Trade-offs in a new era for competition law

Competition law and policy are undergoing the most fundamental transformation in a generation. It was assumed at the time that the substantive novelties introduced by the so-called modernization process of the early 2000s would become permanent features of the system. Two decades later, barely any vestiges from those days remain intact. Twenty years ago, bringing competition law enforcement in line with the best available economic expertise was the utmost priority; these days, effectiveness and administrability are the factors driving change. In a similar vein, consumer welfare appears to have given way to competitiveness and resilience as the guides underpinning action by competition authorities. The long history of competition law teaches us, first and foremost, that these transformations are not new. They are, in fact, to be expected. Expertise, and the policy prescriptions one draws from them, change over time. So do societal preferences. It may make sense at a given point in time to focus on minimizing enforcement errors and, if in doubt, avoid taking action. These priorities and preferences are likely to change in a world where some corporations have the ability to de facto regulate vast swathes of economic activity beyond the nation-state, and where the geopolitical landscape is moving decisively away from the rules and the certainties that had been taken for granted. Expressing a preference, in the current landscape, for the compact of a generation ago is only fruitful as an exercise in nostalgia. Accepting change as an inherent reality in competition law and policy does not mean that the prevailing orthodoxy at a given point in time is not worthy of scrutiny. Every new iteration of the discipline demands a different way of managing the trade-offs that every substantive and enforcement choice involves. A focus on the minimization of enforcement errors and on the maximization of predictability, for instance, necessarily means accepting that some potentially anticompetitive practices will not be sanctioned. Conversely, affording competition authorities greater leeway to venture into uncharted territory may well enhance effectiveness but entails, by design, a sacrifice from the perspective of legal certainty. It is in light of these lessons that the emerging policy, legal, and enforcement landscape must be navigated and its potential consequences scrutinized. There is a risk that the introduction of new considerations and the focus on emerging priorities happens under the pretence that they do not come with trade-offs. The illusion, from this perspective, is that competitiveness or industrial policy—to mention the most prominent themes in the current agenda—would not fundamentally change the landscape; they would just inject new elements into the enforcement mix. Similarly, it may be tempting to argue that the renewed focus on the effective and workable application of competition rules—instead of the minimization of enforcement errors—gets the balance just right (as opposed to striking a different balance reflecting a new set of priorities). Consider, first, the consequences of introducing competitiveness considerations. Commentators and stakeholders who insist on this factor as a necessary ingredient of contemporary competition law and policy do not make a secret of what the aspiration behind the move is. The ambition, above all, is to ensure that EU-based companies can effectively rise to the challenge posed by their rivals in other regions of the world and that their ability to do so is not unduly impaired or hinder by enforcement action. What transpires beneath this ambition is a plea for the sacrifice of consumer welfare in the name of the global relevance of a select group of firms that face particularly intense competition on a global scale. If competitiveness is ever to formally enter the enforcement landscape, it would be necessary to account for the nature and extent of these sacrifices for European consumers. Very much the same can be said of the role of industrial policy in the assessment of, among others, concentrations and the award of State aid. To start with the latter, it is difficult to overestimate the extent to which it would influence the assessment under Article 107 TFEU if industrial policy were to become a justification in its own right under the third paragraph of the provision. Measures that would never have had the chance of being approved under a traditional understanding of EU State aid policy—such as operating aid with the object and effect of reducing the economic operators’ current expenditure—could be given the green light in the name of building or preserving an industrial base in Europe. The consequences for the internal market—such measures are by definition a substantial source of distortions of competition and trade—would be just as difficult to overestimate. Acknowledging the inescapable reality of the trade-offs would go a long way in making sure that the emerging legal and policy landscape does not develop in a way that jeopardizes the role of the system of undistorted competition within the internal market. It would not be, however, the only area that deserves attention moving forward. For all of its undeniable flaws and imperfections, the substantive universe brought about by the modernization of the early 2000s was based on a set of methodological tools that was both well understood and that reflected a widespread consensus among the community of academics, enforcers, and practitioners. Introducing considerations such as competitiveness and industrial policy inevitably leads to the emergence of a vacuum on the methodological front. In the absence of a systematic and well-tested approach, there is a risk that law and policy become so opaque or cryptic that trust in the transparency and soundness of the decision-making process is questioned. The above is not to say that change is undesirable or unwelcome. The point is a different one: with change come not just costs but trade-offs. It would be unwise—and much more costly over the long run—if these were ignored.