification of fines and other judicial documents.

The Lower Chamber of the Parliament approved the bill in September 2015. Since then, the bill has been sitting in the Senate.

In these two years, the bill was not really improved. If anything its content was watered down, as recognised by the President of the Italian competition Authority as well as the European Commission.

The Senate’s plenary is scheduled to vote on the draft in April. The Press reports that, now, the Government intends to impose the “vote of confidence” to ensure a smooth and short debate of the bill. However, few issues remains unresolved. Once the Senate will finally adopt the text, the latter will be sent back to the Lower Chamber for the final approval.

The text approved by the Senate’s Committee contains 74 articles, introducing new rules for TMT and TV operators, the financial services, postal, energy, tourism, transport sectors, as well as for lawyers and notaries. During the discussion at the Senate’s committees level, the two rapporteurs introduced an article changing the mergers’ notification thresholds. It was announced that the Government intends to introduce a “defensive” measure against hostile takeovers, to ensure total transparency in investment strategies in Italian companies.

After more than 800 days the Senate approved the bill on 3 May 2017. The text, which now contains 74 articles, now awaits the final approval by the Lower Chamber.

The content of the drafted bill in pills:

INSURANCE: New rules on discounts for cars’ insurance policies to reward the virtuosity of consumers.

ENERGY: Liberalization of retail energy market (in July 2019). New rules to enhance consumer protection. New provisions to simplify renewable energy production and to encourage small electricity distribution companies.

MOBILE TELEPHONE, ELECTRONIC COMMUNICATIONS AND AUDIOVISUAL MEDIA: rules to increase transparency of mobile contracts and make easier for customers to switch operator. However, operators may impose the payment of the costs incurred by the company to end the contract.

ENVIRONMENT: Stronger rules to allow producers’ access to the packaging market, new minimum quality standards for the treatment of electrical and electronic equipment’s waste, and procedural simplifications concerning ferrous and non-ferrous metal waste.

BANK SERVICES: new provisions to protect competition and transparency in the financial leasing sector.

PROFESSIONAL SERVICES: changes for notaries, regulated professions (e.g. engineers and lawyers) and pharmacies.

TRANSPORT: within a year the Government has to approve new rules for non-scheduled public car services (Taxi).

[To To be continued]

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An Introduction to EU Competition Law*

“As freak legislation, the antitrust laws stand alone. Nobody knows what it is they forbid.”

Isabel Paterson

  WHAT IS COMPETITION POLICY?

Competition policy deals with the organisation of domestic market economics. It aims to allocate resources in the most efficient way.

Continue reading “An Introduction to EU Competition Law*”

Dive into Competition Law

THE ORIGINS AND AIMS OF COMPETITION POLICY

People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty and justice. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies; much less to render them necessary.”

 A. Smith, Wealth of Nations 

Continue reading “Dive into Competition Law”

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