United in Diversity: why we need less (not more) uniformity in (national and EU) competition policy and enforcement in Europe

Based on ‘A Framework for European Competition Law: co-ordinated diversity, (2018) Hart Publishing’

Europe’s peoples are scared, divided, and increasingly dissatisfied with uniform solutions to many local problems. Recent examples can be found in Greece, Hungary, Italy and the UK. For many years, de Búrca and Scott (Constitutional Change in the EU: from uniformity to flexibility? (2000), 2) note that in many areas of EU law, “…increased heterogeneity, political, economic and cultural…inevitably brings an increase in the heterogeneity within the functioning of…[the EU’s] institutions and policies.” Yet, the European Commission, European Parliament, as well as many academics, practitioners and other regulators strongly resist diversity in competition policy and enforcement in Europe. They fear undermining a level playing field for firms in the EU; reduced co-operation between national competition authorities (NCAs) and courts; and increasing the costs to business. In my new book, A Framework for European Competition Law: co-ordinated diversity, (2018) Hart Publishing, I underline uniformity’s benefits, but highlight the important contributions that diversity brings too, including better alignment with national preferences and more innovation and experimentation. I offer a new structure, Co-ordinated Diversity. This combines uniformity and diversity to generate more efficient, effective and legitimate outcomes, in ways which fit with the EU legal order.

Disagreements in competition policy and enforcement exist

Three disagreements in competition policy and enforcement occur: disagreements on aims, methods, and procedural rules and institutional structures. Disagreements on aims involve: the type of competition that is desirable (e.g. consumer welfare or Ordoliberalism); the precise definition of the type of competition selected (e.g. short or longterm consumer welfare); and the relevance of wider public policy goals. For example, the Netherlands favours integrating environmental considerations in competition analysis, the UK does not. Yet, even if we could agree on uniform aims, disagreements on the best methods to achieve these aims are possible. For example, the NCA in the Netherlands asked other NCAs what emphasis they place on innovation in their consumer welfare analysis. Its joint report with the ICN in 2011 uncovered many diverse approaches. The third kind of disagreement concerns the best procedural rules and institutional structures for achieving these aims and methods. For example, should enforcers be independent NCAs, or should one use a court-based system?

Why the Commission and others seek to suppress disagreements through uniformity

The European Commission calls for a “…consistent application of the rules, and the preservation of the unity of competition policy.” Other relevant actors, such as the European Parliament, academics (Cengiz, Ortiz Blanco and Lamadrid de Pablo – although note the work of Kerber and Budzinski, Svetiev, and Wilks), practitioners and regulators overwhelmingly agree that NCAs and courts should closely follow the Commission’s application of Article 101 TFEU (and, to a slightly lesser degree, Article 102 TFEU). While less uniformity is demanded for procedural matters, this is increasing there too.

The Commission emphasises uniformity because it fears that diverse case outcomes undermine a level-playing field for firms and reduce co-operation between national regimes. Others, such as the UK NCA, worry that diverse competition rules raise business costs.

Why uniformity is not enough

While uniformity brings many benefits, A Framework for European Competition Law (2018) argues that we now need more diversity (within limits). Diversity has two core benefits. It allows diverse national policy preferences; and helps with policy innovation and experimentation. These benefits feed into all three kinds of disagreements discussed above, enhancing the efficiency, effectiveness and legitimacy of the competition system.

Could one say that national policy preferences are less valuable in competition law and policy today? There is increasing agreement on competition’s meaning and the benefits it brings, at least within the competition community. The idea is that intense competition pushes firms to innovate and become more efficient, making their outputs cheaper. Successful firms can undercut their rivals (while providing consumers with better goods and services at lower prices). In fact, Buch-Hansen and Wigger (The Politics of European Competition Regulation (2011), 1) say that:

“The assumption that competition is good and more competition is even better has reached the status of a mantra among policy-makers, business people and academics alike. Never before in the history of mankind has faith in competition enjoyed such an exalted, almost religious, standing and never before have more dimensions of social reality been immersed with its logic.”

However, as Piketty (Chronicles on Our Troubled Times (2016), 59-61) notes, the arbitrary nature of inheritance, and our genetic gifts mean that we are not all likely to be able to enjoy success, at least not to the same extent. Some Member States might want to protect values outside of short term efficiency concerns (helping weaker firms (that struggle in competitive environments, at least in the short term), their employees (who risk losing their jobs) and the environment (cheaper goods may mean more waste)). The social costs of competition are significant. States might disagree how best to ameliorate these costs. Diversity allows them to better reflect their national preferences. Note that NCA independence has helped the competition community to avoid political discussions about the costs and benefits of competition policy and enforcement. The book debates this too.

Diversity also creates space for experimentation. This is extremely valuable in the evolution of policy, especially in fast moving markets. Over time, ‘laboratories of democracy’ allow us to compare various approaches and may provide deeper insights into which response is best (different national preferences may also impact upon this assessment). This can generate effectiveness, and legitimacy, benefits too.

Co-ordinated Diversity: combining uniformity and diversity more efficiently, effectively and legitimately

Given the conclusions above, the second part of A Framework for European Competition Law (2018) examines ways of achieving a better mix of uniformity and diversity. It suggests a new framework for national and EU competition law, Co-ordinated Diversity. This is built on Casella’s theory of clubs (Free Trade and Evolving Standards (1996), 142), as interpreted for the EU by Majone (Europe as the Would-be World Power (2009), 220). The idea is to group similar EU Member States in clusters. Similarlity might focus on a combination of culture, languages, geography, ideology (including ideas of competition and varieties of capitalism), legal cultures, relationships to other values, procedural solutions, etc. Different clusters would pursue diverse national and EU competition policy and enforcement (within limits), allowing for a better match with national preferences and more innovation and experimentation.

The third and final part of the book asks whether Co-ordinated Diversity fits within the EU’s legal order. The book notes that Co-ordinated Diversity is not in line with the current practice in the EU (given the prevalence of the uniformity discourse). Having said that, in cases such as Case C-309/99 Wouters [2002], para 108, the European Court of Justice explicitly accepts that Article 101 TFEU can be applied differently (within limits) in different Member States. In fact, most necessary adjustments to implement Co-ordinated Diversity could be easily achieved through changes to Commission notices and joint statements between the Commission and the NCAs. There are, however, some issues which require deeper change, such as amending Articles 101 and 102 TFEU’s procedural regulation and the merger regulation. So, the book asks whether such changes would fit with the EU’s constitutional order. In order to do this, it has to explain how this constitutional order applies in the competition sphere, something which has rarely been attempted before. In the end, A Framework for European Competition Law (2018) argues that it is possible to make Co-ordinated Diversity fully compatible with the EU order and it explains how this might be done.

Conclusion

Many will argue that undermining uniformity in EU competition policy and enforcement will irreparably harm the EU project. As someone who deeply believes in this project, I hope that we become more open to diversity in competition policy and enforcement in Europe. In the EU, there is not ‘one inexorable path of integration implying harmonization and gradual unification, but rather commitment to a broad commonality within which room exists for varying degrees of difference and diversity.’ (de Búrca and Scott (Constitutional Change in the EU: from uniformity to flexibility? (2000), 2, making the point for EU law more generally) In fact, the EU’s motto is ‘United in diversity’. A Framework for European Competition Law (2018) offers a way of achieving a more efficient, effective and legitimate balance between uniformity and diversity in competition policy and enforcement.

Chris Townley

Dr. Chris Townley is a Reader in International Competition Law and Regulation at King’s College London.

Author: Chris Townley

Dr. Chris Townley is a Reader in International Competition Law and Regulation at King’s College London.

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