Competition and Antitrust Law: A Very Short Introduction, Ariel EZRACHI

Ariel Ezrachi

This section selects books on themes related to competition laws and economics. This compilation does not attempt to be exhaustive but rather a survey of themes important in the area. The survey usually covers publication over the last three months after publication of the latest issue of Concurrences. Publishers, authors and editors are welcome to send books to catherine.prieto@univ-paris1.fr for review in this section.

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Competition is omnipresent in all layers of social and economic reality. It is synonymous not only with low or reasonable prices, but above all with abundant choices of quality products and services, with innovations that enhance our daily lives, with technological intelligence that makes hard work almost obsolete, with growth and prosperity. In short, it is a powerful vector of civilizational progress.

From the outset, Ariel Ezrachi invites us to discover the countless feats that are hard to ignore. From the smart phone to the digital assistant to the autonomous car. The competition wants to serve the consumer. However, to satisfy the "consumer-king", it is necessary to set up a rivalry between suppliers who want to attract his favor in exchange for a market share that guarantees a certain profitability. However, this process of competition that must be ensured in a market economy is not natural and implies institutional structures based on law and informed by economic theory. What the author proposes in his book Competition and Antitrust Law is a brief foray into the making of competition.

La concurrence dans tous ses états introduces this initiatory journey into the world of economic competition. The power of competition is highlighted. Whether one is in the presence of pure and perfect competition, an oligopoly or a monopoly, competition changes in appearance and intensity. These models of competition are explained, serving as a chessboard on which the expert as well as the simple citizen concerned with the efficiency of the market and/or his purchasing power can find their bearings. Each model is briefly analyzed, but no less meticulously, in order to understand its innumerable practical variations.

It is in a given market that competition is born and evolves. The nature of supply and demand, as well as the price formation process, shape the course of economic competition that takes place. The key notions that allow us to understand the market’s mechanisms are studied in order to better understand the conditions in which competition is cultivated. The market price, which is the result of competitive supply and effective demand, also provides information on consumer and producer surplus. These conceptual premises lead us inexorably to the notion of the relevant market, its determining role in competitive analysis and its limits. As a basic instrument in competition law and economics, its technical efficiency in terms of identifying competitive intensity is highlighted through the illuminating example of "chains of substitution".

In Chapter 3, the author reviews the genesis of competition law in the United States and the European Union, its multiple ambitions and its notable variations over the last few decades. This branch of law pursues common objectives, regardless of the country in which it is implemented. The protection of a free and efficient competitive process against possible distortions is its main purpose. Although there are variations between countries and between the doctrines (laissez-fairism or interventionism) of the competition authorities as to its interpretation and application, competition law tends towards an unsurpassable horizon which is consumer welfare. Nevertheless, other economic, political and social goals can be assigned to it, as is the case in the founding treaties of the European Union.

What is the optimal level of intervention in markets? This question has the merit of allowing the author to highlight the tumultuous debates that inflame the legal and economic community. The diversity of theories and economic models underlying competition policies calls for heterogeneous measures, or even sometimes no intervention at all, in the event that competition authorities are driven by the firm belief that markets contain self-regulating forces capable of curbing possible anti-competitive practices. Thus, the problem of the cost of mistakes, i.e., the cost of over- or under-intervention, is highlighted in Chapter 4, while emphasizing the extreme difficulty of reaching the point of equilibrium in order to avoid paralyzing healthy market forces through unnecessary or even harmful actions. Consequently, the rules governing competition law (chapter 5) must be deployed with discernment and proportionality.

Do public authorities have a monopoly on competition? The answer is clearly no.

The two major legal traditions in competition law, North American law and European Union law, provide for a dual mechanism to combat anti-competitive practices. The first is what the competition jargon calls public enforcement, by far the most prevalent legal regime, which arms competition authorities with a myriad of powers and instruments to prevent, detect and combat practices harmful to the competitive order. The second is a system of private enforcement that allows injured economic operators and competitors to claim damages either following a final conviction of a competitor (follow-on damages actions) or independently by bearing the burden of proof (stand-alone damages actions). In sum, these two regimes work together to ensure the effectiveness of competition rules by increasing the detection rate of anti-competitive actions and a fortiori to maintain sufficient dissuasive pressure on market operators.

The intensity of competition in markets may sometimes lead firms to engage in practices to get out of the market, or at least to loosen the grip of rivalry on them. To do this, economic operators may have an incentive to form cartels to distort competition (chapter 7). The author explains how these cartels operate, illustrates their protean nature (chapter 8) and highlights how they are likely to siphon off consumer surplus and inevitably alter the workings of free competition. It is therefore not surprising that competition authorities are redoubling their ingenuity to perfect their detection and increase their deterrence.

However, Ariel Ezrachi does not escape the question of the size of dominant firms in his developments. He reminds us that even in competition law "size does not matter". In other words, competition law does not condemn a company that has succeeded on its own merits in achieving a dominant position. Only the resulting abuse of market power is sanctioned. Chapter 9 of this essay reviews the categories of abuse that can be committed by a dominant economic operator, while emphasizing their intrinsic harmfulness.

The final pillar of competition law is merger control. While in principle mergers and acquisitions can be a source of economic efficiency, external growth for companies and sometimes an increase in consumer welfare, they can sometimes constitute a means of stifling actual or potential competition on a market, hence the implementation of an ex ante control of a prospective nature, the philosophy of which the author demonstrates by relying on emblematic cases (chapter 10).

Today’s economies are globalized and their players operate in increasingly interconnected markets. Their practices could have an international scope and generate possible anti-competitive effects simultaneously on several markets. This observation is sufficient to justify the territorial extension of competition rules, but also extensive coordination between authorities, which are encouraged to converge both their standards and their respective practices. Ariel Ezrachi outlines the international dimension of competition, its ambitions but also its limits.

Yes, competition law, says the author, reflects the values that a society would like to see brought to the pinnacle of its laws. The fluctuations in its interpretation and application reflect the issues that agitate the countries in which it is applied. At a time when the planet is exposed to monumental challenges, such as the ecological and digital transition as well as the fight against global warming, Ariel Ezrachi poses, by way of concluding remarks, a final question, called to occupy the enlightened minds of our jurists and economists: what role could be assigned to competition law in this new world in the making?

The answers to this question are sure to come. But will they live up to our collective expectations?

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Author

  • University of Paris I Panthéon-Sorbonne

Quotation

Farouk Er-razki, Competition and Antitrust Law: A Very Short Introduction, Ariel EZRACHI, February 2022, Concurrences N° 1-2022, Art. N° 105272, pp. 251-252

Publisher Oxford University Press

Date 22 July 2021

Number of pages 176

ISBN 9780198860303

Visites 630

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