Every so often, a book can jolt us out of the way in which we have been used to thinking about our own discipline. As Or BrookFootnote 1 herself recognises, an ‘impressive array of legal scholarship’Footnote 2 has debated the objectives of EU competition policy, the impact of the so-called ‘more economic approach’, and the role of sustainability and other non-market related factors,Footnote 3 in the application of competition law generally and Article 101 TFEU specifically.
However, starting from a relatively narrow (if ambitious) set of research questions, Brook prompts the reader to consider the very essence of administrative action. Especially after Regulation 1/2003 (the Modernisation Regulation), and the adoption of the so-called ‘more economic approach’ to competition law enforcement, competition enforcers have opted for administrative discretion (to set their priorities, or to open and close cases) over the transparent enforcement of the rules. This has serious consequences for predictability and legal certainty.
As the title makes clear, the focus of the investigation is Article 101 TFEU (specifically Article 101(1) and Article 101(3)). Chapter 1 sets the scene, laying out the research questions, the methodology and the definitions used. The research questions aim to assess the evolution of ‘the rationale, method and limits for balancing competition and non-competition interests in the enforcement of Article 101 TFEU’.Footnote 4
Brook takes a narrow approach to the term ‘competition interests’, defined as the ‘core value protected by Article 101 TFEU, namely the promotion of competition process and structure’.Footnote 5 This definition is in line with previous academic works,Footnote 6 as well as the European Commission (the Commission)'s position in its Article 101(3) Guidelines: ‘the ultimate aim of Article [101] is to protect the competitive process’.Footnote 7 This narrow definition is not normative,Footnote 8 and crucially does not mean that protecting the competitive structure and process is ‘an end in itself’.Footnote 9 Rather it is the beginning of the process of balancing.Footnote 10 In other words, in order for Article 101 to be relevant, a competition enforcer needs to start from the harm that the particular behaviour has on the competitive structure and process (the ‘prevention, restriction or distortion of competition within the internal market’, as per Article 101(1)). Having acknowledged this, the enforcer can then ‘decide to give preference’ to the protection of one or more non-competition interests.Footnote 11 Brook's approach is therefore agnostic as to outcomes. It seeks to identify the approach taken by enforcers towards the ‘non-competition interests’ that they deem worthy of protection.
‘Non-competition interests’ describe ‘the type of policy promoted by an agreement’.Footnote 12 They include ‘economic and non-economic values such as consumer welfare, economic efficiency, industrial policy, growth, market and social stability, market integration, environment, and culture’.Footnote 13
The promotion of any one of these non-competition interests may lead to economic and non-economic benefits.Footnote 14 For example, an agreement in pursuit of environmental policy may lead to benefits enjoyed by society as a whole, such as the reduction of pollution (a non-economic benefit). Or, an agreement could lead to economic benefits. Direct economic benefits relate directly to the products or services covered by the agreement, whether they accrue to direct or indirect users. An example would be benefits in the form of lower prices, or ‘new products, better quality or variety’.Footnote 15 Indirect economic benefits do not arise in the market directly impacted by the agreement in question. An example is two-sided markets: an agreement on one side can give indirect benefits to users on the other side.Footnote 16
The methodology is a combination of the historical, empirical, evaluative and normative approaches.Footnote 17 Empirically, the findings are based on a systematic content analysis (coding) of (i) all public enforcement actions applying Article 101 TFEU; (ii) from the creation of the EEC in 1957, to 2017; (iii) at the European and (iv) at the national level (in selected jurisdictions). At the European level, the database includes all actions taken by the Commission and the EU Courts. At the national level, it includes all actions taken by the national competition authorities (NCAs) and the courts of five countries, as a representative sample of the Member States of the EU. The countries are France, Germany, Hungary, the Netherlands, and the UK (pre-Brexit). The database includes more than 3100 cases, analysed based on 41 identified variables.Footnote 18 This is research on an epic scale. Brook has explained both the drudgery of the task, and the excitement of unearthing new insights through the results.Footnote 19 The resulting tables and figures are priceless. If there is one aspect that could perhaps be improved upon, the findings (in black and white and sometimes in small print) can be difficult to read. This is unavoidable in a printed book. This reviewer would have liked access to an accompanying website, where the findings could be presented in larger and colour-coded diagrams and tables.
The empirical findings are presented in Chapters 3–7, after a chapter (Chapter 2) dedicated to the background and the history of the balancing principles in Article 101 TFEU, looking at the case law of the Commission and the NCAs. Briefly, Brook notes that there is no clear definition of the objectives of EU competition policy in the EU Treaties generally.Footnote 20 Article 101(1) imposes a general ban on anti-competitive agreements affecting trade between Member States and Article 101(3) sets an exception to the general prohibition.Footnote 21
Substantively, Article 101(3) creates a mechanism whereby otherwise anti-competitive agreements can be accepted if four cumulative conditions are met. The wording of the conditions is not clearly defined, leading to possible divergent outcomes. If, for example, it is accepted that, under the benefit condition (the agreement must contribute to improving the production or distribution of goods or to promoting technical of economic progress) a broad definition of benefits accruing to a wide group of beneficiaries can offset harm to competition interests, non-competition interests would have a greater role. Conversely, if only economic benefits were considered, and only those that accrue to direct beneficiaries, non-competition interests would have a much more limited impact on enforcement.
Unsurprisingly, the empirical analysis detailed in Chapter 3 shows that different benefits and different balancing methods were used by the Commission in applying Article 101(3), at different times. Following the categorisation used in other academic works,Footnote 22 Brook identifies four broad periods. During the first period (foundation, 1962–77) Article 101(3) was essentially a tool for the Commission to balance competition market integration and EU industrial policy. During the second period (workable competition, 1978–1987), remarkably the European Court of Justice declared in Metro I Footnote 23 that the appropriate standard for an exemption under Article 101(3) was that of ‘workable competition’. An agreement that contributes to objectives in the EU interest could be exempted under Article 101(3). The Commission took wide categories of benefits into account. The cases often quoted in support of, broadly, sustainability as a benefit that can justify an exemption under Article 101(3), such as CECED (1999) date from this period. Non-economic benefits to society could justify anti-competitive outcomes such as an increase in prices.Footnote 24
During the third period (economic, social and political EU, 1988–April 2004), the Commission seems to have used non-economic benefits as additional justification for decisions to grant an exemption. Environmental, employment, and industrial policy were the main non-competition interests invoked.Footnote 25
The fourth period (post-modernisation, May 2004–2017) is characterised by the Commission seeking to limit both the non-competition benefits that can be taken into account when balancing (limited to ‘objective economic efficiencies’),Footnote 26 and the beneficiaries. This is referred to as the ‘more economic approach’ and is partly justified by the need to ensure uniformity in the decentralised system of the Modernisation Regulation. Whereas in the earlier periods the benefits considered included collective benefits to society, now the benefits include only direct economic benefits.Footnote 27 Brook shows how the European Courts have not fully embraced this approach,Footnote 28 but ‘regrettably, [they] have done so in an indeterminate manner’,Footnote 29 meaning that the case law does not show the hoped-for clarity over the application of the more economic approach. After modernisation, both the invocation by the parties of Article 101(3) and the Commission's acceptance of it have decreased dramatically.Footnote 30 Some commentatorsFootnote 31 tend to see this as proof that non-competition interests no longer play a key role in the enforcement of Article 101(3) TFEU. Brook argues, however, that modernisation has given the Commission and the NCAs wide discretion to use priority setting powers to ‘simply not bring a case or close a case that had already been opened’,Footnote 32 when they believe that the agreement could fall under Article 101(3). Consideration of non-competition interest has effectively been driven underground.
Although Article 101(3) has often been seen as the main balancing tool for non-competition interests, Brook notes that it is in fact only one of five tools, alongside: (ii) block exemption regulations (BERs), considered in Chapter 4;Footnote 33 (iii) Article 101(1) TFEU exceptions; (iv) national balancing tools originating in the Member States; and, crucially (v) the enforcement discretion and priority-setting choices of the competition enforcers.Footnote 34
The first four balancing tools require an overt consideration of non-competition interests. Brook calls these explicit-substantive balancing tools. Chapter 5 is dedicated to the role of Article 101(1) as a balancing tool. An agreement which does not fall under Article 101(1) will escape the prohibition even though it may not meet the cumulative conditions in Article 101(3). The Court of Justice of the European Union was instrumental to the development of Article 101(1) as an explicit substantive balancing tool. The database allows Brook to identify two main categories of cases where Article 101(1) had a balancing function.Footnote 35 However, ‘because balancing is not guided by clear and predictable criteria, the outcome of applying them to a specific case is highly uncertain and leaves ample discretion to competition authorities’.Footnote 36
Statistically, since the entry into force of Regulation 1/2003, about 90% of Article 101 TFEU enforcement actions have taken place before NCAs.Footnote 37 This changes what Brook calls the locus of the balancing tools, from the EU to the Member States.Footnote 38 Post-modernisation, national balancing tools give national authorities or political actors the discretion to exempt agreements based on broad types of benefits. Broadly, in Chapter 6 Brook identifies three different approaches: the UK and Hungary have largely followed the Commission's interpretation.Footnote 39 Germany and the Netherlands have at times openly deviated. France also deviated, but ‘with more subtlety’.Footnote 40 National balancing tools limit the enforcement of Article 101. This prompts Brook to ask whether they may be deemed an infringement of the duty of sincere cooperation for Member States, in violation of Article 4(3) TFEU.Footnote 41
There is a more insidious way in which the effectiveness of enforcement of Article 101 can be hampered both at the European and at the national level. Brooks calls this the implicit-procedural balancing tool, the fifth identified tool, that depends on the exercise of the authorities’ discretion. This is considered throughout the book and analysed in detail in Chapter 7. Whenever a competition authority decides not to open an investigation or closes it by means alternative to a published decision and remedies (be it by negotiated remedies, informal opinions, or regulatory action), balancing happens in a way that is far less transparent. Brook calls this the dark matter of balancing, or invisible balancing, ‘triggered by the institutional set-up and the specific enforcement procedures of the Commission and the NCAs’.Footnote 42 Drawing attention to this dark matter of balancing is one of the most important contributions of Brook's work to the study of competition law.
Post-modernisation, the Commission and the NCAs have focused enforcement actions on cartels and other clear-cut infringements of Article 101 TFEU. Cases requiring balancing of competition and non-competition interests are either disregarded or solved by the exercise of the NCAs’ discretion to close a case, or to accept a negotiated remedy. As Brook points out, however, ‘effective enforcement cannot exclusively focus on cartels’.Footnote 43 The shift from explicit-substantive to implicit-procedural balancing tools has rendered balancing less transparent, less predictable and has increased legal uncertainty.Footnote 44
Brook concludes with an invitation to research further the topic of empirical mapping of competition law enforcement, especially at the national level. She is one of the main researchers involved in a comprehensive mapping of judicial review of competition law enforcement at the national and at the EU level.Footnote 45 Further, the book concludes with three policy recommendations. First, it calls for competition enforcers to recalibrate their enforcement efforts towards the explicit-substantive balancing tools (specifically, Article 101(3)).Footnote 46 Secondly, enforcers should build a diverse and balanced portfolio of cases, beyond cartel deterrence.Footnote 47 Finally, Brook argues for a substantive harmonisation of balancing in secondary law, perhaps in the form of a Regulation, or maybe a Directive. The EU Courts should also focus on the compatibility of national exceptions with Article 101 TFEU, with a view to clarifying the principle of primacy of EU competition law.
The book does not consider whether private enforcement of the competition rules could also have a role in addressing the issues identified. Increased private enforcement could lead to an enhanced judicial model system, where the courts take part in the enforcement alongside the competition authorities.
It is important (and unsettling) to see an empirical analysis on this scale showing that, after more than half a century, enforcement of the EU competition rules leads to conflicting decisions, multiple balancing standards and, ultimately, fragmentation of that common market whose integration was one of the guiding lights for enforcement of EU competition law, from the very start.
