11. The international dimension

‘The international dimension’ examines the international dimension of competition laws. In order to protect their domestic markets, competition agencies often need to apply their national laws beyond the boundaries of their state. Extraterritoriality in competition law commonly relies on one of two legal concepts. The first extends a competition regime’s jurisdiction to activities which have an effect on that regime’s markets. The second requires ‘implementation’ of anti-competitive activity within the given territory as a condition for extraterritorial application of domestic laws. In the US, the effects doctrine enabled the enforcement of antitrust laws on foreign companies. In the EU, both the effects and implementation doctrines may be used.

5. The legal framework

‘The legal framework’ outlines the key competition provisions currently in the US and EU. Like in most other jurisdictions, EU and US laws include competition provisions that are used to address antitrust violations such as anti-competitive agreements or abuse of monopoly power. They also include laws dealing with proposed mergers and acquisitions. The US Antitrust Law prohibits contracts and agreements between two or more individuals or entities in restraint of trade or commerce. Meanwhile, EU competition law prohibits agreements between ‘undertakings’ that have, as their object or effect, the prevention, restriction, or distortion of competition, and affect trade between the EU member states.

10. Mergers and acquisitions

‘Mergers and acquisitions’ discusses mergers and acquisitions. While of potential benefit to society, mergers, takeovers, share acquisitions, and joint ventures also affect the market structure, and at times may reduce competition. When markets become more concentrated following a merger, we move further away from a competitive market structure to a structure in which market power might undermine the competitive process. To address this risk, the competition agency must assess the impact of the transaction. There are important procedural differences between the European administrative system and the US system in terms of the appraisal of mergers and acquisitions. Other types of mergers include: horizontal mergers, vertical mergers, and conglomerate transactions.

1. The power of competition

‘The power of competition’ discusses the power of competition. The nature of the product and the structure of the market affect the intensity of competition and subsequently the price and quality of goods and services. The model of perfect competition illustrates the ideal market scenario — a perfect market which maximizes consumer welfare. There are a number of consequences of limited competition in a market dominated by a monopoly. In such a market, a single firm offers the product or service. There is also a type of market called an oligopoly, which is characterized by a few key competitors.

4. What is the optimal level of enforcement?

‘What is the optimal level of enforcement?’ focuses on competition law enforcement. All competition jurisdictions acknowledge the central and crucial role of economic analysis in shaping competition prosecution. Greater economic understanding has improved the structure of competition law through legal presumptions and thresholds, enforcement guidelines, and a greater understanding of the gravity and consequences of anti-competitive activities. Indeed, there has been an ever-increasing ‘economization’ of antitrust, as more jurisdictions rely on economic analysis to determine whether intervention is needed. When markets work well, competition enforcers are better off adopting a ‘laissez-faire’ approach (leaving the market to take its own course). Distinguishing pro-competitive activities from anti-competitive activities poses a challenge.

Introduction

‘Introduction’ provides an overview of the competitive process, which has generated much of the prosperity of the Western world. It is this process that delivers the abundance of choice, the lower prices, the increased innovation, and the better quality of goods and services. The antitrust and competition laws are designed to address risks, remedy possible market failures, and safeguard consumer welfare. Competition agencies and courts are tasked with enforcing the law. As they do so, they face the challenge of correctly identifying what amounts to an anti-competitive activity and curtailing it to ensure dynamic and competitive markets.

Final reflections

‘Final reflections’ explains that as the understanding of markets and economic theory evolves, so does the application of competition law. With changing market and socio-political realities, these challenges become apparent. We need to consider the rise of digital markets and the threat of climate change, and assess the effect they have on the enforcement of competition and antitrust laws. What is the right formulation of competition policy? The key to effective competition law enforcement lies not in the pretence of purity or certainty, but in an open and informed debate on the law and economics, and the society to which we aspire.

6. Who enforces the law?

‘Who enforces the law?’ identifies who enforces competition and antitrust laws. In most countries, competition and antitrust laws can be utilized by the public enforcer (the competition agency) that is tasked with maintaining a competitive environment, or by private entities that use the competition provisions to protect their commercial interests, or to claim damages for loss caused by violation of competition law. In the US, at the federal level, two agencies share responsibility for competition enforcement. These are the Federal Trade Commission’s Bureau of Competition (FTC) and The Antitrust Division of the Department of Justice (DOJ). Meanwhile, EU law grants the European Commission primary responsibility for enforcing EU competition laws.

7. The fight against cartels

‘The fight against cartels’ assesses the fight against cartel agreements. When unchallenged and undetected, cartel activity can distort competition and significantly harm consumer welfare and trade. Policy makers have described cartel activity as a cancer in a modern market economy, the effects of which are entirely negative. The law reflects this view by treating cartel activity as unambiguously bad, thus prescribing harsh financial penalties and sanctions to violators. Competition agencies position these illicit activities high on their enforcement agenda. There are a number of leniency programmes which incentivize cartel members to approach the agency and confess their participation. Both the US and EU investigated the Air Cargo Cartel.

9. Monopolies and the abuse of market power

‘Monopolies and the abuse of market power’ studies monopolies and the abuse of market power. The first step in applying competition law to misuse of market power is the identification of such power. How powerful should you be to be deemed to have market power that could trigger antitrust intervention? Many jurisdictions will use the benchmark of ‘dominant position’, some will use ‘monopoly power’ or ‘monopolization’, while others may focus on the presence of ‘superior bargaining position’. There is a difference in approach between the US and EU competition laws which can be seen through several categories of abuse and monopolization, including predatory pricing, excessive pricing, and refusal to supply or license.