The EU’s “New Competition Tool”: Replicating the UK market investigations regime?
Global | Video | November 2020 | 08:36
Video Details
| Ian Giles | Richard, really nice to see you in these unusual circumstances. So, we’re here today to talk about the potential new toy in the tool box, the NCT, the “New Competition Tool” which – the Commission has launched a consultation, they've commissioned some impact assessments, which you’ve authored one of. And this is looking very much at, well there are four proposals put forward, but one of them is particularly close to the UK experience with market investigations. Do you want to maybe just start by talking us through the four proposals and which way you think things might be leaning? |
| RIchard Whish QC | Well, yes. A very interesting initiative by the Commission and all of the four proposals are in a sense based on our market investigation system. I mean, the basic idea being that there are some problems in some markets that can’t be addressed adequately through Articles 101 and 102, and so there you have this separate system of investigating a market, identifying features of it that are adverse to competition and then prospectively trying to find remedies to address those features. No penalties for past behaviour, no damages claims, but correcting the market going forward. And the four different versions of it are – one, that it should be exactly like ours, where any market can be looked at, or should this be limited, for example, to digital platforms? And then also should this be the investigation of markets where there is dominance or could you also address markets where this is no dominance? So those are the four options and, of course, the UK system can look at any market, so in that sense is horizontal and it isn’t interested in dominance because that’s not the point. The point is are there features of the market that are harmful to competition? |
| Ian Giles | Yes. And I guess what’s interesting looking at this is you obviously have an existing regime which covers dominance and covers anti‑competitive agreements and there’s an identification of an enforcement gap, so what is it that the existing dominance rules can’t catch? |
| RIchard Whish QC | Well, I think it’s reasonable to suggest that there are gaps. Let’s just think of something very simple – it’s not what’s motivating this initiative, but something very simple – we all know that there are some oligopolies, oligopolistic markets where firms behave in a parallel manner, but they don’t behave in parallel because there’s a concerted practice. They can intelligently watch each other’s behaviour, they can do a bit of game theory and so you end up with what is like a cartel in practice without being a cartel. Well, there you have a gap. Or you could have a market where there are numerous vertical relationships between different suppliers and different dealers and then cumulatively these parallel networks lead to a suppression of competition, maybe at the retail level where prices are higher than they would otherwise be. But, again, it’s not because of an infringement of competition policy, but there’s a problem. And also there are markets where, frankly, there may be the illusion of competition, but if consumers don’t exercise competitive choices that they have, because they are ignorant or disempowered or lazy, whatever it might be, you can have a market failure – but, again, it’s not because of an antitrust infringement. |
| Ian Giles | Yeah. It’s very interesting isn’t it because if you look at the experience we’ve had in the UK with the market investigation regime, there’s a lot of consumer inertia concerns, consumer lack of engagement or inappropriate information. There’s also, I guess as you’ve hinted at, kind of potential tacit collusion concerns. And one theory is that in a competitive market, somebody would make a better offer to try and drive change, but that doesn't seem to be… |
| RIchard Whish QC | Well, of course, but to my mind, this is precisely when we have to say theory is one thing but there a plenty of markets where the theory just doesn’t actually work out in practice. I remember Yes Minister where the Minister says “but it works Humphrey, it works in practice” and Sir Humphrey says “yes, Minister, but does it work in theory?” It seems to me to sum the problem up very nicely and if you look at our MIRs – auditing, funerals, home collected credit, payday lending – you can have theoretical choices but manifestly it doesn’t actually happen in those markets. The big question then is can you remedy it? That can be monumentally difficult. But you can see that there are problems. |
| Ian Giles |
And when you look at what the Commission is thinking about, they do seem to be much more focussed on the digital sector, the kind of fast-moving markets where they’re not able to move with enough agility in the enforcement, using the current tools. I guess, the other thing that really strikes me about this is the political angle and how going after particular markets – particularly if there are champions who are from one country or another who have strong positions – that can raise lots of questions and I think the Member States have pushed back a little bit on some of these suggestions. |
| RIchard Whish QC | Well, you mention a wealth of issues there and let’s sort of keep industrial champions and protectionism, let’s keep that to one side. Just within normal competition law thinking, I can see why Member States would have issues about all of this because, presumably to the extent that the Commission is given a new competence, one assumes that this might oust their own competences. And I can see that there are many levels to this NCT that give rise to complexity – that being one of them. Another being how this tool relates to 101 and 102, another how does this tool relate to existing systems of sector‑specific regulation? What would the procedures be? Would there be time limits? I mean, there are many, many things that have to be thought through very carefully. |
| Ian Giles |
Yeah, and certainly our experience, having been through a number of the market investigations from the business perspective is, it’s very different as you haven’t been accused of doing anything wrong, but yet you’re subject to this very long, very onerous process which can have some pretty significant outcomes. And the way that the Commission develops that, if it does go forward with this, I think that will be very, very interesting and I don’t know… I know one of the impact assessments that was done was looking at those process points. |
| RIchard Whish QC | Well, Heike Schweitzer has done a very thorough piece of work on procedure and there are many levels to that obviously. You know from our own experience in the UK, time limits became a serious problem and the way the old system, meaning pre‑ERRA 2013 operated, was you could have very protracted cases. I think payment protection insurance beginning to end took something like seven or eight years. But now, of course, you know, it is eighteen months for the investigation – can be extended by six months and six months to implement the remedy. Now, I’m not saying that the Commission would go down that particular road, but that's what we’ve ended up with here. |
| Ian Giles | And I think that would be very interesting to watch, because, of course, a number of them, you also have an appeal afterwards, which is interesting. Anyway, Richard, thank you very much. This is one I think where we watch this space for developments and very nice to see you. |
| RIchard Whish QC | Thank you. |
Head of Antitrust and Competition, Europe, Middle East and Asia
Email
ian.giles@nortonrosefulbright.com