The Historical Foundations of EU Competition Law 9780191643798, 0191643793

Table of contents :
Cover
Contents
List of Abbreviations
List of Contributors
Introduction
1. The Evolution of the Law on Articles 85 and 86 EEC [Articles 101 and 102 TFEU]: Ordoliberalism and its Keynesian Challenge
2. The Drafting and the Role of Regulation 17: A Hard-Fought Compromise
3. National Traditions of Competition Law: A Belated Europeanization through Convergence?
4. American Influences on EEC Competition Law: Two Paths, How Much Dependence?
5. Competition Law and Industrial Policy: Conflict, Adaptation, and Complementarity
6. Towards a Concept of a Workable European Competition Law: Revisiting the Formative Period
7. EU Competition Law in Historical Context: Continuity and Change
Index
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B
C
D
E
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G
H
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J
K
M
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T H E H IS TO RICAL F O UNDATIONS O F EU CO M PET IT IO N L AW

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The Historical Foundations of EU Competition Law Edited by

K IRAN K L AUS PAT EL and H EIK E S CH WEIT ZER

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Great Clarendon Street, Oxford, OX2 6DP, United Kingdom Oxford University Press is a department of the University of Oxford. It furthers the University’s objective of excellence in research, scholarship, and education by publishing worldwide. Oxford is a registered trade mark of Oxford University Press in the UK and in certain other countries © The several contributors 2013 The moral rights of the authors have been asserted First Edition published in 2013 Impression: 1 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, without the prior permission in writing of Oxford University Press, or as expressly permitted by law, by licence or under terms agreed with the appropriate reprographics rights organization. Enquiries concerning reproduction outside the scope of the above should be sent to the Rights Department, Oxford University Press, at the address above You must not circulate this work in any other form and you must impose this same condition on any acquirer Crown copyright material is reproduced under Class Licence Number C01P0000148 with the permission of OPSI and the Queen’s Printer for Scotland British Library Cataloguing in Publication Data Data available ISBN 978–0–19–966535–8 Printed and bound in Great Britain by CPI Group (UK) Ltd, Croydon, CR0 4YY Links to third party websites are provided by Oxford in good faith and for information only. Oxford disclaims any responsibility for the materials contained in any third party website referenced in this work.

Acknowledgements We are grateful to the European University Institute (EUI) in Florence, Italy and particularly to the Robert Schuman Centre for Advanced Studies (RSCAS) and its director, Stefano Bartolini. We first developed the idea of this interdisciplinary project in the equally monastic and inspiring environment of the RSCAS’ Convento, where we both served as professors for several years. Stefano’s unfailing support for the EU Competition Law in Legal and Historical Perspective (EULAH) project, which resulted from this idea, has allowed us to host two workshops to discuss preliminary drafts of these chapters and to prepare this book for publication. Special thanks also go to our co-authors. Reliably, they endured our ways of pressing for ever closer forms of cooperation. Their spirit, expertise, and commitment was decisive for the success of this enterprise, particularly given that circumstances made this cooperation far from easy. During the course of this project, a number of our participants changed their academic base and living quarters, in some cases several times. We the editors were by no means spared this fate of the mobile scholar (and the usual redemption for a stint as EUI professor); we started off in Florence and now work and live in Mannheim and Maastricht/Aachen respectively. Other tandem pairs experienced moves in the order of Oxford to Copenhagen, from Brussels to Berlin, or from Paris to London (among others). Despite all this movement, collaboration within and between the tandems functioned surprisingly well. Moreover, we would like to thank Eric Bussière (University ParisSorbonne), Sibylle Hambloch (Siegen University), Antoine Vauchez (University Paris-Sorbonne), Stephen Wilks (University of Exeter), and Wolfgang Wurmnest (Max Planck Institute for Comparative and International Private Law, Hamburg), each of whom acted as discussants during our second workshop. Special thanks go to Mia Saugman for her administrative support at the EUI and to Mel Marquis for his enormous help in polishing the various contributions to the book. Working with Natasha Flemming at Oxford University Press was a real pleasure. In Mannheim, we would like to thank Andreas Rief and Max Göhring for editorial support, and in Maastricht the colleagues from the Politics and Culture in Europe research group and Anja Servais for secretarial support. Kiran Klaus Patel and Heike Schweitzer Maastricht and Mannheim November 2012

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Contents List of Abbreviations List of Contributors Introduction Kiran Klaus Patel and Heike Schweitzer 1. The Evolution of the Law on Articles 85 and 86 EEC [Articles 101 and 102 TFEU]: Ordoliberalism and its Keynesian Challenge

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Sigfrido M. Ramírez Pérez and Sebastian van de Scheur 2. The Drafting and the Role of Regulation 17: A Hard-Fought Compromise

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Lorenzo Federico Pace and Katja Seidel 3. National Traditions of Competition Law: A Belated Europeanization through Convergence?

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Adrian Kuenzler and Laurent Warlouzet 4. American Influences on EEC Competition Law: Two Paths, How Much Dependence?

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Brigitte Leucht and Mel Marquis 5. Competition Law and Industrial Policy: Conflict, Adaptation, and Complementarity

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Thorsten Käseberg and Arthe Van Laer 6. Towards a Concept of a Workable European Competition Law: Revisiting the Formative Period

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Ernst-Joachim Mestmäcker 7. EU Competition Law in Historical Context: Continuity and Change

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Heike Schweitzer and Kiran Klaus Patel Index

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List of Abbreviations ACDP

Archiv für Christlich-Demokratische Politik (Archive for Christian-Democratic Policy) ACOM Archives of the European Commission in Brussels AEI Archive of European Integration BDI Bundesverband der Deutschen Industrie (Federation of German Industry) BGH Bundesgerichtshof (German Federal Court of Justice) BGHZ Entscheidungen des Bundesgerichtshofs in Zivilsachen (Decisions of the German Federal Court of Justice in Civil Matters) BRITE Basic Research in Industrial Technologies for Europe BT-Drucksache Bundestagsdrucksache (German Parliament printed paper) CAP Common Agricultural Policy CHEFF Comité pour l’Histoire Economique et Financière de la France (Committee for the Economical and Financial History of France) CMLR Common Market Law Review COM Communication from the Commission COMETT Community Programme for Education and Training in Technology DC District of Columbia DG Directorate-General DG III Directorate-General for Enterprise and Industry DG IV Directorate-General for Competition DG XII Directorate-General for Science, Research and Development DG XIII Directorate-General for Telecommunications, Information Market and Exploitation of Research DGB Deutscher Gewerkschaftsbund (German Trade Union) DGFT Director General of Fair Trading Division D Division on State Aid DOJ Department of Justice EC European Communities ECJ European Court of Justice ECMR European Community Merger Regulation ECR European Court Reports ECSC European Coal and Steel Community

x EEC ENI EP EPA ESPRIT EU EUI EURAM EURATOM FCO FIDE FTC GATT GREThA GWB HAEC IMC IMF IRI ISA ITT Task Force MEP MLR MMC NARA NCA NJW NYU OECD OEEC OFT OJ

List of Abbreviations European Economic Community Ente Nazionale Idrocarburi European Parliament European Productivity Agency European Strategic Programme for Research and Development in Information Technology European Union European University Institute European Research in Advanced Materials European Atomic Energy Community German Federal Cartel Office Fédération internationale pour le droit européen Federal Trade Commission General Agreement on Tariffs and Trade Groupe de Recherche en Économie Théorique et Appliquée (Research Unit in theoretical and applied economics) Gesetz gegen Wettbewerbsbeschränkungen (German Act Against Restraints on Competition) Historical Archives of the European Communities Internal Market Committee International Monetary Fund Instituto per la Ricostruzione Industriale (Institute for Industrial Reconstruction) International Studies Association Task Force on Information Technologies Elected member of the European Parliament Master Location Register Monopolies and Mergers Commission National Archives and Records Administration National Competition Authority Neue Deutsche Wochenzeitschrift (New German Weekly Journal) New York University Organisation for Economic Cooperation and Development Organisation for European Economic Cooperation Office of Fair Trading Official Journal of the European Union

List of Abbreviations OPOCE R&D RACE RGBl. RGZ RIW RPC SABAM SEC SJD SME SPD SPRINT TFEU UNICE USEC USSR WuW

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Office des Publications Officielles des Communautés Européenne (Office for Official Publications of the European Communities) research and development Research and Development in Advanced Communications in Europe Reichsgesetzblatt (German Imperial Law Gazette) Entscheidungen des Reichsgerichts in Zivilsachen (Decisions of the German Imperial Court in Civil Matters) Recht der internationalen Wirtschaft (Law of International Economics) Restrictive Practices Court Belgische Vereniging van Auteurs, Componisten en Uitgevers Commission Staff Working Document Doctor of Juridical Science Small and Medium Enterprises Sozialdemokratische Partei Deutschlands (Social Democratic Party of Germany) Software Platform for Integration of Engineering and Things Treaty on the Functioning of the European Union Union of Industrial and Employers’ Confederation of Europe US Mission to the European Communities Union of Soviet Socialist Republics Wirtschaft und Wettbewerb (Economy and Competition)

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List of Contributors Thorsten Käseberg, a lawyer and economist, is working in the German Economics Ministry’s policy planning unit. He is also an official of the European Commission (on leave), where he served as a merger case-handler in DG COMP. He has also served as a lecturer at Humboldt University Berlin and published in particular on economic and regulatory issues, including the book Intellectual Property, Antitrust and Cumulative Innovation in the EU and the US (Oxford: Hart Publishing, 2012). Adrian Kuenzler is Branco Weiss Fellow and member of Society in Science at Yale Law School. His research focuses on behavioural and institutional law and economics, intellectual property, antitrust and financial market regulation. His publications include Effizienz oder Wettbewerbsfreiheit? Zur Frage nach Aufgaben des Rechts gegen private Wettbewerbsbeschränkungen (Tübingen: Siebeck, 2008), for which he won the Issekutz Prize and the Empiris Award. Brigitte Leucht is a postdoctoral fellow at the Saxo Institute at the University of Copenhagen. She previously held a postdoctoral fellowship at the University of Oxford and has taught at a number of institutions including the London School of Economics, the University of Westminster, and the Graduate Institute for International and Development Studies. Publications include The History of the European Union: Origins of a Trans- and Supranational Polity, 1950–72 (London: Routledge, 2009, edited with Wolfram Kaiser and Morten Rasmussen). Mel Marquis is Co-Director of the EU Competition Law and Policy Workshop at the European University Institute (EUI) in Florence. He is Part-time Professor of Law at the EUI, Professore a contratto at the University of Verona, and Visiting Professor at LUMSA in Rome. He has worked as a licensed lawyer in the United States and in Belgium. His most recent publications include ‘Hell Freezes Over: A Climate Change for the Assessment of Exclusionary Conduct under Article 102 TFEU’, in the Journal of European Competition Law and Practice (with Ekaterina Rousseva; article nominated for the Concurrences 2012 ‘Best Antitrust Writing’ Award). Ernst-Joachim Mestmäcker has served as a Professor of Civil Law, Commercial Law and Trade Regulation at the University of Saarbrücken (1959–63), the University of Münster (1963–1969), and the University of Bielefeld (1969–78). Since 1978, he has served as Director of the Max-Planck-Institute for Foreign and International Private Law in Hamburg (Emeritus since 1994). His many publications include: Europäisches Wettbewerbsrecht 5th edn (Munich: Beck, 2012, with Heike Schweitzer). Lorenzo Federico Pace is Professor of EU Law at the Università del Molise and the Università europea di Roma, as well as a member of the Bar of Rome, Italy. He has published extensively on European Union law; his publications include European Antitrust Law: Prohibitions, Merger Control and Procedures (Cheltenham: Edward

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Elgar, 2007) and edited European Competition Law: The Impact of the Commission’s Guidance on Article 102 (Edward Elgar Publishing, 2011). Kiran Klaus Patel serves as Professor of European and Global History in Maastricht, after having held a professorship at the European University Institute in Florence, Italy, and an assistant professorship at Humboldt University in Berlin. His most recent publications include Europeanization in the Twentieth Century: Historical Approaches (New York: Palgrave, 2010, edited with Martin Conway) and edited The Cultural Politics of Europe: European Capitals of Culture and European Union since the 1980s (Houndmills: Routledge, 2013). Sigfrido M. Ramírez Pérez is research fellow of the Permanent Group for the study of the automobile industry and its employees (Ecole Normale Supérieure Cachan, France) and of the Center for the Study of Contemporary European History at the Université Catholique de Louvain-la-Neuve. His most recent publications include Alan S. Milward and a Century of European Change (Houndmills: Routledge, 2012, edited with Fernando Guirao and Frances M. B. Lynch). He is currently collaborating in a project on the official history of the European Commission (1973–86), among other projects. Heike Schweitzer is Professor of Private Law, European Economic Law, and Competition Law in Mannheim, Germany, after having held the chair for European Competition Law at the European University Institute in Florence, Italy. Main publications include: Europäisches Wettbewerbsrecht, 5th edn (Munich: Beck, 2012, with Ernst-Joachim Mestmäcker); Wettbewerb im Gesundheitswesen, Gutachten B zum 69. Deutschen Juristentag (Munich: Beck, 2012, with Ulrich Becker). Katja Seidel holds a PhD in History from the University of Portsmouth. Following a two-year stint as a postdoctoral researcher at the German Historical Institute in Paris, she is a Lecturer in History at the University of Westminster. Recent publications include: The Process of Politics in Europe: The Rise of European Elites and Supranational Institutions (London: IB Tauris, 2010); Europeanisation in the 20th Century: The Historical Lens (Brussels: Peter Lang, 2012, edited with Matthieu Osmond et al.). Sebastian van de Scheur studied European law at Maastricht University and is about to defend his PhD thesis in competition law at the European University Institute in Florence. He is admitted to the Bar in the Netherlands and works as a lawyer (‘advocaat’) at De Brauw Blackstone Westbroek in Amsterdam. Arthe Van Laer is a lecturer in the History Department at the University of Louvain-laNeuve and in the Faculty of Economics, Social Sciences, and Business Administration at the University of Namur, as well as a teacher at the college SC of Charleroi. Her recent work includes the publication of her PhD thesis Vers une politique industrielle commune. Les actions de la Commission européenne dans les secteurs de l’informatique et des télécommunications, 1965–1984, and the participation in an international research project on the history of the European Commission in the period from 1973–86.

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Laurent Warlouzet is presently a Marie Curie postdoctoral researcher at the London School of Economics in 2012–14. He also serves as senior lecturer at the University of Artois (Arras, France) and has been a Jean Monnet fellow at the European University Institute in Florence. His publications include Le choix de la CEE par la France: L’Europe économique en débat de Mendès France à de Gaulle, 1955–1969 (Paris: Comité pour l’histoire economique et financière de la France, 2011) and Quelle(s) Europe(s)? Nouvelles approches en histoire de l’intégration européenne (Brussels: Peter Lang, 2006).

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Introduction Kiran Klaus Patel and Heike Schweitzer

From a legal perspective, competition law has been at the centre of EU law and of European integration for the past fifty years. Together with the fundamental freedoms, it has formed the core of the common-market project as the most successful part of European integration. EU competition law and its enforcement are also often seen as excellent examples of supranational law and governance. Articles 85 and 86 EEC (now Articles 101 and 102 TFEU) were among the first provisions of the Treaty of Rome to be held to have direct effect in the member states. In 1962, Regulation 17 provided the European Commission with direct enforcement powers, and with the exclusive competence to grant exemptions under Article 85(3) EEC (now Article 101(3) TFEU). As specified in Regulation 17 (superseded four decades later by Regulation 1/2003), the Commission had the power to issue decisions directly binding upon undertakings. Furthermore, within the framework of Article 90(3) EEC (now Article 106(3) TFEU), the Commission was empowered to adopt decisions directly binding upon member states. Based on these features, it is often argued, competition law has fundamentally shaped the path of European integration: it has helped to open up national markets and, during the 1980s and 1990s, to liberalize large sectors of the economy. This structural force of competition rules—in part due to the specific institutional characteristics of EU competition law enforcement and the doctrine of supremacy of Union law vis-à-vis national laws—distinguishes EU competition law from competition policies in other parts of the world, including the United States. Finally, a competition law ‘theory’ or ‘philosophy’ evolved which was widely accepted for a long time, despite deep differences in national legal traditions. According to this theory, competition law was to be seen in close connection with a fundamental decision in favour of a free market economy. It was to provide a legal framework for the operation of such a system, namely in the form of clear rules of conduct for market actors. Such a system was also expected to be in the best interest of consumers and to serve as a source of

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prosperity and wealth. Finally, it was thought to provide legitimacy to the European project, as it was based on the protection of economic freedoms and the rule of law. Against this backdrop, it is often seen as the core of a genuinely Western European competition law tradition, distinct from US antitrust law; a true ‘European model’ of competition law. This account of the normative foundations of EU competition law has repeatedly been the subject of intense discussion, and it has recently become so again. Over the years, the ‘prioritization’ of the protection of undistorted competition over selective interventions to promote various policy goals has been an issue—in particular where public measures related to state monopolies. The Treaty authors included specific provisions tailored for such scenarios; namely, Article 37 EEC (now Article 37 TFEU) and the above-mentioned Article 90 EEC. In recent years, the seemingly established normative foundations of EU competition law have been called into question by a welfare theoretical approach (the so-called ‘more economic approach’). According to this interpretation, welfare maximization should be accepted as the only (or superior) goal of competition policy. Interventions into the competitive process should be regarded as justified where they can be shown to maximize welfare overall. Both lines of debate stand for visions of European integration that fundamentally differ from the model to which many competition lawyers have traditionally been committed: a model of integration by law is replaced by a model of integration driven by political agendas or by an overall welfare goal. Among lawyers, these debates surrounding the normative foundations of competition law have raised an acute interest in the history of competition law. Has the European ‘philosophy’ as sketched above indeed been so widely recognized from the start? To what extent has this been the due to ‘Ordoliberal’ influence?1 Should Europe stick to its original model? And as between US antitrust and EU competition law, is there a superior model? Competition law is an established field of legal research in European Union law. Together with internal market law, it has been at the core of substantive EU law for a long time, whilst other EU lawyers have focused on the institutional side of EU law. Over time, and with the growth of integration, EU law has diversified. Simultaneously, competition law has turned into a highly specialized area of EU law.2 Historians, in contrast, have been quite reluctant to deal with the developments leading to today’s EU competition law. Until recently, this backbone of the 1 For a reliable characterization of Ordoliberalism by an outsider, see Michel Foucault, Die Geburt der Biopolitik, Geschichte der Gouvernementalität 2, (Frankfurt am Main: Suhrkamp Verlag, 2004). 2 See, eg, Michael Stolleis, Geschichte des öffentlichen Rechts in Deutschland, vol. 4 (Munich: Beck, 2012), 609–29.

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Common Market has had next to no impact on their accounts of European integration. Between lawyers and historians, there seems to be a divide in the account of the early phase of European integration, similar to the gap that Joseph Weiler has identified between lawyers and political scientists: Whereas lawyers have characterized the foundational period of Community law as an ‘heroic epoch of constitution-building in Europe’,3 with competition law at the core of a dynamic and forceful supranationalism,4 historians have focused on the politics of integration. Their work has mainly concentrated on the tough and protracted bargaining processes between the member states and European institutions, and many of them have stressed that these processes did not lead to the creation of a supranational order, but to that of a hybrid, sui generis political entity.5 Such views are quite similar to those of political scientists, who tend to interpret the period as an ‘era of crumbling supranationalism’.6 In addition, beyond competition, law has remained almost invisible in most accounts of European integration by historians, at least until recently. This can partly be explained by a lack of access to archival sources—as a defining ingredient of the work of EU historians. The ECJ is notorious for not having an official archive, and for turning it into a ‘virtue’ insofar as it has facilitated discreet internal discussions and significant anonymity.7 Many other materials—for instance, those of the Directorate General (DG) IV, in charge of competition at the European Commission—have also become accessible only recently, since most European countries, as well as the EU institutions, have a thirty-year rule by which internal documents cannot during that period be accessed. For this reason, EU history in general is ‘young’ in comparison to EU law research.8 Another explanation for the benign neglect of competition issues is the training many EU historians have received, which is strongly 3 Quote in Joseph H. H. Weiler, The Constitution of Europe: ‘Do the New Clothes have an Emperor?’ and other Essays on European Integration (Cambridge: Cambridge University Press, 1999), 38. 4 Christian Joerges, ‘The Law in the Process of Constitutionalizing Europe’, EUI Working Paper Law No. 2002/4, 6–10. 5 See, eg, N. Piers Ludlow, The European Community and the Crises of the 1960s: Negotiating the Gaullist Challenge (London: Routledge, 2006). 6 Quote in Weiler, The Constitution of Europe, 38; for the work of political scientists, see, eg, Hubert Buch-Hansen and Angela Wigger, The Politics of European Competition Regulation: A Critical Political Economy Perspective (London: Routledge, 2011); Michelle Cini and Lee McGowan, Competition Policy in the European Union, 2nd edn (Basingstoke: Palgrave, 2009); Lee McGowan, ‘Theorising European Integration: Revisiting Neofunctionalism and Testing its Suitability for Explaining the Development of EC Competition Policy?’, in European Integration Online Papers 11 (2007). 7 As a summary of the mentalité driving this approach, see Peter L. Lindseth, ‘The Critical Promise of the New History of European Law’, in Contemporary European History 21 (2012), 468–70. 8 As overviews on the historiography, see, eg, Wolfram Kaiser and Antonio Varsori (eds), European Union History: Themes and Debates (Basingstoke: Palgrave, 2010); Kiran Klaus Patel, ‘Europäische Integrationsgeschichte auf dem Weg zur doppelten Neuorientierung: Ein Forschungsbericht’, in Archiv für Sozialgeschichte 50 (2010), 595–642.

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influenced by diplomatic history and hence has little proclivity for legal concerns. Instead, the top level of politicians and their decisions have been the primary focus of research for a long time. The concrete content of integration was often treated rather superficially, thus replicating the position of political elites who saw economic integration and legal instruments primarily as means for political ends. While this trend is most obvious in historians’ textbooks and surveys of European integration history, it has also affected the more specialized literature.9 This picture has only changed over the past five years, during which law has become one of the most versatile and exciting fields of European history research. Many of the most recent studies embark on an interdisciplinary dialogue and test the assumptions and models of lawyers, political scientists, and others against the evidence of primary archival sources which have finally become available. Some studies confirm existing interpretations, while others challenge conventional wisdoms; for instance, by viewing the ‘constitutional’ interpretation of Weiler, Eric Stein, and others10 not as an adequate interpretation of a historical fact but rather as a legitimizing strategy promoted by the ECJ and other European institutions. In a similar vein, some scholars have challenged ideas about the autonomy and self-executing quality of law and stress the bargaining processes with which jurists have managed to empower themselves.11 It would go too far to call this more than a convergence of sorts. Still, dialogue between the disciplines of law and history has now become an exciting prospect and this is exactly what this book is about. Its basic idea is to study the evolution of EU competition law and policy, both in legal and historical perspective. At the crossroads of the two disciplines’ vantage points, we raise the following questions: How can a review of the early political battles, negotiations, and decisions enrich the understanding of modern EU competition law, and how can a legal focus on court decisions impact on historical accounts of European competition policy? Moreover, how can both disciplines profit from a structured dialogue, and how can this change our interpretation of European integration beyond the confines of a highly specialized literature or discipline?

9 See as surveys, eg, Elisabeth Du Réau, L’idée d’Europe au XXe siècle: Des mythes aux réalités (Paris: Editions complexe, 2008); Gabriele Clemens, Alexander Reinfeldt and Gerhard Wille, Geschichte der europäischen Integration. Ein Lehrbuch (Paderborn: Schöningh, 2008), or, for instance, Alan S. Milward, The European Rescue of the Nation State, 2nd edn (London: Routledge, 2000). 10 See Weiler, The Constitution of Europe; Eric Stein, ‘Lawyers, Judges, and the Making of a Transnational Constitution’, in American Journal of International Law 75 (1981), 1–27. 11 See, as a recent summary, the special issues introduced by Bill Davies and Morten Rasmussen, ‘Towards a New History of European Law’, in Contemporary European History 21 (2012), 305–18; and by Laurent Warlouzet, ‘Introduction’, in Histoire, Economie & Société 27 (2008), 3–6.

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Chronology We mainly focus on the period from the 1950s to the mid-1980s. This period of investigation comprises both the ‘foundational phase’ from the 1950s through the early 1970s—the period that is often seen as representing the ‘constitutionalization’ of competition law—and the years from the 1970s to the 1980s, a period of consolidation and increased application of competition rules to state monopolies. For the earlier part of this phase, the 1957 Treaty of Rome stands out, since it laid the formal basis for today’s EU competition policy. It is therefore the logical starting-point of our analysis. But the dynamics unleashed in the EEC framework cannot be studied without taking into account the negotiations leading up to the signature of the Treaty, as well as the formative experience with competition law in the European Community of Coal and Steel (ECSC) since 1952. Already the ECSC included a rather wide range of antitrust provisions. Its stipulations were a novelty for an international organization in Western Europe, and while the ECSC remained largely a paper tiger for lack of a strong policy implementing these provisions,12 the Coal and Steel experience became a central point of reference during the Treaty of Rome negotiations. The same holds true for the experience with national competition policies—particularly those of the EEC member states themselves during the post-war years, but also the lessons drawn from the interwar years and sometimes even from antitrust policies of the late 19th century. Furthermore, the development of EEC competition law also drew from experiences beyond the confines of the member states. Particularly the United States, with its Sherman Act of 1890, served as an important point of reference and delimitation. Taking all these considerations together, the starting point of our analysis clearly lies in the 1950s with the Treaty of Rome, but we do not stick to it too rigidly. In analysing this ‘foundational’ phase in the history of Community competition law and policy, a number of more specific questions will be raised. What were the debates that led up to what has been identified as a particularly European approach to competition law? What was the role of the ECJ, and what did the Commission and other actors contribute to this development? Were these various actors united by a joint idea, or what kind of conflicts

12 See, eg, Tobias Witschke, Gefahr für den Wettbewerb? Die Fusionskontrolle der Europäischen Gemeinschaft für Kohle und Stahl und die ‘Rekonzentration’ der Ruhrstahlindustrie, 1950–1963 (Berlin: Akademie-Verlag, 2009); Raymond Poidevin and Dirk Spierenburg, The History of the High Authority of the European Coal and Steel Community: Supranationality in Operation (London: Weidenfeld & Nicolson, 1993).

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shaped the evolution of European competition law? Was there indeed an ‘Ordoliberal’ influence, or what were the driving forces behind the evolution of the competition law and policy of the Community? The period that we study ends in the mid-1980s. At the time, the older consensus on what the eminent political scientist John Ruggie has called an ‘embedded liberalism’ slowly ended.13 The new doctrine focused more on the promotion of free trade, free-market principles, and the privatization of public enterprises.14 Simultaneously, a more utilitarian approach towards competition law began to gain traction, which seemed to fit well with the Commission’s increasing growth and competitiveness rhetorics. This perspective also favoured an increasing turn towards welfare economics in the field of competition law—a shift promoted and welcomed by American lawyers in reaction to the global relevance that competition law in Europe had meanwhile gained, accompanied by increasing friction between Community competition law and US antitrust law. Our project does not explicitly deal with this shift towards a ‘more economic approach’. It is exactly the end of our period under study that marks the start of the debates leading up to that shift. The reasons for this choice are manifold. First of all, sticking to the period until the mid-1980s keeps our project manageable— and it keeps historians on board; most of whom are reluctant to speak about the most recent past, for which they lack appropriate sources. The time frame we have adopted also allows us to treat the foundational and consolidation period of Community competition law in its own right, and not only against the backdrop of the more recent debates. At the same time, our analysis does provide a useful background to think about the ‘more economic approach’ in context: some of the reasons referred to by the Commission in order to justify the shift in the enforcement regime are touched upon in the contributions to this volume, namely the backlog created by the notification regime. At the same time, an overall well-functioning framework of competition law doctrine had evolved when the debates about a ‘more economic approach’ started. While it was certainly in need of clarification, refinement and reform in some respects, the urgency of the call for a European ‘antitrust revolution’ arguably had other reasons: it was partly due to the specificity of the European enforcement regime 13 John Ruggie, ‘International Regimes, Transactions, and Change: Embedded Liberalism in the Postwar Economic Order’, in International Organization 47 (1982), 379–416; on this period more broadly, see Tony Judt, Postwar: A History of Europe since 1945 (New York: Penguin, 2005), 535–58. 14 See, eg, John L. Campbell and Ove K. Pedersen, The Rise of Neoliberalism and Institutional Analysis (Princeton: Princeton University Press, 2001); Marion Fourcade-Gourinchas and Sarah L. Babb, ‘The Rebirth of the Liberal Creed: Paths to Neoliberalism in Four Countries’, in American Journal of Sociology 108 (2002), 533–79; François Denord, ‘Néo-liberalisme et ‘économie sociale de marché’: les origines intellectuelles de la politique européenne de la concurrence (1930–1950)’, in Histoire, Economie & Société 27 (2008), 23–33.

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(and the backlog it entailed), and partly due to an ideological shift in DG Competition and to changes in the wider political landscape.15

State of the Art There is already a substantial body of literature on the foundational and the consolidation period of Community competition law. However, our ambition is to provide a comprehensive account of the historical foundations of this regime from the 1950s to the 1980s. Until now, no initiative of this kind has been undertaken. Any discussion of the state of the art probably has to start with David J. Gerber’s seminal book Law and Competition in Twentieth Century Europe, published in 1998. Gerber places particular emphasis on the early intellectual roots of the EU competition rules and the Ordoliberal influences. Obviously, Gerber’s book does not reflect the more recent research, and it downplays the more specific forces and actors that drove the development of European competition law in the early years. Given that Gerber’s account of the issues covered in this book amounts only to some fifty pages, this does not come as a surprise.16 Some studies have added nuances to his argument while substantiating his claim on Ordoliberalism,17 but this interpretation has also attracted criticism. For instance, Hubert Buch-Hansen and Angela Wigger, among others, have stressed the limits of Ordoliberalism’s historical role in this context. Some member states, such as France, as well as transnational business elites, they argue, resisted this approach to competition. According to their account, the ‘content, form and scope of the European competition regime’ was also shaped by a ‘national mercantilist’ discourse on regulation.18 15 For some views on these issues, see, eg, Buch Hansen and Wigger, The Politics of European Competition Regulation; Laurent Warlouzet, ‘The Rise of a European Competition Policy, 1950–1991: A Cross-Disciplinary Survey of a Contested Policy Sphere’, in EUI Working Papers, RSCAS 2010/80; Bastiaan van Apeldoorn, Transnational Capitalism and the Struggle over European Integration (London: Routledge, 2002); Ernst-Joachim Mestmäcker, ‘The EC Commission’s Modernization of Competition Policy: A Challenge to the Community’s Constitution’, in European Business Organization Law Review 1 (2000), 401–44; Heike Schweitzer, ‘The Role of Consumer Welfare in EU Competition Law’, in Josef Drexl and Reto M. Hilty (eds), Technology and Competition: Contributions in Honour of Hanns Ullrich (Brussels: Larcier, 2009), 511–39. 16 David J. Gerber, Law and Competition in Twentieth Century Europe: Protecting Prometheus (Oxford: Clarendon Press, 1998). 17 See, eg, Lee McGowan, The Antitrust Revolution: Exploring the European Commission’s Cartel Policy (Cheltenham, Edward Elgar, 2010); Sybille Hambloch, Europäische Integration und Wettbewerbspolitik. Die Frühphase der EWG (Baden-Baden: Nomos, 2009). 18 Buch-Hansen and Wigger, The Politics of European Competition Regulation, 8; also see Hubert Buch-Hansen and Angela Wigger, ‘Revisiting 50 Years of Decision-Making: The Neoliberal Transformation of European Competition Policy’, in Review of International Political Economy 17 (2009), 20–44.

8

Introduction

Lawyers would in general not follow this claim as far as the substance of Article 85 and Article 86 EEC are concerned, although different aspects were clearly relevant in the state aid field. Rather, lawyers would typically emphasize the traditionally close interaction between competition and internal market goals established during the early phase of European competition law.19 They would also agree that, in the case law of the ECJ, this approach has been maintained ever since,20 while hotly debating the merits of this orientation.21 Recent claims that competition law has, from the start, mainly pursued an efficiency goal,22 has remained an outsider’s position. Other disciplines have focused on different aspects, including in particular the varied voices and forces that shaped the discourse during the early years. The new interest of historians can mainly be attributed to the opening of archives as well as to a broadening of the methodological basis and the research questions in integration historiography. While several book-length studies have concentrated on the inter-governmental and supranational negotiations leading to the competition policy of the ECSC and the EEC,23 others have studied the role of transnational experts, networks, and companies in the formulation of this policy, both before and after the Rome Treaty.24 Furthermore, there are

19 Wolf Sauter has gone so far as to claim that competition was a secondary goal vis-à-vis market integration—Wolf Sauter, Competition Law and Industrial Policy in the EU (Oxford: Oxford University Press, 1997). See also, eg, Pinar Akman and Hussein Kassim, ‘Myths and Myth Making in the Institutionalization and Interpretation of EU Action: The Case of EU Competition Policy’, in Journal of Common Market Studies 48 (2010), 111–32; Pinar Akman, ‘Searching for the Long-Lost Soul of Article 82 EC’, in Oxford Journal of Legal Studies 29 (2009), 267–303. 20 See, eg, Case C-468/06 bis C-478/06, Sot. Lélos kai Sia [2008] ECR I-7139, para. 65; and Cases C-403/08 and C-429/08, Murphy, judgment of the ECJ of 4 October 2011, not yet reported, para. 139. 21 For a theoretical ground of the linkage between competition law and the internal market, see Ernst-Joachim Mestmäcker, ‘Offene Märkte im System unverfälschten Wettbewerbs in der Europäischen Wirtschaftsgemeinschaft’, in Helmut Coing, Heinrich Kronstein and Ernst-Joachim Mestmäcker (eds), Wirtschaftsordnung und Rechtsordnung—Festschrift zum 70. Geburtstag von Franz Böhm am 16. Februar 1965 (Karlsruhe: C. F. Müller, 1965), 345–91. 22 Akman, ‘Searching for the Long-Lost Soul of Article 82 EC’. 23 See, eg, Hambloch, Europäische Integration und Wettbewerbspolitik; Frank Pitzer, Interessen im Wettbewerb. Grundlagen und frühe Entwicklung der europäischen Wettbewerbspolitik 1955–1966 (Stuttgart: Steiner Verlag, 2009); Tobias Witschke, Gefahr für den Wettbewerb? 24 See, eg, Brigitte Leucht, ‘Transatlantic Policy Networks and the Creation of the first European Anti-trust Law: Mediating between American Anti-trust and German Ordo-liberalism’, in Wolfram Kaiser, Brigitte Leucht, and Morten Rasmussen (eds), The History of European Union: Origins of a Trans- and Supranational Polity, 1950–1972 (London: Routledge, 2009), 56–73; or, as a political scientist’s study deeply informed by history, Antoine Vauchez, L’en-droit de l’Europe. Champ juridique européen et institution d’un ordre politique transnational, unpublished habilitation thesis, Paris 2010; Sigfrido Ramirez, ‘Anti-Trust or Anti-US? L’industrie automobile et les origines de la politique de la concurrence de la CEE’, in Eric Bussière, Michel Dumoulin, and Sylvain Schirmann (eds), Europe organisée, Europe du libre échange? Fin XIX siècle—Années 1960 (Brussels: Peter Lang, 2006), 203–28.

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some first prosopographical studies on the personnel in charge of European competition policy at the EEC level.25 The small but powerful literature of political scientists is mainly interested in the dynamics of negotiations that have shaped EU competition policy and it has added many new insights by applying a wide range of theories from the toolbox at its disposal to study European integration.26 A couple of economists have also dealt with the subject, often contextualizing or even comparing EU practices with those of other jurisdictions.27 Taken together, the multidisciplinary research on EU competition law and policy has emerged quite impressively over the past years and decades. However, the existing literature has an important drawback: There is no consensus on the formative influences that drove the emergence of the European competition regime or on its outcome. So far, the different pieces of the jigsaw have not been pieced together. Our book is an attempt to do just this.

Argument At the core of our work, we address four issues that are situated both at an empirical and a methodological level. Firstly, the book revisits the contested influence of German Ordoliberalism in the history of EU competition law. Some of the practitioners involved in European integration as well as many scholars have stressed the role of this ideational source of European competition law, as well as the networks feeding it.28 In particular, Gerber’s Law and Competition in the Twentieth Century has to be mentioned again in this respect, but so must the studies that have challenged its interpretation. We claim that 25 See, eg, Katja Seidel, The Process of Politics in Europe: The Rise of European Elites and Supranational Institutions (London: Tauris, 2010); Eric Bussière, ‘Competition’, in Michel Dumoulin (ed.), The European Commission 1958–1972: History and Memories (Office for the Official Publications of the European Communities, 2007), 303–16. 26 Next to Buch-Hansen and Wigger, The Politics of European Competition Regulation, see, eg, Tim Büthe, ‘The Politics of Competition and Institutional Change in European Union: The First Fifty Years’, in Sophie Meunier and Kathleen R. McNamara (eds), Making History: European Experience and Institutional Change at Fifty (Oxford: Oxford University Press, 2007), 175–94; Lee McGowan, ‘Theorising European Integration’; Stephen Wilks and Ian Bartle, ‘The Unanticipated Consequences of Creating Independent Competition Agencies’, in West European Politics 25 (2002), 148–72; Simon Bulmer, ‘Institutions and Policy Change in the European Communities: the Case of Merger Control’, in Public Administration 72 (1994), 423–44. 27 See, eg, Roger Clarke and Eleanor J. Morgan (eds), New Developments in UK and EU Competition Policy (Cheltenham: Edward Elgar, 2006); Saul Estrin and Peter Holmes (eds), Competition and Economic Integration in Europe (Cheltenham: Edward Elgar, 1998). 28 As a practitioner with highly influential views, see, eg, Hans von der Groeben, ‘Policy on Competition in the EEC’, EEC Bulletin (Supplement), 7/8 (July/August 1961); Hans von der Groeben, Aufbaujahre der Europäischen Gemeinschaft: Das Ringen um den Gemeinsamen Markt und die Politische Union (1958–1966) (Baden-Baden: Nomos, 1982).

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Introduction

through our interdisciplinary setup, we manage to come up with an assessment that sorts out some of the juxtapositions and contradictions of the existing literature, thus lifting the argument to a higher level. In a nutshell, we argue that Ordoliberal ideas have indeed influenced the evolution of EU competition law, with particular thrust during the ‘foundational period’ following the entry into force of the Treaties of Rome. Still, there was no simple transposition of Ordoliberalism from the German setting to the Community. Rather, important European actors felt that only specific features of Ordoliberal thinking, like the focus on individual rights and the rule of law, provided a good fit with the structure and strengths of European law and institutions.29 As the rule of law tended to translate into power for the Commission, these structural features were also recognized by those actors who were not committed to Ordoliberal thinking. To be sure, positions within DG IV varied from the start, and remained so over time, with shifting balances of power and influence. The ECJ ensured the stability of doctrine over time—a doctrine that shared some important starting points with Ordoliberal thinking, but simultaneously emphasized the goals specific to EU law— including, most strikingly, the commitment to a common market. Secondly, the book addresses the autonomy of law vis-à-vis other forces shaping European integration. Lawyers and historians tend to have different views on this, as mentioned before, and each can therefore serve as a good corrective for the other. In fact, we argue that despite all the twists in its trajectory, European competition law remained very stable across our period of study. Early on, the ECJ established its primacy over national laws. Moreover, despite the generality of their wording, Articles 85 and 86 EEC were interpreted to be directly applicable law, and not just policy guidelines to be considered in the design of Community policies. Competition law could thus emerge as a particularly ‘supranational’ policy—more supranational than, for example, the Common Agricultural Policy, another Community policy with its roots in the Treaties of Rome whose history emerged from the 1960s onwards. Due to its commitment to the rule of law, European competition law was never simply functionally driven, but contributed to the ‘constitutional’ character of the European legal order. In fact, claiming such a ‘constitutional quality’ was a conscious strategy by the ECJ, which was then negotiated in a wider realm.30 The great success of the European regime is in part explained by the 29 Christian Joerges, ‘The Law in the Process of Constitutionalizing Europe’, EUI Working Paper Law No. 2002/4, 10. 30 For this argument specifically, see Morten Rasmussen, ‘Establishing a Constitutional Practice of European Law: The History of the Legal Service of the European Executive, 1952–65’, in Contemporary European History 21 (2012), 375–97; Lindseth, ‘The Critical Promise of the New History of European Law’.

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fact that the ECJ and others from among the legal elite managed to institutionalize their ideas.31 That said, DG IV as well as the wider community of representatives of member states, experts, or policy networks, have seen several intense debates on the direction competition law should take. Interestingly, despite the very different backgrounds of the Commission’s relevant staff, consensus on a forceful legal regime and public enforcement of competition law could ultimately be achieved. While the more Social Democrat imprint that European integration politics at large acquired during the 1970s led the Commission to take a somewhat more flexible stance towards crisis cartels for some time,32 the core of competition law doctrine remained untouched. Thirdly, this does not mean that competition law evolved smoothly over time. The different chapters of this book show the serious conflicts that underlie its evolution. From the outset, battles were fought between proponents of a competition policy driven by varying political agendas and welfare objectives and proponents of competition law meant to constrain not only the exercise of private power but also the space for political intervention into the market. The priorities of public competition law enforcement were continuously redefined over time and determined by political compromise. For a long time, it was the joint commitment to the creation of an internal market that provided a common focus for actors from different camps. Standing behind it were fundamentally different ideas about the role of the market and the role of public authority, about competition versus cooperation, and about a utilitarian justification of the European project versus a joint commitment to the creation of a civil society on the basis of strong supranational individual rights—a debate that today lies at the heart of the heated discussions about a ‘more economic approach’. While these three arguments are situated at an empirical level, we argue at a methodological level for a history of competition law and policy that needs to be firmly embedded in wider trends of European integration. Fourthly, therefore, we plea for a widening of the analytical and empirical focus. This entails several things. Any given period under analysis has to be seen against the backdrop of longer-term developments. Such a long-term perspective, for instance, demonstrates how high the stakes actually were during the years in which Community competition law emerged: competition legislation in Western Europe after 1945 marked a radical rupture with the interwar years and the Second World War, when cartels were still considered positive and stabilizing features of an economy. Embedding the research broadly also 31

Rasmussen, ‘Establishing a Constitutional Practice of European Law’. On this wider trend, see, eg, Antonio Varsori and Guia Migani (eds), Europe in the International Arena during the 1970s: Entering a Different World (Brussels: Lang, 2011). 32

12

Introduction

implies that the process of negotiating the legal competences regarding competition has frequently been part and parcel of wider deals between the member states and the emerging supranational institutions. An important example comes from the history of Regulation 17, which resulted from a package deal that also involved progress in the creation of the Common Agricultural Policy. In the negotiations, the German delegation went so far as to create a junctim between these two policy issues.33 Moreover, the shifting role of the relevant institutional actors cannot be disregarded, a point that emerges plainly, for instance, when the strong standing of the Hallstein Commission (1958–67) is compared with the reduced role of the Commission under Hallstein’s successor, Jean Rey (1967–70).34 Transatlantic influences, as well as the lack thereof, must be added to the picture, too, as well as the role of European actors beyond DG IV, the Commission more broadly, and the ECJ. Transnational networks, experts, the representatives of various member states and alternative organizations such as the OECD have all energized the field of European integration and therefore have to be factored in.35 Furthermore, the shifts of the macroeconomic environment in which the European Communities operated during the relevant time frame need to be taken into account.36

Interdisciplinarity To arrive at these and many other conclusions, we have opted for a particularly close form of collaboration between lawyers and historians. In fact, this book is the result of the first systematic interdisciplinary cooperation of lawyers and historians in EU studies. It brings together historians and lawyers in pairs in order to reassess the various aspects of the history of European competition law. In co-authored contributions, each of these teams has analysed a central question in the history of EU competition law and politics. Based on the latest

33 See, eg, Pitzer, Interessen im Wettbewerb, 396. On the wider context of the CAP negotiations, see Kiran Klaus Patel, Europäisierung wider Willen: Die Bundesrepublik Deutschland in der Agrarintegration der EWG (Munich: Oldenbourg, 2009), 192–227. 34 On the history of the Commission, see particularly Dumoulin, The European Commission, 1958–72. 35 On the role of transnational actors, see Kaiser, Leucht and Rasmussen, The History of European Union; on the wider framework of international organizations in Europe, see Kiran Klaus Patel, ‘Provincializing the European Communities: Cooperation and Integration in Europe in a Historical Perspective’, in Contemporary European History 22 (2013), forthcoming. 36 This, of course, has already shaped some of the earliest accounts of European competition law history; see Daniel G. Goyder, EEC Competition Law (Oxford: Clarendon Press, 1988).

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state of the art as well as on primary research, this has led us to new answers. In following this approach, we are aware of the challenges of interdisciplinary research, including the different methodologies and the divergent stance as to normative judgements in the two fields. In this light, our project has a thoroughly experimental character, and it explores the potentials and limits of such an interdisciplinary cooperation. How can both disciplines profit from a structured dialogue, and how can this change our interpretation of European integration beyond the confines of a specific literature or discipline? In this process, both sides have moved beyond the orthodoxies of their respective disciplines—and we as editors would like to thank our team members for their willingness to leave their comfort zones when embarking on this project. Maybe the most important difference between the two disciplines, as we learned during the project, is their stance on normative questions. While an explicit normative position plays a central role for lawyers—where the divide between academic research and legal practice is less firmly established than for historians (there is no world of practitioners for historians comparable to law, alas)—this is much less the case for historians. The lawyers on our team were willing to de-emphasize their normative concerns for an analytically driven scrutiny of the past. Simultaneously, their expertise in the nuances of the legal sphere was crucial for the project, as well as their insights into the practical consequences of laws, policy and court judgments. For their part, the historians were able to add a great deal regarding the politics undergirding the evolution of European competition law. Injecting the insights drawn from hitherto unused archival material has furthered our understanding of the role of the Commission and of the member states as well as of the wider historical context in which the concrete steps taken to advance the competition regime unfolded. Lawyers, by contrast, focus on administrative decisions or judgments and on ways to bring a larger set of decisions and judgments into a coherent line. In the legal community, battles fought fiercely at a given moment matter less over time as a consolidated case law emerges. In our project, both perspectives have been useful: while the historians have helped the lawyers to overcome the tendency to treat legal matters as ahistorical, the lawyers have pushed the historians not to get lost in sheer description of the past but rather to set their questions vis-à-vis a horizon of present-day concerns. Together, both disciplines have also been able to compensate for the scarcity of archival sources revealing the inner deliberations of the ECJ, and together, they have arrived at new interpretations. While, in this and other contexts, historians sometimes overplay conflicts between diverging visions of actors, lawyers focus more on the auto-dynamic and self-executing dimension of law, which makes one hesitant to overplay any personal or political

14

Introduction

opinions of actors in light of professional ethos and the force of law. Intense debates have thus challenged our often implicit assumptions, and have led us to an interpretation that balances and combines the various perspectives to a greater degree than in existing studies. To this end, not only the interdisciplinary but also the international composition of our team has enriched the project. In general, both law and history are among the academic disciplines which to this day are characterized by significant methodological nationalism and a certain nation-centredness of discussions.37 Our team was composed of scholars of very different backgrounds, and all of us have worked and lived for extended periods in host countries, often in more than one. This, together with the unique methods of cooperation employed, has helped to ameliorate some of the interpretative divides which characterize the state of the art. To answer our questions, all chapters combine the analysis of the historical evolution of competition policy, on the one hand, with the history of the material legal dimension, on the other. We start with two chapters on the evolution of the substantive and procedural law, and then go on to reflect upon the most important exogenous influences. We have given preference to readable thought-pieces with a broad perspective over encyclopaedic or exhaustive description. All chapters cover the whole period under study and each of them deals with its topic comprehensively. At the same time, each chapter is based on a wide range of archival historical sources, legal texts, and legal, economic, and historical literature. Other choices and other ways of organizing the book would have been possible. In the literature, some have argued that the Commission played an instrumental role in establishing the trajectory of European competition law and policy,38 and therefore a chapter focusing explicitly on institutions, or for instance on the role of non-state actors such as companies, law firms, or groups such as the European Roundtable of Industrialists would have been possible. Or, instead of an actor-centred focus, a chronological organization of the book could have been an option. Instead, we opted for a topical approach that better allowed us to weave various perspectives (eg, of different actors or different chronological layers) together while also forging a close dialogue between the various contributions. Some important topics were left aside. This is true, in particular, for merger control. This omission was deliber-

37 As one of the starting points in the debate about methodological nationalism, see Andreas Wimmer and Nina Glick Schiller, ‘Methodological Nationalism and Beyond: Nation-State Building, Migration and the Social Sciences’, in Global Networks 2 (2002), 331–4. 38 See, eg, Warlouzet, ‘The Rise of a European Competition Policy’; Cini and McGowan, Competition Policy in the European Union.

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ate and logical, however, as merger control only became a concrete dimension of European competition law after the end of our period of study.39

Contributions The first chapter, co-authored by Sigfrido M. Ramírez Pérez and Sebastian van de Scheur, scrutinizes the general direction of Community competition law in the period under discussion by highlighting the evolution of the law on Articles 85 and 86 EEC (Articles 101 and 102 TFEU). Compared to the current state of the legal and historical debate about the central objective of European competition policy, they manage to harmonize two strands of interpretation which have long confronted each other. Thanks to their dual focus both on DG IV of the Commission and on the ECJ, Ramírez Pérez and van de Scheur are able to identify a crucial split in the ideational orientation and practice of the two institutions: in DG IV, German Ordoliberalism played an important role but never fully dominated, as some in the literature have claimed. Instead, there was a competing, more ‘Keynesian’ conception of competition policy, and this alternative to Ordoliberalism became particularly influential during the 1970s. While the Commission’s stance on competition was thus characterized by internal conflicts and shifting orientations, the ECJ adopted a consistent and powerful doctrine that embedded the goal of market integration in the pursuit of effective competition. The next contribution, by Lorenzo Federico Pace and Katja Seidel, takes stock of the drafting history and the role of Regulation 17/62 in the evolution of Community competition law and policy. As with the first chapter, the authors here present a fresh argument that manages to reconcile rival interpretations. Pace and Seidel argue that while the text of Articles 85 and 86 show a substantial French influence, Regulation 17/62—and thus the procedural rules governing the implementation and public enforcement of substantive competition law—was more reflective of the German economic and legal tradition and understanding of competition. Simultaneously, they reveal that, despite some tensions, Regulation 17/62 was premised on the overall consensus to create a competition law culture in Europe. For this 39 For a summary of the discussion relating to the prolonged efforts, from the 1960s to the 1980s, to secure a merger regulation, see Laurent Warlouzet and Tobias Witschke, ‘The Difficult Path to an Economic Rule of Law: European Competition Policy’, in Contemporary European History 21 (2012), 437–55. See also Bruce Lyons, ‘An Economic Assessment of European Commission Merger Control: 1958–2007’, in Xavier Vives (ed.), Competition Policy in the EU: Fifty Years on from the Treaty of Rome (Oxford: Oxford University Press, 2009), 135–75; Simon Bulmer, ‘Institutions and Policy Change in the European Communities: The Case of Merger Control’, in Public Administration 72 (1994), 423–44.

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Introduction

reason, Article 85 was interpreted as a strict prohibition of agreements and concerted practices in restraint of competition—a prohibition unknown in most member states at that time. Moreover, the Regulation’s notification system turned into a sort of transmission belt, transferring the new prohibition to each of the member states’ competition laws. Taken together, these dynamics led to a revolutionary way of regulating relations between undertakings through previously little-used antitrust provisions. Adrian Kuenzler and Laurent Warlouzet then assess the influence of the national traditions of competition policy on the Community as well as the flows from the European level back to the national tier. They contend that the progressive strengthening of European competition policies in the post-war decades mainly resulted from a convergence of sorts, and is less due to a diffusion process emanating from Brussels or the sheer force of one specific national model, like German Ordoliberalism. Instead of seeing ‘Europeanization’ as a top-down operation or a bottom-up movement, they stress the parallel and entangled moves into the direction of a partially ‘Europeanized’ form of competition policy in Western Europe. At a normative level, Kuenzler and Warlouzet argue that, due to this confluence of diverging traditions, the history of European competition law was shaped by two very different approaches—a more public-interest centred approach on the one hand, and a more judicial approach on the other. While the first dominated in the period until the early 1970s, the second gained in importance thereafter. In the end, they both had a strong bearing on European competition law and reveal a valid, but largely unexplored and unexpected source of legitimacy for a categorical pair of opposites in competition law: rule-based versus case-based forms of reasoning. Complementing this focus on dynamics within the Community and the member states, Brigitte Leucht and Mel Marquis scrutinize American influences on European competition law and similarly walk the middle line in their interpretation, circumscribing the amount as well as the limits of transatlantic exchange. They contend that European actors did in fact draw on US antitrust ideas and that the history of European competition law was informed by a continuous transatlantic dialogue. DG IV officials and competition-policy experts formed part of a wider transatlantic landscape of intellectual exchange. Still, reference to the United States remained highly selective, and motivations undergirding this process of transatlantic exchange altered over time. In comparison to the Commission and its development of policy, the ECJ and its judgments often disregarded or (implicitly) opposed American ideas. Such resistance or indifference, it is argued, may lie in the fact that the ECJ was motivated by a quest for an autonomous, non-derivative understanding of competition law as part of an effort to express its constitutional mission of laying the building blocks for a collective European identity.

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Thorsten Käseberg and Arthe Van Laer assess, in their chapter, the relationship between the competition policy and industrial policy. They stress that the period under study has been characterized by many different patterns of interaction, but that at the end of the day, European competition policy-makers often kept the upper hand vis-à-vis attempts to adapt competition policy to national or European industrial policy objectives. Simultaneously, they have managed to limit and to shape the gestalt of national and European industrial policies much more than the other way around. The legal set-up of the respective policies, the relative institutional power of DG III (in charge of industrial policies) and DG IV, the prevalent economic paradigm, and the leadership qualities and personal networks of key actors are the main factors explaining the relationship between these two policies evolved since the 1950s. The next chapter stands out in comparison to the preceding ones in two respects. At a formal level, it only has a single author, Ernst-Joachim Mestmäcker, who has combined a remarkable scholarly career with the role of advisor to the Commission on competition issues since the early days of the Community. For these reasons, he is one of the principal actors of the early years of European competition law. At the level of content, Mestmäcker links together the various preceding chapters from the personal perspective of one who has lived through, and significantly influenced, this era. He thus addresses the central issues that the other papers also discuss, such as the tension between the idea of a community or union developing from a multinational international law treaty on the one hand, and the concept of an autonomous legal order on the other; the relationship between law and economics; and the relationship between competition policy and industrial policy, rounding off the volume with his concise analysis. The final chapter, penned by the editors of this book, will discuss recent reforms of EU competition law and present-day concerns in light of their historical foundations, thus tracing areas of continuity and change. As such— and since it explicitly adopts a normative position—it is quite different in nature from the other contributions to this volume. Debates on the ‘more economic approach’ of the last fifteen years or so have tended to emphasize the discontinuities. By contrast, a historical perspective reminds us of the achievements of fifty years of European competition law. Issues once fiercely debated have become mainstream policy today, among them the relatively clear separation of competition law and other public policy goals, the application of competition rules to state-regulated sectors or the concurrent applicability of Community and national competition rules. Unwittingly, the ‘fight against cartels’ takes up an early Ordoliberal request which, in the early days, was overridden by a concern with vertical restraints such as restrictions on the re-selling of contract products into other territories. In other respects,

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Introduction

European competition policy has fundamentally changed. The entry into force of Regulation 1/03 constitutes a clear rupture with Regulation 17/62—a rupture competition lawyers still have to grapple with in some important respects. The legal versus discretionary nature of Article 101(3) TFEU under the new regime has not yet been fully resolved. The ‘more economic approach’—in particular its proposition to replace the goal of protecting the competitive process by the goal of efficiency—continues to be the most fundamental challenge to established competition law doctrine that European competition law has seen so far: the focus on a process resulting from the exercise of individual rights is replaced by a focus on outcomes to be justified along utilitarian lines. The basis for the legitimacy of EU competition law would thereby be changed. The belief in the ability to apply competition rules on the basis of predicted outcomes is conceptually related to the optimism traditionally underlying industrial policy. Taken together, all these chapters provide, we suggest, a richer interpretation of EU competition law history than those appearing in previous works. This book is not ‘anti-Gerber’, but neither does it simply follow his—or any other—established line of argument. Intense discussion in an interdisciplinary setting has resulted in texts that come up with fresh claims which often combine hitherto unreconciled strands of interpretation. This is what makes our interpretation of the history of EU competition law and politics distinctive vis-à-vis competing accounts.

1 The Evolution of the Law on Articles 85 and 86 EEC [Articles 101 and 102 TFEU] Ordoliberalism and its Keynesian Challenge Sigfrido M. Ramírez Pérez and Sebastian van de Scheur

1.1 Introduction Divergent interpretations exist as to the forces that shaped European competition policy until the early 1980s. The standard account in the legal, political science, and historical literature has characterized this period as one of ‘constitutionalization’ of Ordoliberal values through different normative actions (decisions, rulings, and regulations). For David Gerber, it was the Germans, particularly the first President of the European Commission, Walter Hallstein, the Commissioner for Competition, Hans von der Groeben, and the German Secretary of State for European Affairs, Alfred Müller-Armack, who successfully pushed for Ordoliberal ideas in the period from the Spaak Report to the signing of the Treaty of Rome. Accordingly, the standard account assumes that European competition policy came to follow two major goals. First, market integration was the most important objective of competition law enforcement, with the Commission and the Court using Articles 85 and 86 EEC predominantly as instruments to ‘eliminate private restraints on trade across national borders’.1 As a consequence, the emphasis in the enforcement of Article 85 was on vertical rather than on horizontal relationships between firms, with special attention paid to agreements between manufacturers and distributors that aimed at protecting the distributor against parallel imports. Second, the protection of effective and undistorted competition as such was the second— and typically Ordoliberal—objective of EEC competition policy. Several 1 David J. Gerber, Law and Competition in Twentieth Century Europe: Protecting Prometheus (Oxford: Oxford University Press, 1998), 263–4, 354.

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other scholars, including Lee McGowan and historians such as Sybille Hambloch, Katja Seidel, and Laurent Warlouzet, not to mention a host of legal scholars, have argued similarly, adding further thrust to the Ordoliberalism argument.2 This view has been seriously challenged recently by political scientists and lawyers. Wolf Sauter had argued many years ago that the central objective of European competition policy was not the enforcement of antitrust law (protecting individual rights) but rather a combination of different public policy goals, the most important being market integration, to which all other economic policies, including competition, were always subordinated.3 According to others, the long-term policy objective of the EEC during the early years was not to preserve ‘economic freedom’, but economic efficiency. Political scientists such as Hubert Buch-Hansen and Angela Wigger have recently stressed the limits of Ordoliberalism due to the pressure of member states in the Council and the lobbying of transnational elites. According to this neo-Gramscian interpretation, Ordoliberalism was balanced by big business as well as the neo-mercantilist objectives in other EEC quarters.4 Some lawyers had even put into doubt that German Ordoliberals crafted the competition policy of the EEC

2 Lee McGowan, The antitrust revolution: exploring the European Commission’s cartel policy (Cheltenham: Edward Elgar, 2010); Sybille Hambloch, Europäische Integration und Wettbewerbspolitik. Die Frühphase der EWG (Baden-Baden: Nomos, 2009); Katja Seidel, ‘DG IV and the Origins of a Supranational Competition Policy: Establishing an Economic Constitution for Europe’, in The History of the European Union: Origins of a Trans-and Supranational Polity 1950–1972; Wolfram Kaiser, Brigitte Leucht, and Morten Rasmussen (eds) (New York: Routledge, 2009), 148–66; Katja Seidel, The Process of Politics in Europe: the Rise of European Elites and of Supranational Institutions (London: Tauris Academic Studies, 2010); Laurent Warlouzet, ‘Quelle Europe économique pour la France: la France et le Marché Commun Industriel 1956–1969’ (PhD diss., Université de la Sorbonne-Paris IV, 2007); Laurent Warlouzet, ‘Europe de la concurrence et politique industrielle communautaire: La naissance d’une opposition au sein de la CEE dans les années 1960’, Histoire, Economie et Société 27 (2008), 47–63; Laurent Warlouzet, ‘The Rise of European Competition Policy, 1950–1991: A Cross-Disciplinary Survey of a Contested Policy Sphere’, EUI Working Paper RSCAS 2010/80, (last accessed 21 February 2013); Laurent Warlouzet and Tobias Witschke, ‘The difficult path to an economic rule of law: European competition policy, 1950–1991’, Contemporary European History 21, 3 (2012), 437–55. 3 Wolf Sauter, Competition Law and Industrial policy in the EU (Oxford: Oxford University Press, 1997). 4 Hubert Buch-Hansen, ‘Rethinking the history of European level merger control: A critical political economy perspective’ (PhD diss., Copenhagen Business School, 2008), 151. Published version: Frederiksberg: Copenhagen Business School Press, 2009; Angela Wigger, ‘Competition for competitiveness: the politics of the transformation of the EU competition regime’ (PhD diss., Vrije Universiteit Amsterdam, 2008); Angela Wigger and Hubert Buch-Hansen, The politics of European competition regulation: A critical political economy perspective (London and New York: Routledge, 2011).

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and defined it as a carefully constructed myth which had been considered as self-evident by other scholars.5 Our contribution will show why the seemingly contradictory stories of the evolution of EU competition policy are not so contradictory after all; they are different pieces of a jigsaw puzzle which must be put together to be complete. The competition policy of the EEC from 1963–81 cannot merely be considered as the more-or-less successful implementation of Ordoliberal concepts, but rather as the result of a variety of different institutional actors within and outside the Commission. In particular, we will show that an account of the early evolution of EEC competition policy has to distinguish between the discussions taking place within DG IV and in the political arena on the one hand, and the development of the law by the ECJ on the other. Within DG IV, there was not only an Ordoliberal, but also an alternative discourse on competition policy which managed to curb via political means the attempts of Ordoliberals to develop their project in a coherent manner. We call this a ‘Keynesian’ discourse, as it reflects the adherence of the relevant actors to the ‘Keynesian post-war consensus’, which favoured both planning (planification) and neo-corporatism, and not the market as the fundamental coordination mode of capitalist development. Proponents of this approach included European Socialists, including especially Social Democrats, and particularly Social Christians among the Christian Democrats. As translated to the field of competition policy, this implied: • an emphasis on public interest values (industrial and social policy objectives) as compared to a pure focus on the protection of competition; • a more tolerant stance towards cartels and state aid as compared to the strict prohibition advocated by Ordoliberals; • a pro-concentration approach, facilitating cross-border concentrations, as compared to controlling mergers with regard to their effects on competition alone. As regards the ECJ, little is known about its internal debates. We claim, however, that the case law of the ECJ does not reflect the political debates characterizing the work of the Commission. Instead, the Court adopted a 5 Pinar Akman, ‘Searching for the long-lost soul of article 82 EC’, Oxford Journal of Legal Studies 29 (2009), 267–303; Pinar Akman and Hussein Kassim, ‘Myths and myth making in the institutionalization and interpretation of EU action: The case of EU competition policy’, Journal of Common Market Studies 48 (2010), 111–32. For a confirmation of the Ordoliberal myth see, Sigfrid Quack and Marie-Laure Djelic, ‘Adaptation, recombination, and reinforcement: The story of antitrust and competition law in Germany and Europe’, in Beyond continuity: institutional change in advanced political pconomies, Wolfgang Streeck and Kathleen Thelen (eds) (Oxford: Oxford University Press, 2005), 255–81.

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consistent and powerful doctrine of competition law, guided by two principal objectives: economic integration—an objective laid down in Article 3(c) of the EEC Treaty; and the protection of competition ‘as such’—an objective based originally on Article 3(f ) of the EEC Treaty, which provided that the Community had the task of ensuring that competition on the Common Market was not distorted. Particularly in cartel cases in the 1970s, the goal of market integration came to be embedded in the pursuit of effective competition, so that European competition law was soon de facto pursued on the basis of only one core objective: that of protecting effective competition on the Common Market. This relative stability of the case law of the ECJ and the determined choice of a competition law enforcement driven by a single goal is in contrast with the political battles between Ordoliberals and interventionists within the Commission. It may reflect the different role of the court: while the Commission had to give shape to and communicate an entirely new policy, the Court’s function was one of judicial review—a review which allowed the Commission a broad margin of discretion, as the ECJ highlighted in its early cases.6 Moreover, the cases brought forward by the Commission tended to be in line with the strong pro-integrationist stance that the ECJ followed during the early years, irrespective of the political affinities of individual judges. Finally, the particular logic of judicial decision-making acted as a disciplining force upon the Court: the ECJ had to decide individual cases, and was less obliged to explain a resulting policy. In order to substantiate our claim, the second section of this chapter reviews the actions of the Commission during the 1960s, the 1970s, and the early 1980s, and we discuss some central cases illustrating this process of clarification of the values guiding competition policy. A third section will look at relevant judgments by the ECJ during the same period. Section 4 will conclude.

1.2 Establishing the Objectives of European competition law and Policy—the Commission’s Perspective 1.2.1 The Institutional and Personal Setting The political battles to be fought in the creation of the EEC’s competition policy could already be sensed from some early institutional quarrels. When the first European Commission was set up, its President, Walter Hallstein, 6 Joined Cases 56 and 58/64, Établissements Consten S.à.R.L. and Grundig-Verkaufs-GmbH v Commission [1966] ECR 299, 347.

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took steps, at the request of the German government, to prevent the French Commissioner, Socialist Robert Marjolin, from including competition policy within his portfolio of economic policies.7 Rather, von der Groeben became the first Commissioner for competition policy. This was balanced by the appointment, as Director-General for Competition, of Pieter VerLoren van Themaat—a Social Democrat recommended by Commissioner Sicco Mansholt (a member of the Dutch Labour Party, the Partij van de Arbeid ). To counter this move, Hallstein requested and Ludwig Erhard personally sent Hermann Schumacher, an Ordoliberal economist, to work as head of the directorate in charge of cartels, after Eberhard Günther, the head of Germany’s Federal Cartel Office, declined to leave his position for Brussels. It was understood that the stakes were high both for the Ordoliberals linked to Erhard and to his Secretary of State for European Affairs, Alfred Müller-Armack, and for their Keynesian-inclined opponents. The struggle for the control and definition of competition policy did not subside as the new Commission started its work.

1.2.2 Objectives Underlying the Competition Policy of the European Commission between 1963 and 1970 It is important to begin by taking a broad view of the possible competition tools provided by the Treaty before focusing on the timing and ‘hierarchy’ of their application. The instruments of Community competition policy were not limited to just two provisions, ie, Article 85 (restrictive agreements) and Article 86 (abuse of dominance); in fact, there were originally four notable components. Rules concerning public monopolies and other privileged undertakings were established by Articles 37 and 90. The grant of state aid was made subject to a supervisory system by Articles 92, 93, and 94. Later, merger control was added as a fifth component. Contrary to the Treaty of Paris, the EEC Treaty did not contain specific merger control provisions, but the Community finally adopted the European Community Merger Regulation (ECMR) in 1989 (and refined it in 2004). Moreover, major decisions about the political priorities of European competition policy were to be taken by the Council of Ministers in the form of regulations proposed by the Commission, a major example of which was Regulation 17/62. The Council resisted the Commission’s propositions on several occasions, notably in the case of merger control.8 Therefore, even if we take the Commission and its DG IV 7

Seidel, The Process of Politics in Europe, 134. Commission Proposal for Regulation of the Council on the Control of Concentrations between Undertakings, OJ 1973 C92/1. Reproduced in Paul M. Schmitt, ‘Multinational Corporations and Merger Control in Community Antitrust Law’, in European Merger Control: Legal and Economic Analyses on Multinational Enterprises, Klaus J. Hopt (ed.) (Berlin and New York: Walter de Gruyter, 1982), 169–86. 8

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as central pieces of European competition policy, it would be a mistake to assume that it was the only actor to define European competition policy. The Treaty delegated supranational powers not to DG IV as such but to the Commission, the Council, and the Court of Justice, with the European Parliament and the Economic and Social Committee having a consultative status. This state of affairs comports with the classical account by Alan Milward on the history of European integration: European institutions in the policy-making process should be seen as integral and complementary parts of the European administrative state, and not antagonistic to it.9 Moreover, the survival of national interests was important, as the Commission was deeply permeated by national conceptions and interests as to how to define its competition policy. In that sense, competition policy was not an exception. The German Ordoliberal conception and agenda was clearly defined by Hans von der Groeben in a programmatic text which was prepared for him by Ivo Schwartz and published in 1961.10 The text made clear that ‘coordinating the economic plans of the vast multitude of firms and persons concerned in the various individual markets constituting the Common Market’ was entrusted to ‘not a number of European planning officials unable to cope with so complex a problem but fair competition, based on performance and governed by statutory rules’.11 It was very clear that the core of the Common Market was the competition regime itself, with complementary measures in social and regional policies.12 If this was the European economic order of the Treaties, then DG IV’s portfolio had a very precise task: creating the conditions for competition which were both fair—that is, free from discriminatory measures coming from public measures—and effective—referring to the behaviour of private actors. To that end, it was not possible to give a material or chronological priority to either objective, as the Treaty made clear that the only way to build the chosen competitive order was simultaneously to pursue both. 9 Peter Lindseth, Power and Legitimacy: Reconciling Europe and the Nation State (New York: Oxford University Press, 2010); Alan S. Milward and a Century of European Change, Fernando Guirao, Frances B. Lynch, and Sigfrido M. Ramírez Pérez (eds) (New York: Routledge, 2012). 10 Veronika Heyde and Myriam Rancon, ‘Interview with Ivo Schwartz’ (in German), 15 January 2004, ConsHist.com, ‘Histoire interne de la Commission européenne 1958–1973’, available at 4–5, (last accessed 21 February 2013). As Schwartz recalled, this fundamental text was published later as Hans von der Groeben, ‘Wettbewerbspolitk in der Europäischen Wirtschaftsgemeinschaft’ in Wirtschaft und Wettbewerb 6 (1961), 373–96. An English-language translation was published as ‘Policy on competition in the EEC’, EEC Bulletin (Supplement) No. 7/8 (July/August 1961), (last accessed 21 February 2013). 11 Von der Groeben, ‘Policy on competition in the EEC’, 5. 12 Von der Groeben, ‘Policy on competition in the EEC’, 6–8.

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The thrust of this holistic concept of a European competitive order was straightforward: ‘[It is the opinion of the EEC Commission that] State and private distortions of competition must be counteracted with equal firmness and on the same principles’. It is on this basis that von der Groeben explained the creation, within DG IV, of four directorates: two for private practices, ie, cartels and monopolies; and two for public measures, ie, state aids and the harmonization of legislation (especially in the field of taxation). In the overall task of creating a competitive order, von der Groeben was controlled by a subcommittee of the College of Commissioners including Jean Rey, then the Commissioner for external trade, and Robert Marjolin, who was responsible for economic policy and free movement. Approaching the priorities during the transition period (ie, until the end of 1969), von der Groeben identified cartels as the first priority because their effects were the closest to those of tariffs and quotas. He particularly singled out ‘international price, quota and cartels dividing the Common Market as well as export and import cartels regulating trade between Member States’.13 With regard to Article 86, the long-term ambition was to limit strategic behaviour in the market by monopolies and oligopolies, and potentially to use the provision as a tool to prohibit anticompetitive mergers. In order to deal with public measures distorting competition, von der Groeben proposed to create greater competitive neutrality in the fields of tax, company and patent law, and a reduction in the external tariff in selected markets.14 Against this backdrop, Karl-Heinz Narjes, Hallstein’s chef de cabinet, praised von der Groeben because he had helped during his two mandates as Commissioner of competition to prevent the spread of a ‘planning’ ethic throughout the Community.15 This positive assessment in fact reveals that Ordoliberals did play a role in the shaping of European competition policy at both intellectual and practical levels. But such influence was not exclusive, nor uncontested, as an important part of the existing scholarship has uncritically assumed. Considering that von der Groeben’s text of 1961 contained the fundamental roadmap guiding Ordoliberal action in the Commission by the time of the approval of Regulation 17/62, the question is whether this agenda was successfully achieved over the next two decades of European integration. The official history of the Commission concludes that the action of DG IV during the first decade was subordinated to the member states’ interest in responding to external competition, and in particular the ‘American challenge’. Von der Groeben had not evoked international competitiveness at all as a proper 13 14 15

Von der Groeben, ‘Policy on competition in the EEC’, 25. Von der Groeben, ‘Policy on competition in the EEC’, 21. Seidel, The Process of Politics in Europe, 142.

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aim of EEC competition policy.16 However, Eric Bussière contends that the actions of DG IV prioritized the objective of market integration more than the creation and maintenance of competition. Despite its attempt to apply a holistic approach to both private barriers and public distortions to competition, DG IV turned out to be a paper tiger in the fight against state intervention, an increasingly intractable problem in the 1960s and especially the 1970s. Regarding state intervention, an inventory of state aid regimes was taken in October 1964 and some flagrant cases of aids (ship-building and textiles in particular) violating the Treaty were tackled, but it proved to be impossible to reach a political consensus among the member states for the adoption of a Council regulation, despite the efforts of von der Groeben. A regime tailored for regional aids fared no better. Anti-cartel enforcement, supposedly the most important priority area of DG IV, does not reveal a clear-cut victory for Ordoliberal positions either: the early Council regulations confirmed relatively broad exemptions in favour of the agricultural (Regulation 26/62) and the transportation (Regulation 141/62) sectors from competition rules. Furthermore, DG IV chose to tackle vertical restraints instead of horizontal price-fixing cartels. In a short period of time it became clear that preventing the creation of private (vertical) barriers to trade (and dismantling those already in place) was a priority if the EEC’s customs union with internal free trade was to be successful. In this light, it can be seen that the Ordoliberal agenda was not the sole driver behind the practical enforcement of competition law. It would have been much more consistent with Ordoliberal principles, as we saw in von der Groeben’s text, to protect competition as such, and to guarantee the rights of all economic actors in the marketplace by tackling, as von der Groeben advocated, international price and market-sharing cartels, and export and import cartels. During the drafting of Regulation 17/62, DG IV, Hermann Schumacher had even suggested that vertical agreements should be excluded from the scope of the Regulation, a principle successfully resisted by the French government.17 Turning to the actual implementation of Regulation 17/62, the near compulsory notification of cartels that had been supported by Eberhard Günther among others, against the French preference for a ‘control of abuse’ system, soon became a nightmare for the Commission. In particular, the inclusion of certain exclusive dealership agreements with a modification of Commission Regulation 27/196218 by Commission Regulation 153/62 in 16 Eric Bussière, ‘Concurrence’, in La Commission Européenne 1958–1972: histoire et mémoires d’une institution, Michel Dumoulin and Marie-Thèrese Bitsch (eds) (Luxembourg: OPOCE, 2007), 303–17. 17 Warlouzet, ‘Quelle Europe économique pour la France’, 619. 18 Commission Regulation 27 of 3 May 1962, OJ 1962 35/1118.

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December 1962 (simplified notification procedure for such agreements)19 brought about a deluge of notifications (34,000 by February 1963), very seriously hindering DG IV’s operations. Von der Groeben had to go to the Council and beg for a new general delegation to permit the Commission to exempt particular categories of agreements (to relieve some of the pressure of the notification system), but the member states were not ready to grant this power unless the Commission came forward with decisions on particular agreements indicating the approach it aimed to apply in this field. For its part, it took DG IV nearly two years before it submitted, in March 1964, a proposal for a Council regulation in the hope of escaping the centralization nightmare that had been brought on this young administration. By 1964, the situation had become critical for DG IV, which was internally affected by important differences and conflicts between the Ordoliberal Commissioner and his Social Democrat Director-General,20 and between the Director-General and the Ordoliberals under his direction.21 A clear stance on the fundamental issue of vertical restraints finally came with the Commission’s decision in Grundig-Consten in September 1964.22 Manfred Caspari, von der Groeben’s deputy chef de cabinet (and DG’s Director-General in the 1980s), recalled that this pioneering decision was pushed by VerLoren van Themaat, but resisted by the Commissioner. In particular, VerLoren van Themaat and members of the cabinet had made efforts to persuade von der Groeben and Schumacher.23 Apparently, there were significant differences of opinion within DG IV about how competition policy should be applied.24 VerLoren van Themaat did not share the Ordoliberal approach to competition policy put forward by von der Groeben. Contrary to the idea that the Germans were the only ones with a consolidated experience in antitrust matters (the famous GWB had only entered into force at the same time as the Treaty of Rome in 1958), VerLoren van Themaat had more antitrust credentials than any of the German participants in DG IV, as he had worked and written 19

Commission Regulation 153 of 21 December 1962, OJ 1962 153/2918. Laurent Warlouzet, ‘La France et la mise en place de la politique de la concurrence communautaire’, in Europe organisée, Europe du libre-échange?, Eric Bussière, Michel Dumoulin, and Sylvain Schirmann (eds) (Brussels: Lang, 2006), 175–200. 21 Warlouzet, ‘Quelle Europe économique pour la France’, 621. 22 Décision 64/566/CEE de la Commission du 23 septembre 1964, affaire IV-A/00004–03344 —Grundig-Consten, JO 1964 161/2545 (no English version). 23 Interview with Manfred Caspari, quoted in Bussière, ‘Concurrence’, 319. 24 VerLoren van Themaat has confirmed the significant hesitation stemming from the different competition policy concepts, and portrayed as mythical the notion that Germans dominated the formulation of competition policy during this period. See Jan van der Harst and Nienke Betlem, interview with Pieter VerLoren van Themaat, 13 February 2004 (in Dutch), (last accessed 21 February 2013). 20

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on antitrust issues for the Dutch Ministry of Economics since the 1940s. VerLoren van Themaat had worked in the Office for Steel and Iron during the Second World War, and more importantly he had been the President of the Group of Experts on antitrust at the OEEC working group in charge of preparing the Free Trade Agreement to avoid the division of Europe between the Six and the Seven.25 Even before taking his position in the Commission, he had a clear idea of what European antitrust should look like. In a note sent to the newly appointed European Commissioner, but written before 1958, the Dutchman was straightforward in his rejection of a neo-liberal political philosophy for European competition policy and exposed his own conception. This approach was based on his experience in the Netherlands, and he suggested it as a compromise between the German and the French conceptions, but with specific features. VerLoren van Themaat believed that cartels were the first priority of European competition policy but, contrary to the Germans, he espoused the French thesis that they were not harmful as such, and could be useful in order to reach other economic and social aims. He suggested following a neo-corporatist tradition, as in the Netherlands, which he aimed to introduce in European competition policy by setting up a regular dialogue with industrial interests, trade unions, and consumers. Its basic tenet was that European competition policy had to favour the Community interest defined in Article 2 of the EEC Treaty, since competition was one of the instruments to be coordinated with other economic policies and not an end in itself.26 In a nutshell, the Common Market was the aim of European competition policy and competition was to be based on economic performance, an effective division of labour between companies, cooperation between them, and public intervention to reach this aim. These competition policy principles were ‘Keynesian’ insofar as they aimed to be tolerant in cartel policy and flexible toward state intervention. They were neo-corporatist in their attempt to accommodate the views and interests not just of business, which was to a certain extent unavoidable, but also of trade unions and consumers. Moreover, VerLoren van Themaat was not alone with his Keynesian approach, as the Division on State Aid (Division D) was in the hands of Marjolin’s man sent to DG IV, Armand Saclé. This specialist in export aids had worked with the French Commissioner in the negotiations of the Treaty of Rome and was a close collaborator of the Director for trade 25 Pieter VerLoren van Themaat, ‘Die Kartellpolitik der Niederlande’, in Internationales Handbuch der Kartellpolitik, Georg Jahn and Kurt Junckerstorff (eds) (Berlin: Duncker and Humblot, 1958), 351–7. For various essays disussing themes associated with VerLoren van Themaat, see In Orde: Liber Amicorum Pieter VerLoren van Themaat, René Barents (ed.) (Kluwer: Deventer, 1982). 26 For this note (‘Wettbewerbspolitik’) from 25 May 1958 in von der Groeben’s private papers, see Seidel, ‘DG IV and the Origins of a Supranational Competition Policy’.

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affairs in France, Bernard Clappier. He knew VerLoren van Themaat before joining DG IV, and he was a key counterweight preventing any major advance of German Ordoliberals in the strategic dossier of state aid control.27 Summing up, DG IV was divided not because of personal rivalries but by national, and more interestingly by political cleavages about which kind of competition principles to follow. After all, most of this first generation of high civil servants were selected by their governments to serve in influential positions in order to defend their national and political interest within the new institution. They did not become ‘Europeanized’ from one day to the next. Indeed, European integration was a mariage de raison more than a love affair for most of the politicized top civil servants who directed DG IV. Furthermore, EEC competition law was applied in parallel with national competition laws. A wide gap between the way Community law was applied and the way German or Dutch or French law was applied would have been problematic for the competitiveness of their firms operating in the Common Market in the making. The Grundig-Consten decision demonstrates these tensions, but it also shows the difficulty of uncovering them ex post. Interpretations remain difficult since the minutes of the Commission’s meeting are not very explicit about the exact positions of each of its members. What we know is that only the Italian Commissioner, Guido Colonna, abstained on the basis that he had no time to study the case. More interestingly, an important modification was made to DG IV’s proposed decision. This modification replied to the argument of the companies that their vertical agreement did not affect trade. The College found that it was enough that the restrictions affected trade between member states in any way, regardless of the importance of this influence on market conditions,28 and thereby significantly extended the reach of the competition rules. DG IV’s decision in Grundig-Consten, which was later substantially upheld by the Court of Justice, cleared the way for an acceleration of its proposed Council regulation to obtain the general power to issue block exemptions. However, Council Regulation 19/65 of 2 March 1965 only provided the 27 Eric Bussière, Veronika Heyde and Laurent Warlouzet, ‘Interview with Armand Saclé’, 28 January 2004, ‘Histoire interne de la Commission’, available at (last accessed 21 February 2013). 28 AHCE, BAC 209/1980, PV special, 9 September 1964. The DG IV officials that attended this meeting as observers were VerLoren van Themaat, Albrecht, Schwartz, Schumacher, René Jaume (Schumacher’s deputy in the cartels directorate), and Rob Mok, the civil servant who was the rapporteur of the case. Jochen Thiesing of the Commission’s Legal Service also attended this meeting (and later represented the Commission when the case was litigated before the ECJ). On Mok, see Current and Future Perspectives on EC Competiton Law: a Tribute to Professor M.R. Mok, Laurence Gormley (ed.) (London, The Hague, Boston: Kluwer, 1997). On Thiesing,, Kommentar zum EWG-Vertrag Hans von der Groeben and Jochen Thiesing (ed.) (Baden-Baden: Nomos, 1974).

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Commission with the power to exempt bilateral exclusive dealing and licensing agreements linked to the acquisition or use of industrial property rights. Moreover, this Regulation only had a duration of five years.29 Schwartz remembered these limitations as providing one of the most difficult frustrations of his career. In a confrontation with Marjolin and the Director General of the Legal Service Michel Gaudet, who insisted that this was a competence of the Council,30 the Ordoliberals failed to achieve their objectives fully. Their action was seriously constrained by political interference from the Council or from within the Commission, and had to compete with a more Keynesian approach. Even with these serious limitations, Council Regulation 19/65 was adopted only with great difficulty because the Italian government, which had unsuccessfully opposed the granting of block exemption powers, quickly challenged the validity of the Regulation before the Court of Justice with the hope of having it annulled on the grounds that Article 85 could only cover horizontal agreements, and that it did not apply to vertical agreements such as those in the automobile distribution sector. In July 1966, the ECJ rescued DG IV from this difficult position. On the same day, the ECJ substantially upheld the Commission’s position both in the case involving Italy’s attack against the Regulation31 and in the appeal brought against the Grundig-Consten decision.32 The reasons motivating the Court’s judgments cannot easily be clarified, as we lack archival sources that might reveal its internal deliberations. In any case, it is evident that the Commission’s victories before the Court opened the door for DG IV to issue its first block exemption regulation, although it was limited to bilateral agreements on exclusive selling and purchasing.33 The aim was to encourage cross-border commercial agreements in order to advance economic integration. This Regulation was all the Commission was able to obtain under von der Groeben during the Commission’s first decade of existence. In July 1967, the new Commission headed by Jean Rey took the DG IV portfolio away from von der Groeben and charged him instead with Internal 29 By comparison, in 1971, the Commission managed to ensure that Council Regulation 2821/71 (OJ 1971 L285/46) would be valid for ten years. 30 ‘Interview with Ivo Schwartz’, 31. 31 See Case 32/65, Italy v Council and Commission [1966] ECR 563. 32 Joined Cases 56 and 58/64, Consten and Grundig v Commission [1966] ECR 299, decided the same day (13 July 1966) as Italy v Council and Commission. These two judgments came just two weeks after Case 56/65, Société Technique Minière v Maschinenbau Ulm (‘STM’) [1966] ECR 235. The direct link between the three cases was evident if we consider an internal note of the Commission’s Legal Service analysing the result of the three cases together and its consequences for the Commission and for competition policy. Société Téchnique Minière and Consten and Grundig are discussed in section 1.3.1, page 39 and footnotes 60 and 61. On these cases, see also in Section 4.3.1 in this volume. 33 Commission Regulation 67/67 of 22 March 1967, OJ 1967 57/849.

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Market and Regional Policy. The Dutch Social Catholic Emmanuel (Maan) J. A. Sassen was appointed as the new Commissioner for Competition. The Ordoliberal agenda remained in place, however, as in compensation von der Groeben’s head of cabinet between 1961 and 1963, Ernst Albrecht, was appointed Director-General, replacing VerLoren van Themaat, who resigned from the EEC administration and accepted an academic post in Utrecht.34 In this way, the presence of both souls of European competition policy was still preserved for a few years but the roles were reversed; political leadership was now in the hands of a leader of the Catholic People’s Party (KVP) of the Netherlands who clearly advocated a mixed economy and corporatism. Sassen was no newcomer to European integration, as he had been a long-serving leader during the 1950s of the Christian-Democratic group at the Assembly of the European Coal and Steel Community. He continued his European career between 1958 and 1967 as Dutch Commissioner in EURATOM. Trained as a lawyer and having worked in the highest administrative court of the Netherlands, Sassen was a political heavyweight. The Keynesian approach gained new traction.35 When von der Groeben stepped down, nearly a decade had passed from the signature of the Treaty of Rome until the moment in which DG IV could actually start using its anti-cartel powers vis-à-vis European companies with some confidence—still seriously curtailed by the Council and under the control of the Court of Justice. The backlog of notified cases in important industrial sectors like the automobile industry remained in a legal limbo for many years despite the efforts of DG IV. For example, the first automobile distribution agreements were not authorized until March 1972, when DG IV issued its first decision on a case of automobile distribution involving BMW Germany, an agreement notified in 1963.36 It was one thing to preach the Ordoliberal credo and to sow seeds of ambition to move in the direction of a pure competition approach; policing markets and imposing real discipline on cartels and monopolies was another. 34

He also served as the Dutch Advocate General at the Court of Justice from 1981 to 1986. According to Sassen’s official biography after leaving the EEC Commission in 1971, he served as the permanent representative of the Netherlands in the European Communities until 1977. See (last accessed 21 February 2013). 36 It was only in 1983 that the Commission drafted the first detailed regulation (Regulation 123/85) establishing a block exemption for motor vehicle distribution and servicing agreements. Ten years later this instrument was replaced by Commission Regulation 1475/95. See further Sigfrido M. Ramírez Pérez, ‘La politique de la concurrence de la Communauté Economique Européenne et l’industrie européenne: les accords sur la distribution automobile (1972–1985)’, Histoire, Economie et Société 27 (2008), 63–79. The most recent regulations are Commission Regulation 1400/2002 and Commission Regulation 461/2010. See (last accessed 21 February 2013). 35

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1.2.3 The Commission’s Policy during the 1970s and 1980s: the Influence of Social-Democratic Principles on EEC Competition Policy in Times of Economic Crisis Sassen’s approach to competition policy was markedly different from that of von der Groeben’s, even antagonistic in central aspects. In a speech to the European Parliament in 1970, for instance, he contended that ‘[c]ompetition policy has no autonomous existence. It is a capital aspect of the general economic policy and it strongly influences the economic and social order in which we are living. That is the reason why I believe that competition policy must be carried out by a politically responsible institution like the European Commission, which is placed under the political control of this Parliament, and that time has not yet come to delegate such tasks to a European office cartel, or any institution of that kind’.37 Distancing himself further from the Ordoliberal approach, he did not accept that the protection of the competitive process should enjoy priority over political considerations linked to the competitiveness of European firms. For him, the terms ‘antitrust law’ and ‘antitrust policy’ were too restrictive to define European competition policy, as it ‘must be more than a mere “anti-policy”, whether directed against restrictive agreements or against monopolies, and be extended to effective harmonization in the conditions of production. Only this can ensure optimum utilization of the factors of production, the maintenance and strengthening of the competitiveness of European firms on the world market and—beyond the purely economic objectives—the safeguarding of freedom in a way that is consistent with our social objectives.’38 From then on, competitiveness and industrial policy objectives were central elements of Sassen’s approach. Much in line with VerLoren van Themaat’s approach to cartels, Sassen wanted to prioritize assistance to firms to adapt to economic realities over the principle of absolute prohibition. In practice this meant evaluating whether they were good or bad not by their legal nature but ‘by the effect agreements have on actual market trends [ . . . ]. Market analysis is essential to European competition policy.’ He considered that this ‘predominantly economic approach’ should allow the Commission to concentrate on what it considered to be really important cases. On the EEC’s ‘policy on industrial combination’, Sassen also made plain that, confronted with an 37 AHCE, Speeches, E. Sassen, Réactions concernant le rapport fait au nom de la Commission économique du Parlement européen par Cornelis Berkhouwer sur la concurrence comme un des aspects de la politique économique générale, Strasbourg, 05–02–1970 (our translation). 38 HAEC, Speeches, The policy of the European Communities in the field of antitrust law, address by M. Sassen, Knokke-Zoute, 21 March 1969 (all quotes in English from original text). Subsequent notes come from this fundamental speech in front of European industrialists.

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increasing trend on the part of European companies to merge in order to enhance their competitiveness and adapt to a larger market, the Commission would work to maintain effective competition. However, firms had to be able to attain the size required from the point of view of research, production, and marketing. In this line, market concentration should not eliminate effective competition; if it did so, the Commission would automatically consider that there was an abuse of dominance, although Sassen added that there were ‘only a few markets on which there is a threat to workable competition’, and that the Commission therefore had not yet considered it necessary to apply Article 86 to merger cases.39 This alternative conception of competition policy was accentuated under Sassen’s successors after 1970. None of them was German, which seems to contradict an assumption sometimes made to the effect that Germans maintained political control of DG IV. In particular, Albert Borschette and Raymond Vouel each came from Luxembourg. Having participated in the negotiations leading to the Treaties of Rome as deputy head of his national delegation, Borschette knew the Treaty’s contents and intent particularly well. Moreover, he had been permanent representative of his country in the Council and in the Euratom Commission since 1958. After his sudden death, he was succeeded in 1976 by Raymond Vouel, a Socialist who held similar views. But the real continuity over competition policy was ensured by the decade-long presence of the Director-General who had replaced Albrecht at the end of 1970, Willy Schlieder. Schlieder was German, but he was not an Ordoliberal. Having worked in DG Competition between 1958 and 1960 before becoming the chef de cabinet of the President of the Economic and Social Committee of the EEC, he had returned in 1963 to DG IV as head of the main unit (general questions) of Directorate A, still directed by Hermann Schumacher. From 1967 until his appointment as Director-General of DG IV he served as chef de cabinet of the SPD Commissioner, and trade-union leader from the German DGB, Wilhelm Haferkamp. Before joining the European Commission, Schlieder had also worked for the DGB, as a lawyer. This political and professional background made him closer to the Keynesian conception of competition law. If we add to Albrecht’s departure that of von der Groeben, who was not reappointed in 1970 as German Commissioner, we can reasonably expect that their influence and the impact of their principles also declined in the application of competition policy during this period. Moreover, between 1976 and 1981 during the Thorn Commission, two Social Democrats (Vouel and Schlieder) shared the driver’s seat of European 39 HAEC, Speeches, The policy of the European Communities in the field of antitrust law, address by M. Sassen, Knokke-Zoute, 21 March 1969.

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competition policy in times of economic stagnation. But what were the tools and principles which marked this golden age of Keynesianism in the competition policy of the EEC? Maybe the more evident elements of the Keynesian conception in practice consisted of flexibility in relation to crisis cartels and state aid, and coherence with sectoral plans for restructuring. According to Schwartz, DG IV had always been opposed to sectoral industrial policy, as it was by definition a distortion of competitive conditions.40 The proliferation of production quotas and joint ventures at the European level under the permissive attitude of DG IV in relationship to steel, shipbuilding, chemistry, and textiles made clear that the wheel had turned. The Commission’s first Annual Report on competition policy of 1972, which has been presented ever since then to the European Parliament as a measure of accountability, acknowledged that, in the field of state aid, social considerations played a role in the Commission’s decisions.41 However, in the GB-Inno-BM case (1977), the ECJ imposed some limits on the continuous rise of state intervention. In that case it qualified the principle that member states themselves were not bound by the Treaty rules addressed to undertakings by indicating that member states must not adopt or maintain measures that deprive those rules of their effectiveness. 42 A long line of subsequent case law makes it clear that, among other things, the member states must not promote or facilitate cartels.43 This Keynesian phase coincided with a renewed willingness by the Commission to start applying Article 86. At the time of the negotiation of the Treaty of Rome, the German position had prevailed as the French had requested the principle of prohibition of dominant positions per se and not just of their abuse, because the French sought to make Article 86 a defensive weapon against American multinationals.44 However, the concept of ‘abuse of dominance’ needed further clarification, and the first significant attempt in this regard was made under the auspices of von der Groeben. In 1965 DG IV had already collaborated with a group of independent legal experts in order to develop basic principles on, inter alia, the

40

‘Interview with Ivo Schwartz’, 13. Commission, First Report on Competition Policy (1972), 17. 42 Case 13/77, SA G.B.-INNO-B.M. v Association des détaillants en tabac (ATAB) [1977] ECR 2115. 43 See Case 267/86, Van Eycke v ASPA NV [1988] ECR 4769. 44 Sigfrido Ramirez, ‘Anti-Trust or Anti-US? L’industrie automobile et les origines de la politique de la concurrence de la CEE’, in Europe organisée, Europe du libre échange? Fin XIX° siècle—Années 1960, Éric Bussière, Michel Dumoulin, and Sylvain Schirmann (eds) (Brussels: Peter Lang, 2006), 203–28, 210. This was explicitly said by Marjolin to the top management of Renault in a speech on the reasons for this state-owned company to support the Treaty of Rome. 41

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application of Articles 85 and 86 to concentrations.45 This initiative seems to have been linked to the request by European companies to encourage mergers between them to counter the ‘American challenge’, but the group of experts favoured means similar to those suggested by von der Groeben: eliminating legal and administrative barriers, and not industrial planning.46 The Commission Memorandum made crystal clear that it was against building their action in this field on an enlarged application of Article 85. Instead, they preferred to leave this task to a specific merger regulation of the Council. A role model could be found in the ECSC, which had a very clear merger control provision in its Article 66. As regards Article 86 EEC nothing was done, even though it was fundamental for the application of this provision to understand what would qualify as an abuse of a dominant position. By the end of von der Groeben’s term in DG IV, the French Socialist Pierre Uri, who had drafted with von der Groeben the competition part of the Spaak Report, attributed the prolonged reluctance of DG IV to develop Article 86 ‘to the proved difficulty to formulate a doctrine’; in his view, the Treaty was flexible enough to allow the formulation of various possible policies.47 Article 86 only truly came to life with Borschette and Schlieder when the Commission decided on 9 December 1971 to apply it to a concentration in the Continental Can case.48 The company concerned in this case was an American manufacturer, Continental Can, which according to the Commission had a dominant position on the market for light metal containers for meat and fish products, and for metal closures for glass bottles. The Commission found that Continental Can had abused its dominant position by taking control, through its subsidiary Europemballage, of the largest producer of these products in the Benelux in April 1970 after having bought, one year earlier, the largest German manufacturer of this kind. The College of Commissioners’ discussions on this issue indicate that resolving this case was rich in potential conflict: an agreement between Commissioners could only be found the following morning with Borschette’s approval of a compromise regarding the first article of the decision, which had originally read: ‘Continental Can [ . . . ] has abused its dominant position by practically eliminating competition for the products’. The compromise, following the suggestion of Raymond Barre, Commissioner for economic affairs, stated that ‘Continental Can [ . . . ] has abused its dominant position [ . . . ]. This acquisition has resulted in the 45

Gerber, Law and Competition in Twentieth Century Europe, 357. Warlouzet, ‘Europe de la concurrence et politique industrielle communautaire’, 58. 47 Pierre Uri, discussant comments in Revue du Marché Commun No. 109 (January-February 1968), 89. 48 Décision 72/21/CEE de la Commission, du 9 décembre 1971, affaire IV/26 811—Continental Can Company (no English version), JO 1972 L7/25. 46

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practical elimination of competition for the above-mentioned products in a substantial part of the common market’.49 The Commission therefore argued that the merger of an already dominant enterprise with a firm active in the same market could constitute an abuse. Contrary to the then-current doctrine focused on intent, the Commission maintained that it was sufficient to find an ‘objective infraction’ of Article 86. Continental Can, on the other hand, claimed that the Commission was going too far in its competencies, given that the EEC Treaty had not included a merger control provision as the ECSC Treaty had. More importantly, it suggested—and the Advocate General agreed—that Article 3(f ) of the EEC Treaty (competition should not be distorted in the Common Market) could not support this extensive interpretation of Article 86, and that an explicit merger provision was needed. In February 1973, the ECJ essentially confirmed the Commission’s new doctrine with its judgment in Continental Can, although technically it annulled the Commission’s decision for lack of evidence demonstrating that competition had been eliminated in a substantial part of the common market (see section 3.2.2)50. The ruling was at first controversial in legally informed circles.51 Schlieder, despite the Commission’s partial victory, was fully aware that Article 86 provided only a precarious and insufficient means to properly control concentrations. In July of 1973, the Commission therefore proposed a more specific draft Council regulation on merger control, of which a notable feature was the possibility of an exemption for concentrations in the common interest of the EEC. Such an exemption could potentially have allowed the creation of European ‘champions’, and would have given the Commission the capacity to pursue industrial policy at the European level.52 The draft merger regulation was debated and discussed until 1976 but the obstacles in the path of the Council’s approval were already clear to Schlieder. As he noted, ‘the most controversial issues concern the problems of reconciling national industrial, social and regional policies with merger decisions taken by Community authorities, the parallel application of Community and national 49 AHCE, BAC 259/1980, European Commission, PVs Spéciaux, Meeting of the 8–9 December 1971, 33. 50 Case 6/72, Europemballage Corporation and Continental Can Company Inc. v Commission (‘Continental Can’) [1973] ECR 215. 51 See in particular Lazar Fosceanu, La jurisprudence de la Cour de Justice des Communautés Européennes en matière de concurrence: les règles applicables aux entreprises (Articles 85 et 86 du Traité de Rome (Paris: Editions techniques et économiques, 1977). The preface was written by Daniel Vignes, director of the Council’s Legal Service. 52 See Buch-Hansen and Wigger, The politics of European competition regulation, 70–1.

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law in the area of merger control and the participation of Member States in the decision making process’.53 The proposal was ultimately blocked. As the merger regulation draft slept in the file cabinets of the Council of Ministers until later efforts in 1981, the Social-Democratic period started to decay with the induction of a new Commission under the direction of Gaston Thorn. Manfred Caspari took over as Director-General of DG IV. Caspari, another Ordoliberal, had followed von der Groeben in 1968 as his chef de cabinet and returned in 1981 as Director-General after working as Deputy Director-General in the external relations DG for seven years. In DG IV he served under the direction of new Commissioner Frans Andriessen, a Dutchman who, like Sassen, came from a Social-Catholic background. Andriessen’s tenure was a period of transition leading up to the definitive neo-liberal turn of European competition policy when Andriessen was replaced in 1985 by Irish Commissioner Peter Sutherland.54 To summarize, a closer look at the background of decision-makers in charge of developing competition policy from the 1960s through the 1980s disproves the widespread assumption that the Commission was dominated by German Ordoliberals during these early years. From the start, there existed a counter-current based on what we call ‘Keynesian’ principles. In the choice of enforcement priorities and in actual decision-making, both schools of thought had to and did come to terms. In some respects, Ordoliberal thoughts were accepted. But in other instances—in particular with regard to state aid and crisis cartels during the period of economic crisis in the 1970s—Keynesian ideas prevailed. Throughout, there was a strong belief among key actors within the Commission that competition policy was to be considered not an end in itself but as one of various tools in the service of European integration and European competitiveness.

1.3 The Court’s Perspective If we look at the evolution of EEC competition law from the perspective of the ECJ’s case law, the political struggles and shifts find little reflection here. 53 Willy Christoph Schlieder, ‘Recent Antitrust Developments in the European Community’, Address before the New York City Bar Assocation, 31 March 1976, 30, (last accessed 21 February 2013). 54 On this turn and the transition period, see Hubert Buch-Hansen and Anglea Wigger, ‘Revisiting 50 Years of Market-Making: The Neoliberal Transformation of European Competition Policy’, paper presented at the ISA Convention in San Francisco, March 2008; Matthieu Montalban, Sigfrido Ramírez Pérez, and Andy Smith, ‘EU Competition Policy Revisited: Economic Doctrines Within European Political Work’, Cahiers du GREThA 2011–33 (2011), (last accessed 21 February 2013).

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This is surprising, to some extent. The political backgrounds and views of the judges of the ECJ may well have diverged as much as those of Commission personnel, yet it seems that these diverse backgrounds played out less in the context of the role the ECJ had to play, or the role it committed itself to play. It was the Commission’s task to give shape to a completely new body of law and to design a competition policy for the EEC. The ECJ’s task as defined by the EEC Treaty was one of judicial oversight. However, as frequently highlighted in the literature, the spirit in which this was done was constructive rather than passive,55 and in its jurisprudence the Court was strongly pro-integration.56 It also seems that the implicit rules of legal discourse—in particular in a case law regime of precedents—created a relatively stable environment in which competition law could evolve.57 While shifts in the ECJ’s jurisprudence can be observed, they are more nuanced than the administrative policy shifts described for the Commission. Overall, the picture that emerges from the case law is one characterized by some courageous fundamental judgments in the early years, which were then developed with a sense of continuity.

1.3.1 The Objectives of Article 85 EEC in the 1960s Case Law of the Court: Market Integration alongside Undistorted Competition Until the Continental Can judgment of 1973 (discussed in more detail below in Section 1.3.2.2), the application of competition law was limited to Article 85 EEC. An infringement of Article 85(1) required the fulfillment of two cumulative criteria. An agreement between firms58 was inconsistent with this provision when it (a) had the capacity to ‘affect trade between Member States’, and (b) had as its ‘object or effect the prevention, restriction or distortion of competition within the common market’. Subsections (a) to (e) of the Article provided a non-exhaustive list of types of agreements that may be considered anticompetitive. Although from a blank slate it would have been possible to give substance to this broad and open wording of Article 85 and especially Article 86 in various ways, the Commission and the Court adopted from the very beginning a method of teleological (goal-oriented) interpretation, putting the provisions 55

See, eg, Miguel P. Maduro, We The Court (Oxford: Hart Publishing, 1998). Henri de Waele, ‘The Role of the European Court of Justice in the Integration Process: A Contemporary and Normative Assessment’, Hanse Law Review 6 (2010), 3–26. 57 Maduro, We The Court, 25. 58 Article 85 applied not just to agreements between undertakings but also to decisions by associations of undertakings and concerted practices. For the sake of simplicity this chapter will refer only to ‘agreements’. 56

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of competition law in the context of the objectives of the Treaty. Although it was more implicit in the early case law, the Court later explicitly prescribed a teleological approach to Community law. In CILFIT (1982), the Court held that ‘every provision of Community law must be placed in its context and interpreted in the light of the provisions of Community law as a whole, regard being had to the objectives thereof and to its state of evolution at the date on which the provision in question is to be applied’.59 By linking Community law, and by implication competition law, to the objectives laid down in the Treaty, the Court distanced itself to a considerable extent from the ideological mood swings within the Commission that came as a result of the political differences between the various concurrent and subsequent DG IV officials. As we noted briefly earlier, in 1966 the Court expressed its view on the application of Article 85 to vertical agreements between firms in some groundbreaking judgments. First, it issued a preliminary ruling in Société Technique Minière (STM).60 Two weeks later the Court decided the appeal in Consten and Grundig.61 Since the two judgments were issued within such a short time, and since all five judges that participated in STM were also on the panel that decided Consten and Grundig,62 it is not surprising that they show many similarities. The list contained in Article 85(1) of conduct that is possibly captured by that provision must be considered as illustrative, not as exhaustive. Therefore, in STM the Court considered that Article 85(1) required the assessment of the effects of an agreement from ‘two angles of economic evaluation’;63 namely, effects on trade between member states and effects on competition. As a consequence, the Court appeared to reject the idea of per se illegality under Article 85: ‘[Article 85(1)] cannot be interpreted as introducing any kind of advance judgment with regard to a category of agreements determined by their legal nature’.64 The substance of the two conditions of Article 85(1) had to be clarified. On the issue of an agreement’s potential effect on trade between member states, the Court stated: This provision [ . . . ] is directed to determining the field of application of the prohibition by laying down the condition that it may be assumed that there is a 59 Case 283/81 Srl CILFIT and Lanificio di Gavardo SpA v Ministry of Health (CILFIT) [1982] ECR 3415, para. 20. 60 Case 56/65, Société Technique Minière. 61 Joined Cases 56 and 58/64, Consten and Grundig. 62 The judges common to both cases were Hammes, Delvaux, Donner, Lecourt (rapporteur in STM), and Trabucchi (rapporteur in Grundig-Consten). Two additional judges participated in Consten and Grundig, namely, Monaco and Strauss. Roemer was Advocate General in both cases. 63 Case 56/65, Société Technique Minière, 248. 64 Case 56/65, Société Technique Minière, 248.

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possibility that the realization of a single market between Member States might be impeded. [ . . . ] Therefore, in order to determine whether an agreement which contains a clause ‘granting an exclusive right of sale’ comes within the field of application of article 85, it is necessary to consider in particular whether it is capable of bringing about a partitioning of the market in certain products between member states and thus rendering more difficult the interpenetration of trade which the treaty is intended to create.65

With these considerations the Court effectively made the Community’s objective of market integration a direct goal of Article 85(1). However, the Court was not the first to consider that market integration was an objective of competition law. Two years earlier, the Commission had given similar indications in its Grundig-Consten decision.66 That case concerned an arrangement of exclusive dealership between a German producer of electronics (Grundig) and its French distributor (Consten), by which Grundig undertook not to deliver to other distributors in France, while Consten undertook not to sell products from competing brands, and not to re-import Grundig’s products to Germany or other countries. In addition, Consten was allowed to register in France the trademark ‘GINT’, a brand that Grundig affixed to all its exported products, so as to provide Consten with a means to protect itself against parallel imports. The Commission considered that both the exclusive dealership and the agreement on the registration of the GINT trademark isolated the French market within the Community, and thus hindered the creation of an integrated European market.67 On appeal, the ECJ supported this understanding of ‘effect on trade between Member States’, despite the fact that Advocate General Roemer had advised against it. According to Roemer, trade between member states should only be regarded as ‘affected’ when an agreement had a proven negative effect on the volume of trade between member states.68 The ECJ, giving judgment two weeks after STM, rejected this view, considering that ‘what is particularly important is whether the agreement is capable of constituting a threat [ . . . ] to freedom of trade between Member States in a manner which might harm the attainment of the objectives of a single market between states’.69

65

Case 56/65, Société Technique Minière, 249. Décision 64/566/CEE, Grundig-Consten. 67 Décision 64/566/CEE, Grundig-Consten, section II.2. 68 The Advocate General considered that an exclusive dealership could allow a firm in one member state to penetrate the market of another, and that the Commission should have compared the expected flow of trade between member states in a situation with the agreement to the hypothetical flow of trade without the agreement. See Opinion of Advocate General Roemer in Consten and Grundig [1966] ECR 299, 358, and 360–1. 69 Consten and Grundig [1966] ECR, 341 (emphasis added). 66

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The second requirement for the application of Article 85(1), namely, that the agreement in question by its object or effect restrict competition within the Common Market, reflected the Treaty’s objective of ensuring undistorted competition (Article 3(f ) EEC) as an important catalyst for the harmonious development of economic activities within the Community (Article 2 EEC). Although the link between Article 85(1) and Article 3(f ) was straightforward, the Court still had to give substance to the term ‘competition’, and had to determine the methods by which to assess whether competition was prevented, restricted, or distorted. In Grundig-Consten the Commission and the Court considered that the agreement granting absolute territorial protection affected competition by eliminating competition between distributors in France, leading to higher prices and a restriction of consumer choice.70 Advocate General Roemer advised the Court to annul the Commission’s decision on the ground that it had not taken account of the possibility that the exclusive dealership arrangement was necessary for Grundig to penetrate the French market for consumer electronics. As he explained, the elimination of wholesale competition could lead to increased competition between brands, thus increasing the total volume of trade between France and Germany.71 The Court rejected the notion that this trade-off between inter- and intrabrand competition mattered for the lawfulness of the distribution agreement: it held that an agreement tending to restrict competition between distributors should not escape the prohibition of Article 85(1) merely because it may increase competition between producers.72 The Court moreover held that the isolation of the French wholesale market eliminated any form of competition between distributors, and there was ‘no need to take account of the concrete effects of an agreement once it appears that it has as its object the prevention, restriction or distortion of competition’.73 Some commentators have argued that the Commission and Court decided the entire case solely on the basis of the single market imperative.74 Although the Commission has frequently been criticized for not attempting to assess the weighed effect of the distribution agreement on trade, it cannot be denied that it did consider genuine competition policy concerns, pointing to an inefficient 70

Grundig-Consten, section II.1; Consten and Grundig [1966] ECR 299, 343. Opinion of Advocate General Roemer, 360–1. The applicants on appeal and the German government claimed that the total volume of trade had indeed increased. Opinion of Advocate General Roemer, 342. 72 Opinion of Advocate General Roemer, 342. 73 Opinion of Advocate General Roemer, 342. 74 Sauter, Competition Law and Industrial Policy, 119; Gerber, Law and Competition in Twentieth Century Europe, 355. 71

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allocation of resources as a result of higher prices and reduced consumer choice.75 The Court moreover assessed the likeliness that inter-brand competition would compensate for a loss of intrabrand competition, stating that ‘the more producers succeed in their efforts to render their own makes of product individually distinct in the eyes of the consumer, the more the effectiveness of competition between producers tends to diminish’.76 Consten and Grundig therefore clearly shows that the Court addressed both of the ‘angles of economic evaluation’ it had identified in STM: the objective of market integration and that of stimulating rivalry between distributors and, ultimately, between producers, to the benefit of the consumer. This consideration does not take away the fact that the Court in the 1960s not only endorsed, but actively promoted, the protection of market integration under Article 85. In its preliminary ruling Brasserie de Haecht I (1967) the ECJ even considered that Article 85(1) could only apply when an agreement hindered market integration: in order to satisfy [the condition of ‘effect on trade between Member States’], it must be possible for the agreement, [ . . . ] to appear to be capable of having some influence, direct or indirect, on trade between Member States, of being conducive to a partitioning of the market and of hampering the economic interpenetration sought by the Treaty.77

In its 1969 preliminary ruling Walt Wilhelm, the Court explicitly considered the creation of a single market the predominant objective of European competition law: Article 85 of the EEC Treaty applies to all the undertakings in the Community whose conduct it governs either by prohibitions or by means of exemptions, granted— subject to conditions which it specifies—in favour of agreements which contribute to improving the production or distribution of goods or to promoting technical or economic progress. While the Treaty’s primary object is to eliminate by this means the obstacles to the free movement of goods within the common market and to confirm and safeguard the unity of that market, it also permits the Community authorities to carry out certain positive, though indirect, action with a view to promoting a harmonious development of economic activities within the whole community, in accordance with Article 2 of the Treaty.78

In other words, from the case law of the Court in the 1960s it is safe to conclude that the Court saw in Article 85 in the first place an instrument to remove hindrances to market integration, not to protect rivalry or to combat 75

Grundig-Consten, section II.1. Consten and Grundig [1966] ECR 299, 343. 77 Case 23/67, Brasserie De Haecht v Wilkin-Janssen [1967] ECR 407, 415. 78 Case 14/68, Walt Wilhelm and others v Bundeskartellamt [1969] ECR 1, para. 5 (emphasis added). 76

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inefficiency. Although Article 85 would seem to be primarily linked to the objective of Article 3(f ) of the Treaty, namely, a system of undistorted competition in the Common Market, the case law of the 1960s seems to consider Article 3(f ) merely as a secondary consideration in the application of Article 85. Above all, the Court linked Article 85 to Article 2 of the Treaty: competition law was applied in the light of the highest overarching goal of the EEC; that of establishing a common market. In fact, one could say that the Court in its early judgments seemed to consider competition law instrumental to market integration—a conception of competition law that is specific to the European legal order and not inherent in Ordoliberal thought. Legal commentators have often criticized the Court for this order of priorities. We will argue, however, that over time the ECJ came to consider market integration as an objective inherent to competition law, rather than an overarching goal of the Treaty to which competition law was subordinate.

1.3.2 The 1970s and 1980s: Market Partitioning as an Obstacle to a ‘Competitive Market Structure’ The effect of agreements on market integration remained an important element in the case law under Article 85 in the 1970s, even as the Commission took aim at some hard-core price fixing cartels in Dyestuffs,79 Vereeniging van Cementhandelaren,80 and European Sugar Industry.81 The anticompetitive nature of price fixing is undisputed, so the fact that the Commission and the ECJ nevertheless continued to assess such agreements’ effects on market integration is indicative of the continued importance that the institutions attached to market integration. However, the relationship between market integration and undistorted competition started to change: instead of two autonomous goals of competition law, impediments to market integration became ipso facto distortions of competition, and anti-competitive practices came to be seen as an impediment to market integration. At the same time, in ruling for the first time in major Article 86 cases, the Court introduced the notion of a ‘competitive market structure’ (or in the phrasing of the Court, 79 Décision 69/243/CEE de la Commission du 24 juillet 1969, affaire IV/26.267—Matières colorantes, JO 1969 L195/11 (no English version), upheld: Case 48/69 Imperial Chemical Industries v Commission (‘Dyestuffs’) [1972] ECR 619. 80 Décision 72/22/CEE de la Commission du 16 décembre 1971, affaire IV/324—Vereeniging van Cementhandelaren, JO 1971 L13/34, upheld: Case 8/72 Vereeniging van Cementhandelaren v Commission [1972] ECR 977. 81 Commission Decision73/109/EEC of 2 January 1973 in Case IV/26 918—European sugar industry, OJ 1973 L140/17, partly annulled for lack of evidence of the involvement of several applicants: Case 40/73 Cooperatieve Vereniging Suiker Unie and Others v Commission (‘Suiker Unie’) [1975] ECR 1663.

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an ‘effective competition structure’) into European competition law, a concept which eventually accommodated both the goal of effective competition between firms and the goal of market integration.

1.3.2.1 Article 85: The Anticompetitive Nature of Market Partitioning In the Dyestuffs judgment (1972), the Court considered that the partitioning of the common market ipso facto led to a restriction of competition. The Commission had fined producers of dyes and pigments from several member states for practices by which they, on several occasions, almost simultaneously raised prices by the same percentage. The Court considered that by doing so, the producers effectively shielded themselves from foreign competition, making sure that a price increase on the national market did not motivate customers to shop abroad. This compartmentalization of the dyestuffs market led, in consequence, to a restriction of competition within the common market. As the ECJ stated, ‘differences in rates encourage the pursuit of one of the basic objectives of the Treaty, namely the interpenetration of national markets and, as a result, direct access by consumers to the sources of production of the whole community’.82 The cross-border price-fixing cartel therefore distorted the free flow of goods between member states and prevented a more efficient allocation of resources within the Community. The Court extended the reach of Article 85(1) to price-fixing agreements that confined themselves to the territory of a single member state in Vereeniging van Cementhandelaren (1972). The applicant argued that the Commission had no jurisdiction over a price agreement between cement dealers since it was a purely national cartel, limited to the territory of the Netherlands, which did not apply to imports or exports and which, as a consequence, did could have any effect on the patterns of trade between member states.83 The Court rejected this objection, holding that ‘[a]n agreement extending over the whole of the territory of a Member State by its very nature has the effect of reinforcing the compartmentalization of markets on a national basis, thereby holding up the economic interpenetration which the Treaty is designed to bring about and protecting domestic production’.84 It would later repeat this consideration in Remia (1984).85 The Commission in European Sugar Cartel (1973) condemned concerted practices between sugar manufacturers that isolated the markets of Belgium, West Germany, Italy, and the Netherlands by refusing to sell to operators wishing to import sugar into other member states, and by 82 83 84 85

Case 48/69, Dyestuffs, para. 116. Case 8/72, Vereeniging van Cementhandelaren, para. 26. Case 8/72, Vereeniging van Cementhandelaren, para. 29. Case 42/84, Remia BV and others v Commission [1985] ECR 2545, para. 22.

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exerting pressure on Belgian and Dutch dealers to do the same.86 These cases show an evolution in the application of Article 85 in that the ECJ, rather than assessing both the anticompetitive and the market-partitioning effect of a cartel, now started to consider market partitioning ipso facto as anticompetitive.

1.3.2.2 Pioneering Article 86 and the ‘Competitive Market Structure’ Under Article 86 EEC, the behaviour of a dominant firm was prohibited (‘incompatible with the common market’) when it (a) qualified as an abuse of a dominant position, and (b) was capable of affecting trade between member states. Article 86 also featured an illustrative list of potential abusive behaviour (sub-paragraphs (a) to (d)). In stark contrast to the cartel cases under Article 85, the Court and Commission did not pay much attention to market integration in the foundational period of Article 86 in the early 1970s. The first significant attempt to clarify the concept of abuse of dominance under Article 86 was under the auspices of the Commission, which in 1965 collaborated with a group of external experts in order to develop basic principles on, inter alia, the application of Articles 85 and 86 to concentrations. The resulting memorandum suggested that a dominant undertaking abused its dominant position when it acted wrongfully with regard to the objectives established by the Treaty.87 This means that the Commission considered a dominant undertaking’s conduct to be abusive when it was inconsistent with the objective of undistorted competition laid down in Article 3(f) EEC. It did not explicitly consider the importance of Article 86 for the promotion of market integration, perhaps due to a lack of experience with unilateral behaviour and its potential effects on cross-border trade. The ECJ had a couple of opportunities in the late 1960s and early 1970s to express its views on the substance of Article 86. In three separate preliminary rulings, the Court was asked whether a firm abused its dominant position when it used an industrial property right (trademark, exclusive right of distribution) to raise prices. The Court in all cases considered that although a high price was not in itself evidence of abuse of dominance, it could be a 86 European Sugar Industry, section IV.a: ‘[A]ccount should be taken of the fact that [ . . . ] the measures taken by those concerned are obviously contrary to the objective of integration of the markets envisaged in the Treaty. In this connection it should not be forgotten that the various practices are directed towards the same goal although the methods of implementing them vary according to the special features of the market concerned and the sugar supply situation. The effect of every such practice is to reduce to the minimum the possibilities of importing sugar freely without the control of the national producers’. (emphasis added) The Court too found that the concerted practice posed a threat to the single market. See Case 40/73, Suiker Unie, para. 33. 87 As the Memorandum explained, ‘[i]l y a exploitation abusive lorsque le comportement fautif au regard des objectifs fixés par le Traité’. Mémorandum sur la Concentration dans le Marché Commun (01.12.1965), reprint, Revue Trimestrielle de Droit Européen 2 (1966): 651–77, 676.

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‘determining factor’ for abuse if it was ‘particularly marked’ and ‘unjustified by any objective criteria’.88 The Court’s language was broad and vague, and it did not define crucial terms like ‘abuse of dominance’ or ‘objective justification’. It seems that the Court left the initiative for developing the principles of Article 86 to the Commission.89 But then the Commission in 1971 adopted its decision in the Continental Can case, introduced above.90 In this case, when Continental Can acquired control of Dutch rival Thomassen through its European subsidiary, Europemballage, the Commission decided that the acquisition strengthened Continental Can’s dominant position and that this ‘irreversible modification of the structure of the supply-side of the market’91 constituted an abuse of dominance under Article 86. This was the first time the Commission analysed alleged anticompetitive conduct on the basis of its effect on market structure. Also remarkable is that the Commission considered that the merger threatened the realization of a single market between member states on the grounds that merger would bring an end to the cross-border trade between the merging parties. It is unclear why the Commission did not consider a cross-border merger to be a symptom of market integration. Of particular interest in this case are the considerations of the Advocate General and the ECJ on the applicability of Article 86 to concentrations between firms. It was not until 1989 that the Community adopted its first merger regulation,92 and the possibility of applying the Treaty provisions to concentrations was far from self-evident. Advocate General Roemer, in contrast to the ECJ, did not primarily follow a teleological approach towards the interpretation of EU law. Rather, he suggested an approach that combined an analysis of the original intent of the drafters of the Treaty with an attempt to derive common principles of law from the legal traditions of the EEC’s member states and to transpose them to the European level.93 Taking this approach, he considered that the wording of Article 86 did not condemn either a position of monopoly or even an attempt at creating a monopoly

88 Case 78/70, Deutsche Grammophon/Metro SB [1971] ECR 487, para. 19. Similarly, see Case 40/70, Sirena v Eda [1971] ECR 69, para. 17. 89 Gerber, Law and Competition in Twentieth Century Europe, 357. 90 Décision 72/21/CEE, Continental Can. 91 Décision 72/21/CEE, Continental Can, recital 24 (our translation). 92 Council Regulation (EEC) No. 4064/89 of 21 December 1989 on the control of concentrations between undertakings, OJ 1989 L257/90. 93 In this light, Grilli describes Roemer’s methodology for constructing European law as ‘ius commune in reverse’. See Antonio Grilli, ‘Aux origins du droit de l’Union Européenne: le “ius commune” national dans les conclusions des avocats généraux Karl Roemer et Maurice Lagrange (1954–1964)’, The Legal History Review 76 (2008), 155–72.

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as long as this was not done by unfair means. A regular merger such as the one under investigation was not an unfair means of restricting competition.94 Moreover, as the Advocate General argued, the drafters of the Treaty were familiar with Section 2 of the US Sherman Act, and had they wished to extend the scope of Article 86 to acts of ‘monopolization’ along the lines of Section 2, they would not have phrased Article 86 the way that they did.95 The Advocate General suggested that instead of an extensive interpretation of Article 86, it was more appropriate to adhere to a narrow interpretation, considering that Article 86 was a ‘drastic’ provision containing a prohibition sanctioned by a penalty.96 Based on a teleological interpretation of the Treaty, the Court came to the opposite conclusion. It began by stating that Articles 85 and 86 pursued the same objective: ‘Articles 85 and 86 seek to achieve the same aim on different levels, viz. the maintenance of effective competition within the common market’.97 It considered that the scope of application of Article 86 was to be determined on the basis of ‘the spirit, general scheme and wording of article 86’, as well as ‘the system and objectives of the treaty’.98 Then the ECJ stated that ‘if Article 3 (f ) provides for the institution of a system ensuring that competition in the common market is not distorted, then it requires a fortiori that competition must not be eliminated’.99 The Court held that Article 86 could be applied to mergers that resulted, by way of their effect on the structure of the market, to such a dominant position that ‘any serious chance of competition’ would be practically eliminated.100 As explained earlier, the Court annulled the Commission’s decision on the basis that the Commission had not sufficiently proven that the merger eliminated all competitive restraints on the merged entity but it added, importantly, that Article 86 did not impose such a strict precondition. In the further case law under Article 86 in the 1970s we witness that the Court openly took a structuralist approach to abuse of dominance. Whereas ‘trade between Member States’ was previously understood in terms of the ‘flow of cross-border trade’ and ‘freedom to trade beyond national borders’, the Court increasingly spoke of the competitive structure in the Common Market. 94

Opinion of Advocate General Roemer in Continental Can [1973] ECR 215, 254. Opinion of Advocate General Roemer in Continental Can [1973] ECR, 256. The Advocate General acknowledged that the absence of merger control within the Community was a serious lacuna in the law, but considered that Article 86 was nevertheless unsuitable for this purpose. See Opinion of Advocate General Roemer in Continental Can [1973] ECR, 256. 96 Opinion of Advocate General Roemer in Continental Can [1973] ECR, 255. 97 Case 6/72, Continental Can, para. 25. 98 Case 6/72, Continental Can, para. 22. 99 Case 6/72, Continental Can, para. 24. 100 Case 6/72, Continental Can, para. 25. 95

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In Commercial Solvents (1974), the Court considered that a manufacturer (CSC) abused its dominant position when it stopped supplying raw materials to a downstream competitor (Zoja) who had been a long-standing customer.101 Since the ECJ in Continental Can had indicated that an abuse of dominance did not require an elimination of all competition from the market, the Commission in this case based its argument on the fact that the elimination of a major customer constituted a ‘grave attack on the conditions of effective competition on the common market’.102 The Court considered that a dominant undertaking which ceased to supply one of the principal manufacturers in the downstream market and thus eliminated competition on the part of this customer, was abusing its dominant position within the meaning of Article 86.103 The ECJ in this case gave no regard to the actual effect of the refusal to supply on consumer welfare. It did not investigate whether Zoja actually needed the supply of raw material by CSC, so as to establish that Zoja would indeed be eliminated from the downstream market, leaving that market in the hands of CSC.104 Moreover, the Court did not assess whether CSC was able to produce the downstream product at a lower cost, and whether CSC would face sufficient competitive constraints in order to pass those advantages on to consumers. What is more, despite the fact that it would have been easy for the Court to justify an assumption of reduced rivalry as a consequence of the elimination of a major producer of finished products from the market, the Court did not comment on any such likely effect. This suggests that the Court aimed to convey the message that the actual effects of the behaviour of a dominant firm on competition were irrelevant if it was established that the behaviour potentially affected the competitive structure of the Common Market. Moreover, the ECJ did not explicitly consider the effects of CSC’s behaviour on market integration. It applied the condition of ‘effect on trade between Member States’ in a purely jurisdictional manner: once it was established that the competitive structure within the common market was affected, Community law applied.105 The Court’s considerations about the effects of a firm’s conduct on the competitive structure of the Common Market were not limited to the scope of Article 86; this was a general statement, and it applied to Article 85 as well.106 From today’s perspective, the consequence of the ‘competitive market 101 Cases 6/73 and 7/73, Istituto Chemioterapico Italiano SpA and Commercial Solvents Corp v Commission [1974] ECR 223. 102 Décision 72/457/CEE de la Commission, du 14 décembre 1972, affaire IV/26.911—ZOJA/ CSC—ICI, OJ 1972 L299/51, section II.C. 103 Cases 6/73 and 7/73, Commercial Solvents, para. 25. 104 Cases 6/73 and 7/73, Commercial Solvents, para. 26. 105 Cases 6/73 and 7/73, Commercial Solvents, paras. 31–3. 106 Cases 6/73 and 7/73, Commercial Solvents, para. 31.

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structure’ paradigm for the relationship between competition law and market integration was twofold. In the first place, it confirmed that competition law was primarily concerned with impediments to competition: the partitioning of markets was a competition law problem and was for that reason subject to the prohibitions of Articles 85 and 86. Competition had thus become a goal in itself, and competition law became more Ordoliberal.107 In the second place, it was an important ideological step. No longer did the Court consider the European economic landscape to be one of national markets in the process of integration; rather, it started from the presumption of a single European market with a competitive market structure.108

1.3.2.3 Continued Focus on the Anticompetitive Nature of Market-partitioning Conduct in the Late 1970s and Early 1980s In United Brands (1978), the Court supported the Commission’s finding of abuse in the sales conditions between dominant banana operator United Brands Company (UBC) and European distributors/ripeners, by which the latter were prohibited from reselling green (pre-ripened) bananas of UBC’s Chiquita brand. Important in this regard is that UBC ripened and distributed Chiquita bananas both through vertically integrated dealers and through independent third parties, and that the price of Chiquita bananas differed significantly between member states. Once bananas were ripened, they could no longer be distributed without affecting their quality. With regard to the agreement’s effect on trade between member states, the Commission found that the sales conditions prevented cross-border competition between distributors, so that they led to a partitioning of the market.109 The Court upheld this part of the decision on appeal. In particular, the Court explained that the restriction on reselling went beyond what might have been necessary for the purpose of maintaining quality standards, and therefore constituted an abuse of UBC’s dominant position.110 107 For background and discussion of some of the arguments and strategy in the Continental Can case, see Heike Schweitzer, ‘The History, Interpretation and Underlying Principles of Section 2 Sherman Act and Article 82 EC’, in European Competition Law Annual 2007: A Reformed Approach to Article 82 EC, Claus-Dieter Ehlermann and Mel Marquis (eds) (Oxford: Hart Publishing, 2008), 119–64. 108 In 1974, however, most observers would predominantly have linked the Court’s considerations to the Structure-Conduct-Performance paradigm of the Harvard School, the dominant economic school of thought in the US from the 1950s until the 1970s. Harvard School scholars took the view that active control of a market’s competitive structure could boost the industry’s economic performance. See, eg, Joe S. Bain, Barriers to New Competition: Their Character and Consequences in Manufacturing Industries, 1st edn (Cambridge, MA: Harvard University Press, 1956). 109 Commission Decision 76/353/EEC of 17 December 1975 in Case IV/26699—Chiquita, OJ 1976 L95/1, section II.A.3. 110 Case 27/76, United Brands Company and United Brands Continentaal BV v Commission [1978] ECR 207, paras. 130–62.

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In two further cases, Hoffmann-La Roche and Michelin, the Commission expanded the scope of Article 86 to include rebate schemes. Hoffmann-La Roche (1979) was a dominant vitamin manufacturer that concluded agreements with its purchasers containing the obligation or, by means of fidelity rebates,111 the incentive for purchasers to obtain from Roche all or most of their vitamins. Most of the contracts moreover contained a so-called ‘English clause’.112 The Commission found that these contract clauses were abusive for two reasons. Firstly, they induced purchasers to buy solely from Roche, thereby restricting competition between vitamin manufacturers.113 Secondly, the Court found that the English clause, in combination with Roche’s guarantee to match the best prices on the local market, in fact facilitated a partitioning of the common market.114 Market partitioning was also at the heart of the Michelin judgment (1983). The Commission had found that Michelin, a dominant tyre manufacturer, had granted rebates to customers in order to secure their fidelity and effectively remove their ability to switch freely to alternative suppliers. Michelin granted selective rebates to customers in the Netherlands who sold, on an annual basis, more than an individualized sales target. With regard to the effect of the rebates on the achievement of a single market within the Community, the Commission considered, in line with the Court’s considerations in Vereeniging van Cementhandelaren, that a rebate extending over the entire territory of the Netherlands made it more difficult for other producers to penetrate the Dutch market for tyres.115 The Court supported the Commission in this respect. Michelin and the French government claimed that the Commission had erred by finding that the rebates affected trade between member states on a ‘purely abstract and theoretical analysis’.116 The Court rejected this claim, considering that patterns of cross-border trade existed on the Community market for tyres, and that ‘Article 86 does not require it to be proved that the abusive conduct has in fact appreciably affected trade between Member

111

A fidelity rebate is a discount granted by the supplier on condition that the purchaser obtains all or a large part of its total input exclusively or preferentially from the supplier. 112 An English clause allows the purchaser to obtain its supplies from other sources on more favourable terms, unless the supplier decides to match those terms and offer the purchaser an equally attractive deal. 113 Commission Decision 76/642/EEC of 9 June 1976 in Case IV/29.020—Vitamins, OJ 1976 L223/27, para. 24. 114 Decision 76/642/EEC Vitamins, para. 105. 115 Commission Decision 81/969/EEC of 7 October 1981 in Case IV.29.491—Bandengroothandel Frieschebrug BV/NV Nederlandsche Banden-Industrie Michelin, OJ 1981 L353/33, recital 51. 116 Case 322/81 NV Nederlandsche Banden Industrie Michelin v Commission (Michelin) [1983] ECR 3461, para. 102.

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States but that it is capable of having that effect’.117 However, the Court did not explicitly mention the objective of market integration. In the 1980s the Commission continued to intervene against practices that posed a threat to the attainment of a single market between Member States. In British Leyland (1984) the Commission condemned practices that had a restrictive effect on the import of cars into the United Kingdom. In the decision, which was held up on appeal,118 the Commission showed particular concern for impediments to the free movement of goods and to the economic interpenetration sought by the EEC Treaty.119 In Eurofix-Bauco v Hilti (1987) the Commission found that a producer abused its dominant position when it induced Dutch distributors not to supply to customers in the United Kingdom.120 The Commission and the ECJ also kept refining their approach to distribution agreements. The Commission continued to find infringements of Article 85(1) in distribution agreements under which distributors were prohibited or discouraged from exporting to other EEC member states, since such restrictions inevitably led to the isolation of a part of the Common Market.121 But the Commission also acted on the basis of the perceived anticompetitive nature of selective distribution systems. It held that in a selective distribution system producers had to ensure competition between distributors by allowing them to determine prices at their own discretion (SABA,1975).122 The ECJ, in supporting the Commission, added that a selective distribution system was compatible with Article 85(1) as long as resellers were chosen on the basis of non-discriminatory, objective criteria.123 In the same vein, the Court held that admission to a selective distribution network could not be made conditional upon a minimum sales requirement (Lancôme, 1980).124 Finally, the 117

Case 322/81, Michelin, para. 104. Case 226/84, British Leyland Plc v Commission [1986] ECR 3263. 119 Commission Decision 84/379/EEC of 2 July 1984 in Case IV/30.615—BL, OJ 1984 L207/11, recital 29. 120 Commission Decision 88/138/EEC of 22 December 1987 in Cases IV/30.787 and 31.488— Eurofix-Bauco v Hilti, OJ 1988 L65/19, para. 76. 121 Commission Decision 76/915/EEC of 1 December 1976 in Case IV/29.018—Miller International Schallplatten GmbH, OJ 1976 L357/40 and Commission Decision 78/163/EEC of 20 December 1977 in Case IV/28.282, The Distillers Company Limited, OJ 1978 L50/16, upheld respectively in Case 19/77, Miller International Schallplatten GmbH v Commission [1978] ECR 131 and Case 30/78, Distillers Company Limited v Commission [1980] ECR 2229. 122 Commission Decision 76/159/EEC of 15 December 1975 in Case IV/847—SABA, OJ 1975 L28/19, para. 43. 123 Case 26/76, Metro SB-Großmärkte GmbH & Co. KG v Commission [1977] ECR 1875, para. 20. Similarly, see Case 126/80, Maria Salonia v Giorgio Poidomani and Franca Baglieri, née Giglio [1981] ECR 1981. 124 Case 99/79, SA Lancôme and Cosparfrance Nederland BV v Etos BV and Albert Heijn Supermarkt BV [1980] ECR 2511. 118

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Commission fined a producer of consumer electronics, not on the basis of the formal criteria of its selective distribution system but for the systematic discriminatory application of those criteria (AEG, 1982).125 Agreements between companies could thus also be considered anticompetitive independent of their effect on market integration. However, where companies’ conduct led to the partitioning of the Common Market, this in itself was considered to have anticompetitive effects. This reinforces the suggestion that effective competition (or a ‘competitive market structure’) was the ultimate goal of Articles 85 and 86. Whereas in the 1960s market integration was treated as a separate or even overarching goal of competition policy, by the 1970s market partitioning had become one of many anticompetitive practices that triggered the application of European competition law. Summing up, from the foundational period in the 1960s until the 1980s the ECJ applied competition law in a largely continuous manner, with each case building on precedents rather than on the industrial policy paradigm of the moment. In its early days, the Court still seemed willing to subordinate competition law to the higher economic policy goal of market integration. However, when the paradigm shifted in the 1970s, and the ECJ came to consider market integration as an inherent element of European competition law, the last elements of industrial or economic policy disappeared from the Court’s application of competition law. It can indeed be argued that from the late 1970s the Court’s application of the competition rules has been focused on only one policy goal laid down in the Treaty: that of protecting free competition in the European internal market.

1.4 Conclusions The approaches of the Commission and the ECJ to EEC competition law in the early years developed in close interaction. Yet the underlying discourses—to the extent they can be reconstructed—differed markedly. For the Commission, the standard account of an intellectual and political hegemony of German Ordoliberals from 1962 to 1981 must be rejected. Ordoliberal ideas, principles, and networks were indeed important and influential, but they constituted just one among other intellectual and political networks which attempted to shape competition policy. In particular, there was a competing ‘Keynesian conception of competition policy’, which ultimately flourished during the 1970s. The group promoting this alternative 125 Commission Decision 82/267/EEC of 6 January 1982 in Case IV/28.748—AEG-Telefunken, OJ L117/15, upheld: Case 107/82, AEG-Telefunken AG v Commission [1983] ECR 3151.

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conception was built up by Social-Christians and Social-Democrats. For them, the fundamental political interest was not the market; it was planning for European competitiveness, democratic accountability, and neo-corporatism. These alternative conceptions created tensions and caused hesitation. In addition, the freedom of action of DG IV was seriously curtailed by the College of Commissioners and by the Council. The challenge, therefore, was to get the backing of both groups in defining the contours of competition policy and in deciding the early cases. The practical design of EEC competition policy did not follow a German Ordoliberal program, but rather developed its own logic, as evidenced, for example, by the focus on vertical agreements instead of horizontal cartels. The ECJ, on the other hand, had to work with the cases that came its way, either as appeals against Commission decisions or as preliminary questions from national courts. It is therefore not surprising that the competition policy of the Commission (ie the choice of what type of cases to pursue) is reflected in the historical case-by-case development of competition law. Nevertheless, compared to the political diversity within the Commission, which led to ideological struggles as to the priorities of European competition policy, the Court’s case law did not display traits of internal struggles, but evolved smoothly. This is at least the impression created by the texts of the judgments, although they may not tell the whole story. The Court’s broad agreement on the goal of European integration and on the importance of integration through law may go a long way toward explaining this stability. Together with an apparent agreement on the methods of legal interpretation, on the importance of the rule of precedents for building up a new legal order and the concentration on the decision of the cases that were before them, it may provide a tentative explanation of why the diverse personal backgrounds of the judges did not translate into ideological changes of the Court’s jurisprudence. Market integration—deeply engrained in the structure of the Treaty of Rome—was not questioned as an imperative principle of European competition law. The Court realized at an early stage that effective competition and the efficient allocation of resources within the Common Market was conditional upon removing and preventing the establishment of (private) barriers to trade between member states. Whereas market integration was initially considered an autonomous and somewhat ‘foreign’ objective of competition law (STM and Consten and Grundig), it was soon recognized as a condition for effective competition, and any conduct by one or more firms with the effect of hindering or reversing market integration became an ipso facto competition law violation. The Court thus dismissed the danger of a multi-value European competition law with an increased risk of conflicts between values and of inconsistent development of the law.

2 The Drafting and the Role of Regulation 17 A Hard-Fought Compromise Lorenzo Federico Pace and Katja Seidel

2.1 Introduction The introduction of competition rules in the European Coal and Steel Community (ECSC) and a few years later in the Treaty establishing the European Economic Community (EEC) marks a cultural sea change in Western Europe: from a cartelization era, Europe moved towards a competition-based culture.1 In the first half of the 20th century, cartels had been largely considered as an accepted means for individuals to exercise their right of private initiative. In 1957, when the EEC Treaty was signed, none of the six signatory countries had rules on competition law in the way that we understand them today; that is, laws setting out cartel prohibition and preventing the abuse of a dominant position. In Germany, as the first member state of the EEC to introduce such legislation, the Gesetz gegen Wettbewerbsbeschränkung (GWB) only entered into force in January 1958, not by chance on the same day the EEC Treaty (and its competition law provisions) came into operation.2 While influenced by national traditions and discussions at the level of the member states, the EEC played an instrumental role in making antitrust provisions a central component of Europe’s legal culture and in discrediting the pro-cartel attitude that had prevailed until the end of the Second World War.3 The 1 See, eg, Brigitte Leucht, ‘Tracing European Mentalities: Free Competition in Post-WWII-Europe’, in Cultures politiques, opinions publiques et intégration européenne, Marie-Thérèse Bitsch, Wilfried Loth, and Charles Barthel (eds) (Brussels: Bruylant, 2007), 337–53. 2 On the evolution of national competition laws in France, Germany, Italy, Spain, and the United Kingdom since the 1930s, see the contributions in The impact of the Commission’s guidance on Article 102, Lorenzo Federico Pace (ed.) (Cheltenham and Northampton, MA: Edward Elgar Publishing, 2011). 3 On this point and for a list of international cartels in force in 1932, see Lorenzo Federico Pace, European Antitrust Law: Prohibitions, Merger Control and Procedures (Cheltenham and Northampton, MA: Edward Elgar, 2007), 8.

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importance of EEC competition law was further strengthened with Regulation 17/62, which set out the rules for the implementation of Articles 85 and 86 of the Treaty (now Articles 101 and 102 TFEU). In the negotiations leading to the Treaties of Rome and later in the bargaining over Regulation 17/62, the major national economic traditions clashed, above all those of France and Germany. In this chapter we argue that, while the text of Article 85 showed a strong French influence, Regulation 17/62— and thus the procedural rules governing the implementation and public enforcement of substantive competition law—rather reflected the German economic and legal tradition and understanding of competition, a tradition which was at the time well represented at the level of the Commission and in the Internal Market Committee of the European Parliament. Secondly, we contend that despite some conflicts, the overall consensus and the real objective of Regulation 17/62 was to create a competition law culture in Europe, and that this goal partly explains the particular shape of Regulation 17/62 and the public enforcement system established by it. In Regulation 17/62, Article 85 EEC was interpreted as a strict prohibition of agreements and concerted practices in restraint of competition—a prohibition unknown in most member states. A major feature of the Regulation was that, to a large degree, it centralized public enforcement at the European level. In order to ensure the uniform application of Article 85 throughout the member states, a strong incentive to notify agreements to the Commission was introduced, and the Commission had exclusive powers to grant exemptions. The notification system of Regulation 17/62 became the ‘transmission belt’ that ‘exported’ the new prohibition to each of the member states’ competition laws.4 These centralizing features (and the lack of a competition culture) also explain the irrelevance, at that time, of the private enforcement of these prohibitions. These factors, and the corresponding autonomy that the member states conceded to the Commission in the enforcement of the antitrust provisions of the Treaty, opened up what was, for Europe, a revolutionary way of regulating relations between undertakings through the hitherto little-known antitrust provisions. In this way, it forced acceptance of the view that, for example, collusion between undertakings was not in the public interest but was harmful to the general good. Our analysis is based on a wide range of historical sources and legal texts as well as on the legal, economic, and historical literature. This, together with our aim to underline the importance of earlier experiences for the emergence 4 On the shift from the abuse principle to the prohibition principle with regard to anticompetitive agreements in the national legislation of selected member states, see the contributions in The impact of the Commission’s guidance on Article 102.

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of EEC competition law, sets this chapter apart from previous writings on the subject. Furthermore, in order to better grasp the shape of Regulation 17/62 and the way it was first applied by the Commission, we conduct our analysis in light of both the global and European economic circumstances in the first part of the 20th century (which could be called the ‘cartelization period’) and the drafting of the EEC antitrust prohibitions. Since these aspects are closely intertwined, any research endeavour that fails to take them into consideration would reach only partial or incorrect conclusions.5 This is the case with some of the more recent literature on early EEC competition policy. Some recent studies have tried to refute the long-standing claim that European competition policy drew heavily on Ordoliberal ideas, a view which is essentially based on David Gerber’s seminal book Law and Competition in Twentieth Century Europe.6 Pinar Akman and Hussein Kassim claim, for example, that EU competition policy did not have Ordoliberal origins. However, to disprove the Ordoliberal influence the authors focus solely on the Treaty negotiations and the Articles on competition. They fail to extend their analysis to the immediate post-war period and to Regulation 17/62, the latter instrument being, alongside the relevant Treaty Articles, the cornerstone of European competition policy.7 As this chapter will demonstrate, the impact of the German experience on the emergence of a European competition policy actually became stronger once the EEC started operating. However, Gerber’s classic interpretation has certain limitations: in particular, he underestimates the French role in the creation of Articles 85 and 86. Moreover, perhaps due to the wide scope of his study, his analysis of Regulation 17/62 is cursory and incomplete. Furthermore, his analysis contains flaws that would have been avoided if he had studied primary source materials.8 In the end, Gerber tells us very little about the different aims and ideas that have influenced the competition rules in the EEC Treaty and Regulation 17/62, or the actors involved in the drafting of the Regulation. In the debate about the Ordoliberal origins of European competition law (a concept often much too vague),9 this chapter occupies a middle ground, 5

See, eg, Pace, European Antitrust Law, 3–33, 70, 100. David Gerber, Law and Competition in Twentieth Century Europe: Protecting Prometheus (Oxford: Clarendon Press, 1998). 7 Pinar Akman and Hussein Kassim, ‘Myths and Myth-Making in the European Union: The Institutionalization and Interpretation of EU Competition Policy’, Journal of Common Market Studies 48 (2010), 111–32; Pinar Akman, ‘Searching for the Long-Lost Soul of Article 82 EC’, Oxford Journal of Legal Studies 29 (2009), 267–303, 267. 8 For example, Gerber falsely attributes the drafting of Regulation 17/62 to Arved Deringer, then a member of the European Parliament. Gerber, Law and Competition, 348–51. 9 On the meaning and content of the Ordoliberal idea, see Ernst-Joachim Mestmäcker, ‘The development of German and European competition law with special reference to the EU Commission’s Article 82 Guidance of 2008’, in The impact of the Commission’s guidance on Article 102, 39. 6

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demonstrating the crucial French influence on the prohibition of Article 85 EEC and showing that the emerging European competition policy was not about uploading a theoretical framework, such as the Ordoliberal idea of competition, to the European level. Rather, it argues that the German experience and the idea of the role of competition law in the economy that had formed in the course of discussions among a community of politicians, economists, lawyers, and academics10 on the problems of cartelization and competition since the Nazi period had a major impact on shaping European competition culture and European thinking about the role of competition in the Common Market mainly after 1958; that is once a relevant practical experience with regard to the enforcement of antitrust rules had been established in domestic economic policy-making, and predominantly at the level of procedural law. This practical experience, and the changing competition culture, influenced not only the drafting compromise contained in Regulation 17/62 but also the trajectory of EEC competition law in the first years after the enactment of Regulation 17/62.11 However, at the European level these ideas underwent changes and adaptations. The Regulation implementing Articles 85 and 86 was a compromise reflecting the concerns and preferences of other member states too. Moreover, the evolution of European competition law was closely linked to the goal of fostering European integration and to realizing a common market, substantively as well as procedurally. These were concerns specific to European competition law, with no counterpart in the original Ordoliberal discourse.12 The rules and procedures enshrined in Regulation 17/62 reflected these concerns. This chapter thus fills an important gap in research on the emergence and application of EEC competition law. In order to explain the move towards, and the outlines of, a European-level competition culture, it covers the drafting and implementation of Articles 85 and 86 (section 2), the drafting and negotiation of Regulation 17/62 (section 3), the enforcement system set up by Regulation 17/62 (section 4) and an evaluation of the ‘ebb’ of the Regulation, which was replaced in 2003 by Regulation 1/2003 (section 5).

10 Among academic works, see in particular Franz Böhm, Wettbewerb und Monopolkampf. Eine Untersuchung zur Frage des wirtschaftlichen Kampfrechts und zur Frage der rechtlichen Struktur der geltenden Wirtschaftsordnung (Berlin: Heymann, 1933). 11 On this point, see the direct experience of Professor Korah in these years in Valentine Korah, ‘Guidance on the Commission’s Enforcement Priorities’, in The impact of the Commission’s guidance on Article 102, 8. 12 Hans von der Groeben laid out these goals of EEC competition policy in his article ‘Policy on competition in the EEC’, EEC Bulletin (Supplement), no. 7/8 (July/August 1961), 3–30.

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2.2 The Drafting and Implementation of Articles 85 and 86 EEC A first experiment with antitrust rules at the European level came with the ECSC competition prohibitions. While the Schuman declaration of May 1950 did not contain any explicit reference to cartel regulation,13 on 4 October 1950 Monnet warned the heads of the national delegations that, if there were no clear rules prohibiting cartels, the American government would not give any financial support to the coal and steel project.14 Thus, American pressure— and the US Embassy’s working group in Paris which helped to draft the provisions15—played an important role in the origins of European competition law.16 The drafting of the ECSC competition rules, even if the text was quite different from that of the EEC Treaty, was the first occasion where competition between undertakings was foreseen as the basic principle of trade between European member states. While Articles 65 and 66 were designed for the specific conditions of the coal and steel market, the competitive principle was here to stay and was carried through to the negotiations on the Treaty of Rome, where Articles 65 and 66 served as one of the models for Articles 85 and 86.17 In the negotiations on the EEC Treaty, US pressure was no longer needed: the parties themselves considered competition law provisions to be a necessity. In view of the then-heavily cartelized European economy, the negotiations focused on the issue of cartels more than on anticompetitive unilateral conduct. With regard to anticompetitive agreements, the legal cultures of the two most important economies of the six ‘would-be’ EEC member states, France and Germany, clashed.18

13 Wyatt C. Wells, Antitrust and the Formation of the Postwar World (New York: Columbia University Press, 2002), 163. 14 See Dokumente zum Europäischen Recht, Vol. 3, Reiner Schulze and Thomas Hoeren (eds) (Berlin: Springer Verlag), xxi. 15 See Brigitte Leucht, ‘Transatlantic policy networks and the formation of core Europe’ (PhD diss. University of Portsmouth, 2008), 56, 197. 16 See Lorenzo Federico Pace, I fondamenti del Diritto antitrust europeo: norme di competenza e sistema applicativo dalle origini alla Costituzione europea (Milan: Giuffrè, 2005), 52; Pace, European Antitrust Law, 21. See also Schulze and Hoeren, Dokumente, xxi and document no. 7; Wells, Antitrust and the Formation, xxi. 17 On the question of continuity, see Brigitte Leucht and Katja Seidel, ‘Du Traité de Paris au règlement 17/1962: ruptures et continuités dans la politique européenne de concurrence, 1950–1962’, Histoire, Economie et Société 27 (2008), 35–46. 18 On the drafting of Article 85 and 86 EEC generally, see Pace, European Antitrust Law, 65 ff. and 111 ff.

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2.2.1 The Drafting of Article 85 EEC and its Enforcement The wording of Article 85 was strongly influenced by the French legislation on agreements between enterprises, and built on the antitrust provisions France had introduced at the national level in 1952. These laws expressed a clear policy choice as to how agreements between undertakings were to be legally appraised. Germany, by contrast, did not yet have a final version of its own antitrust laws at its disposal when the EEC Treaty was negotiated. Therefore, the Bonn government could not put forward a clear position on competition policy regarding the assessment of agreements between undertakings.

2.2.1.1 The Situation in Germany Already before the First World War, Germany was denoted as the ‘land of cartels’. A report from 1920 listed more than 2,100 German cartels. That same year, the German state enacted a somewhat primitive version of cartel laws.19 Although these laws did not make cartels unlawful, they prohibited the abuse of cartel agreements. By the early 1940s, partly as a consequence of this economic policy choice, Germany’s economy was organized on the basis of cartels rather than competition.20 At the end of the Second World War, the Occupying Powers in Germany enacted a law on decartelization.21 The government of the Federal Republic subsequently established a Study Commission to draft laws to safeguard competition. The Study Commission finished its work just as the discussion 19 On the origins of cartelization in Germany, see Chapter 3, this volume. For detailed studies on the regulation of cartels in Germany, see Ferdinand Baumgarten, and Artur Meszleny, Kartelle und Trusts— Ihre Stellung im Wirtschafts- und Rechtssystem der wichtigsten Kulturstaaten (Berlin: Verlag von Otto Liebmann, 1906); Clemens Lammers, Kartellgesetzgebung des Auslandes—Bericht an den Völkerbund für die internationale Wirtschaftskonferenz (Berlin: Carl Heymanns Verlag, 1927), 104; Kurt Wiedenfeld, Kartelle und Konzerne (Berlin: Walter de Gruyter & Co, 1927); Oswald Lehnich, Kartelle und Staat unter Berücksichtigung der Gesetzgebung des In- und Auslandes (Berlin: Verlag von Reimar Hobbing, 1928); Clemens Lammers, Internationale Industrie-Kartelle (Völkerbunds-Denkschrift) (Berlin: Carl Heymanns Verlag, 1930), 140; Erich Ertel, Internationale Kartelle und Konzerne der Industrie (Stuttgart: C.E. Poeschel Verlag, 1930); Horst Wagenführ, Kartelle in Deutschland (Nürnberg: Verlag der Hochschulbuchhandlung Krische & Co, 1931); Horst Wagenführ, Kartellverträge—Deutsche ausländische und internationale Kartellverträge im Wortlaut (Nürnberg: Verlag der Hochschulbuchhandlung Krische & Co, 1931); Horst Wagenführ, Kartellgesetzgebung in Deutschland (Nürnberg: Verlag der Hochschulbuchhandlung Krische & Co, 1933); Fritz Werr, Internationale Wirtschaftszusammenschlüsse (Kartell und Konzern) und Staat als Vertragspartner (Berlin: Heymann, 1936); Heinrich Friedländer, Die Rechtspraxis der Kartelle und Konzerne in Europa (Zurich: Polygraphischer Verlag, 1938); Fritz Hausmann, Konzerne und Kartelle im Zeichen der ‘Wirtschaftslenkung’ (Zurich: Verlag für Recht und Gesellschaft AG, 1938); Emil Eggmann, Der Staat und die Kartelle (Zurich: Dr H. Girsberger Verlag, 1945). 20 Mestmäcker, ‘The development of German and European competition law’, 34. 21 Harold Rasch, ‘Kartellverbot und Grundgesetz’, Wirtschaft und Wettbewerb (1955), 679.

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on the antitrust rules of the Treaty of Rome was taking place. This caused certain difficulties for the German representatives in the Treaty drafting group.22 In order to understand the position defended by the Federal Republic of Germany during the negotiations on the Treaty of Rome, one needs to bear in mind that there was a fierce debate in Germany on the issue of which cartel legislation model should be adopted. One school of thought advocated the Verbotsprinzip (principle of prohibition) whereas another favoured the Missbrauchsprinzip (principle of abuse).23 The first group, influenced by the political and economic disaster of Nazi Germany, maintained that in order to safeguard individuals’ rights of economic initiative, it was necessary to prohibit any kind of horizontal agreement between undertakings (and thus, cartels). Furthermore, that school of thought contended that the dispersion of economic power and a generalized recognition of the right of economic initiative would promote social justice.24 From a legal point of view, according to this approach, anticompetitive agreements between companies would have no legal force. They would acquire legal force only after being notified to a particular regulatory body.25 By contrast, the supporters of the principle of abuse advocated laws that would prohibit cartels and deprive them of legal effect only ex post, after it had been ascertained that the agreement was illegal.26 This option would have left the situation not dissimilar to the previous period, as the prohibition would have been applied, as in the French experience, on an ex post, case-by-case basis and not as an ex ante general rule. The philosophy that was adopted in the 1957 German Law on Competition was the principle of prohibition, subject to certain specific exemptions. Regulation of vertical agreements fell under a different law (Article 15 et seq. 22

See Schulze and Hoeren, Dokumente. On this point, see Knut Wolfgang Nörr, Die Leiden des Privatrechts—Kartelle in Deutschland von der Holzstoffkartellentscheidung zum Gesetz gegen Wettbewerbsbeschränkungen ( J.C.B. Mohr, Tübingen, 1994), 203; Ernst-Joachim Mestmäcker, ‘Der Böhm-Entwurf eines Gesetzes gegen Wettbewerbsbeschränkungen’, Wirtschaft und Wettbewerb (1955), 285; Wolfram Doerinkel, ‘Abriß der 1. Lesung des Kartellgesetzentwurfs im Bundestag’, Wirtschaft und Wettbewerb (1955), 572; Rasch, ‘Kartellverbot und Grundgesetz’, 679; Werner Benisch, ‘Zur Problematik eines gesetzlichen Schutzes des Leistungswettbewerbs’, Wirtschaft und Wettbewerb (1955), 421; Werner Benisch, Ist das Kartellverbot Grundgesetzwidrig?, in Der Betrieb (1956), 37. See also Harold Rasch, Wettbewerbsbeschränkungen Kartell- und Monopolrecht; Kommentar zum Gesetz gegen Wettbewerbsbeschränkungen, 2nd edn (Herne: Verlag Neue Wirtschafts-Briefe, 1958). 24 See Andreas Heinemann, Die Freiburger Schule und ihre geistigen Wurzeln (Munich: VVF, 1989). 25 Franz Böhm, ‘Verstößt ein gesetzliches Kartellverbot gegen das Grundgesetz?’, Wirtschaft und Wettbewerb (1956), 173. 26 Rudolf Isay, ‘Wirtschaftliche und rechtliche Konsequenzen des Böhm-Entwurfs’, Wirtschaft und Wettbewerb (1955), 339. 23

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of the GWB) which was not based on the principle of prohibition. The German antitrust law was approved in 1957 and entered into force on 1 January 1958, the date the Treaty of Rome took effect, including its antitrust provisions. The reasons why the principle of prohibition prevailed over the abuse principle are multifaceted and complex. The then-Minister of Economics, Ludwig Erhard, certainly favoured the former and he effectively used pressure from the American allies to impose this stricter approach against officials in his own ministry and industrialists favouring the abuse principle.27

2.2.1.2 The Situation in France As early as the 1920s, France had enacted laws regulating agreements between undertakings.28 At the beginning of the 1950s, it established a committee to reform Article 419 of the Penal Code, which related to agreements among firms, since this provision had proved ineffective and difficult to enforce. The Draft Law of 10 July 1952 was probably influenced by the European model dating from the first half of the 20th century, which aimed to control cartels rather than prohibit them. That model assumed that cartel agreements between companies were not necessarily harmful for competition and that a distinction therefore had to be made between good and bad agreements (bonnes et mauvaises unions).29 Article 1 of Draft Law 9951 provided that, in principle, agreements between companies aiming to improve production and distribution in the general interest were lawful, while Article 2 prohibited only behaviour aimed at creating monopolies or ‘coalitions’ or limiting or eliminating unfair competition.30 The proposal was later radically amended.31 In its final form, Articles 59 bis 27

See Lisa Murach-Brand, Antitrust auf Deutsch. Der Einfluss der Amerikanischen Alliierten auf das Gesetz gegen Wettbewerbsbeschränkungen (GWB) nach 1945 (Tübingen: Mohr, 2004); Brigitte Leucht, ‘Transatlantic policy networks in the creation of the first European anti-trust law: Mediating between American anti-trust and German Ordo-liberalism’, in The History of the European Union: Origins of a Trans- and Supranational Polity 1950–1972, Wolfram Kaiser, Brigitte Leucht, and Morten Rasmussen (eds) (Abingdon: Routledge, 2009), 56–73, 66. 28 See Robert Plaisant and Jacques Lassier, Les Ententes Industrielles sous forme de Sociétés ou d’Associations (Paris: Juris-Classeurs, 1956). 29 Joseph Hamel and Gaston Lagarde, Contrôle des ententes industrielles, § 231 Traite de Droit Commercial (Paris: Librairie Dalloz, 1954), 280; Charley del Marmol, ‘Les Ententes industrielles en Droit comparé’, La Revue de la Banque (1929), 86; Pierre Gide, Le Projet Français de Loi Anti-Trust et les expériences étrangères—Etats-Unis—Angleterre—Allemagne (Paris: Librairie Du Recueil Sirey, 1953); André Toulemon, ‘Le Décret-loi du 9 août 1953 relatif au maintien ou au rétablissement de la libre concurrence industrielle ou commerciale’, Revue trimestrielle de Droit Commercial (1954), 269. Pierre Fortunet, ‘Dirigisme et libre concurrence—De la réglementation des ententes professionnelles et des conditions de vente par le décret du 9 août 1953’, Revue des Sociétés (1954), 236; Iouda Tchernoff and Pierre Olivier Lapie, ‘Industrial and trade combinations under French law’, in Trade Combinations in U.S.A., France, Germany, Poland, Leslie Scott (ed.) (Paris: Librairie du Recueil Sirey, 1932), 49. 30 Del Marmol, ‘Les Ententes industrielles en Droit comparé’, 86. 31 See Del Marmol, ‘Les Ententes industrielles en Droit comparé’, 86.

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and 59 ter of the Decree of 9 August 1953 regulated the délit de coalition, thereby expressly prohibiting all agreements whose object or effect was to distort competition, but providing for exceptions. Two categories of agreements falling within the scope of the prohibition provided for by Article 59 bis were exempted:32 • agreements provided for by laws or regulations;33 and • agreements which brought about specific advantages for competition. Because of the exemption in the prohibition and because the provision was enforced by judges (that is, ex post and case-by-case), the délit de coalition did not form competition law rules as we know them today, and was also markedly different from the kind of prohibition found in the Sherman Act of 1890 in the US.

2.2.1.3 The Drafting of Article 85 EEC: Establishing a Link between Article 85 and the Future Regulation 17/62 During the drafting of the antitrust rules of the Treaty of Rome, the French representatives proposed a rule on cartels which would harmonize the national laws on price discrimination.34 As far as anticompetitive practices were concerned, the proposed rule would contain the same principles as Articles 59 bis and 59 ter of the French decree of 9 August 1953.35 This aspect of the proposal drew the classical distinction between ‘good and bad’ agreements. Accordingly, anticompetitive agreements were prohibited, but specific agreements which had a beneficial effect on competition could benefit from an exemption. By contrast, the German representatives had difficulty in putting forward a clear proposal. Since it was not yet decided how their national law would be 32 In particular, Article 59 bis of the Decree of 9 August 1953 on the maintenance and re-establishment of free competition, which regulated the délit de coalition, provided as follows (our translation): ‘Without prejudice to Article 59 ter, all concerted actions, conventions or express or implicit agreements, or coalitions of any form, whose object or effect is to hinder the free play of competition by restricting the reduction of production costs or prices or favouring an artificial price increase, shall be prohibited’. ‘Any such agreement or convention relating to a practice thus prohibited shall be void’.‘Such nullity may be invoked by the parties or by third parties; it may not be invoked by the parties against third parties [ . . . ]’. Article 59 ter provided as follows: ‘Article 59 bis shall not apply to concerted actions, conventions or agreements: 1. which result from the application of a legislative or regulatory measure; 2. which are demonstrated by the parties to have the effect of improving production, or assuring the development of economic progress by means of rationalisation and specialisation’. 33 These became well known to EEC law in that they were relevant to a number of judgments in the 1980s. See Case 136/86, Bureau National Interprofessionnel du Cognac v Yves Aubert [1987] ECR 4789; Case 122/83, BNIC v Clair [1985] ECR 391. 34 Schulze and Hoeren, Dokumente, document 51. 35 Schulze and Hoeren, Dokumente, document 51.

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formulated, they feared that the drafting of the Community rules on cartels might conflict with it. It was in any event evident that the Treaty rules would have a considerable influence on their domestic law.36 After initial hesitation, the German representatives proposed that the principle of prohibition without exception should be accepted. They claimed that this was an indivisible proposal that could not be tampered with.37 When confronted with this proposal, the representatives of France and the other countries hardened their own positions, which led to a stalemate.38 Official documents indicate that the German representatives themselves declared that ‘it is impossible to impose at European level a principle (ie the principle of prohibition) which is the subject of discussions in Germany itself ’.39 The situation was resolved by Hans von der Groeben, the German chairman of the subgroup of the Treaty negotiations dealing with competition questions. He had been one of the authors of the Spaak Report; he had close ties with the Freiburg Ordoliberal School, and he later became the first Commissioner for Competition. The compromise which von der Groeben proposed—and which was accepted—was a provision which prohibited anticompetitive agreements between undertakings (Article 85(1) EEC). However, the compromise provided for an exception to the prohibition and set out the conditions which must be met before the prohibition could be declared inapplicable (Article 85(3) EEC).40 Moreover, it provided that ‘any agreements or decisions prohibited pursuant to this Article shall be automatically void’ (Article 85(2) EEC). Although there were some differences, the final provision closely followed the wording of Articles 59 bis and 59 ter of the French decree of 9 August 1953. In order to break the stalemate as to whether to apply the provision pursuant to the principle of prohibition or the principle of abuse, von der Groeben proposed to postpone the controversial decision of how the exception provided for by Article 85(3) should be implemented. This decision would be taken in a regulation which would be enacted after the Treaty of Rome had been signed. To that end, on 28 November 1956 a draft provision was prepared. After being redrafted a number of times, it became Article 87(2)(e) EEC.41 36

Schulze and Hoeren, Dokumente, document 62. Schulze and Hoeren, Dokumente, document 62, xxvii. 38 Schulze and Hoeren, Dokumente, document 62, xxvii. 39 Schulze and Hoeren, Dokumente, document 65. 40 Schulze and Hoeren, Dokumente, document 65, xxi. 41 Schulze and Hoeren, Dokumente, document 65, xxxi. Article 87(2)(e) stated: ‘1. The appropriate regulations or directives to give effect to the principles set out in Articles 85 and 86 shall be laid down by the Council, acting by a qualified majority on a proposal from the Commission and after consulting the European Parliament. 2. The regulations or directives referred to in paragraph 1 shall be designed in particular: [ . . . ] (b) to lay down detailed rules for the application of Article 85(3), taking into account the need to ensure effective supervision on the one hand, and to simplify administration to the greatest possible extent on the other’. 37

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By virtue of that compromise, a clear link between the cartel prohibition of Article 85 EEC and what would later be Regulation 17 was established. Articles 88 and 89 EEC provided that, ‘until the entry into force of the provisions adopted in pursuance of Article 87, the authorities [of the] Member States’ would apply Article 85(1) and Article 85(3) EEC ‘in accordance with the law of their country’. In this way, the deployment of the national authorities was justified directly by provisions of the Treaty. Thus, by virtue of Article 88 EEC the national authorities were competent to apply the exception provided for by Article 85(3) ‘in accordance with the law of their country’. Under the terms of the compromise, the choice of whether to apply Article 85(3) according to the prohibition principle or the abuse principle was thus temporarily left up to the member states.42

2.2.2 The Drafting of Article 86 EEC The Spaak Report foresaw that the EEC Treaty would include a rule prohibiting monopolistic behaviour by undertakings. Official documents show that the drafting of Article 86 EEC proved less difficult than the drafting of Article 85.43 Unlike Article 85(3), Article 86 did not require any implementing measures since, as subsequent case law recognized, it fulfilled all the conditions necessary for it to have direct effect. This was confirmed by Article 1 of Regulation 17/62, and it is dealt with in Chapter 1 of this volume.

2.3 Demystifying the Origins of Regulation 17/62 The Rome Treaty thus circumscribed the room for manoeuvre left during the negotiations of what would become Regulation 17/62. The drafters of the Regulation had to decide how to apply the prohibition of anticompetitive agreements contained in Article 85(1). They had to decide whether to follow the ‘German’ prohibition principle, or the ‘French’ abuse principle, or a compromise solution between the two principles. The complex drafting history of Regulation 17/62 has begun to be researched, but not all aspects have been examined. David Gerber’s seminal book still serves as a reference for lawyers, historians, and social scientists. 42 On the positions taken by the Dutch government and the French and Italian parliaments in 1957, see Albrecht Spengler, Die Wettbewerbsregeln der Europäischen Wirtschaftsgemeinschaft (Cologne: Bundesverband der deutschen Industrie (BDI), 1957). 43 On this issue see Heike Schweitzer, ‘The History, Interpretation and Underlying Principles of Sec. 2 Sherman Act and Art. 82 EC’, in Claus-Dieter Ehlermann and Mel Marquis (eds), A reformed approach to Article 82 EC (European Competition Law Annual 2007, 2008), 119.

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As mentioned in the introduction, however, Gerber’s analysis contains flaws. Sibylle Hambloch provides a detailed description of the drafting of Regulation 17/62.44 However, her research largely omits the role of state and non-state actors, and she does not discuss how different national models affected the decision-making process for this crucial regulation. In contrast, Laurent Warlouzet’s book focuses mainly on French actors’ attitude towards, and their impact on, the emerging European competition rules.45 More recently, Pinar Akman and Hussein Kassim presented their interpretation of the origins of European competition policy. They argue that the Commission came up with five ‘myths’ to legitimize its action in the field of competition policy.46 From a historical point of view, Akman and Kassim’s myth theory is interesting but largely unsatisfactory, as it lacks context and a convincing source base. A major claim of their article is to prove that European competition policy did not have Ordoliberal origins. However, as we pointed out earlier, they restrict their analysis to the Treaty negotiations and do not pay enough attention to Regulation 17/62. Moreover, if they had taken into account the context of the different national competition law experiences in the late 1950s, and the background of actors such as Walter Hallstein and Hans von der Groeben, they would have been able to explain the origins of some of these ‘myths’ which, as this section will argue, lie specifically in the German experience with competition law. The aim of this section is to shed light on the drafting history of Regulation 17/62 and thus to highlight the ideas and the role that institutions and individual actors played in the process of drafting the Regulation. It will show that the Regulation was partly a compromise, reflecting the competition policy traditions and preferences of the various member states, but that the impact 44 Sibylle Hambloch, ‘Die Entstehung der Verordnung 17 von 1962 im Rahmen der EWG-Wettbewerbspolitik’, Europarecht 37 (2002), 877–87. See also Sibylle Hambloch, Europäische Integration und Wettbewerbspolitik: die Frühphase der EWG (Baden-Baden: Nomos, 2009). From a liberal intergovernmentalist perspective, see also Frank Pitzer, Interessen im Wettbewerb. Grundlagen und frühe Entwicklungen der europäischen Wettbewerbspolitik 1955–1966 (Stuttgart: Franz Steiner Verlag, 2009). 45 Laurent Warlouzet, Le choix de la CEE par la France. Les débats économiques de Pierre Mendès-France à Charles de Gaulle (1955–1969) (Paris: CHEFF, 2011). 46 Akman and Kassim, ‘Myths and Myth-Making’. The use of the term ‘myth’ is problematic since, according to the Oxford English Dictionary, the term has two meanings: a myth can be a traditional story, especially one concerning the early history of a people or explaining a natural or social phenomenon, and typically involving supernatural beings or events; or it can be a widely held but false belief or idea. Neither is an entirely accurate description of the Commission’s actions in competition policy. These ‘myths’ are firstly, the Commission linked competition policy to the goal of European integration; secondly, it claimed that competition policy was important for the Common Market, and thirdly, ensured economic prosperity; fourthly, the Commission claimed that fair competition was good for businesses, and fifthly, that it increased consumer welfare.

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of the German experience on the emergence of a European competition policy actually became stronger once the EEC started operating, as compared with the Treaty negotiations. Actors such as von der Groeben, coming from the German Economics Ministry, were deeply influenced by such debates. It is probably inaccurate to call von der Groeben an Ordoliberal.47 However, notions such as the now-famous ‘economic constitution’, which in simple terms refers to the establishment of a legal framework for economic activity, were arguably not used in member states other than Germany, but they played a crucial role in von der Groeben’s competition policy concept for the EEC, as first expressed in 1961 and in the Commission’s draft for Regulation 17/62.48 Competition then became a key element in the discourse about the Common Market, and the rules and procedures enshrined in Regulation 17/62 were an important component of this discourse.

2.3.1 The Quest for a Pragmatic Solution: Drafting Regulation 17/62 As recalled earlier, Hans von der Groeben was the first EEC Commissioner in charge of competition policy. At his side, and heading the Directorate-General for Competition (DG IV), was Director-General Pieter VerLoren van Themaat, a Dutch lawyer and cartel expert. Von der Groeben and VerLoren van Themaat wanted to achieve a slow transition and a conversion of public opinion, trade unions, consumer organizations, and industry to the ‘competitive principle’.49 They did not set out to ignite an Ordoliberal revolution, but they did aim to create a competition culture in Europe which would be at the core of the Common Market. Before Regulation 17/62 was adopted, member states were obliged by Article 88 to apply Articles 85 and 86 in accordance with their national laws. However, the member states’ application of Article 88 was very heterogeneous, as they continued to apply different principles to the assessment of cartels.50 Another major challenge for the application of Articles 85 and 86 in the member states was the diverging interpretation of the direct application of these rules; ie, whether they were ‘law’ and thus had to be applied by the member states or whether they were merely programmatic statements of

47

See, eg, Gerber, Law and Competition, 264. See Von der Groeben, ‘Policy on competition in the EEC’. 49 Archiv für Christlich-Demokratische Politik (ACDP, Sankt Augustin) I-659–001/2, VerLoren van Themaat to von der Groeben, Wettbewerbspolitik (Erste Diskussionsgrundlage), 23 May 1958, 7. 50 See Pitzer, Interessen im Wettbewerb, 344. 48

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policy that were simply guidelines.51 The Dutch government thought the latter was the case, whereas the German government and the German Federal Cartel Office (FCO) maintained that the Treaty established an economic constitution and had to be applied directly. This situation led to legal uncertainty as to whether agreements and contracts concluded after 1 January 1958 were legal and how national authorities should deal with this matter. In this controversy the Commission rallied the point of view that the Treaty rules laid down binding law, and its proposal for the future Regulation 17/62 assumed that, with the exception of its third paragraph, Article 85 would be directly applicable.52 More generally, DG IV favoured a practically oriented (anwendungsorientiert) competition policy, based on experience with individual cases in the member states. The Commission considered that it should develop basic guidelines to achieve homogeneous analysis and homogeneous outcomes in concrete cases. The different interpretations in the member states of basic concepts such as ‘competition’ and ‘distortion of competition’ necessitated such guidelines, according to VerLoren van Themaat.53 If there was any guiding concept for the Commission at the time, it was that of ‘workable competition’ (as opposed to perfect competition).54 In contrast to Ordoliberals, VerLoren van Themaat and von der Groeben did not see competition as a goal in itself, at least not in the context of the Community. Instead, they wanted to develop general legal principles for the assessment of individual cases. They thus aimed at a juridical system comparable to that in Germany, in which political interference and political reasoning in case decisions were excluded as far as possible, in contrast to the administrative system that existed in most member states.55 Precisely because of the controversies and insecurities surrounding the application of Articles 85 and 86, the Commission did not move with great haste to draft a regulation on the basis of Article 87. Von der Groeben and

51 This was a debate among legal experts at the time. See Gerber, Law and Competition, 346; Hambloch, Europäische Integration und Wettbewerbspolitik, 99–102. For the contemporary debate, see Ernst Wohlfarth, Ulrich Everling, Hans Joachim Glaesner, and Rudolf Sprung, Die Europäische Wirtschaftsgemeinschaft. Kommentar zum EWGV (Berlin: Vahlen, 1960), 237 f. 52 Arved Deringer, ‘Verordnung Nr. 17/62 und Verordnung Nr. 1/2003—die historische Perspektive’, Vortrag von Prof. Arved Deringer bei dem Seminar Ein halbes Jahrhundert Europäisches Wettbewerbsrecht, Brussels, 17 June 2003; European Commission, Historical Archives (Brussels), BAC 71/1988, Nr. 109/1, 1960, 3. The ECJ’s Bosch judgment of 1962 confirmed this direct applicability of Articles 85 and 86 before the entry into force of Regulation 17. 53 ACDP I-659 001/2, VerLoren van Themaat to von der Groeben, Entwurf. Zusammenstellung der wichtigsten Diskussionspunkte im Rahmen der Besprechung mit Herrn von der Groeben über die Wettbewerbspolitik, Brussels, 20 March 1960, 1. 54 VerLoren van Themaat to von der Groeben, 20 March 1960, 4. 55 Gerber, Law and Competition.

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VerLoren van Themaat thought that they first needed to gain as much experience as possible, and furthermore they felt that it would be impossible in any event to achieve a unanimous vote in the Council. According to Article 87, after a period of three years, any regulation for the application of Articles 85 and 86 could be adopted by majority voting, but during the initial three years, unanimity was required.56 However, another familiar figure, Alfred Müller-Armack, State Secretary in the German Economics Ministry and one of the promoters of Germany’s ‘social market economy’, informed von der Groeben at a Council meeting in February 1960 that the Council was in fact waiting for a proposal under Article 87.57 Since Germany had recently enacted the GWB, certainly one of the most far-reaching cartel laws in the Community, the German government had every interest in a strict and homogeneous application of EEC competition rules in order not to disadvantage German industry vis-à-vis other national industries in the Common Market. Following this meeting, DG IV started drafting the regulation in a comité de rédaction comprising VerLoren van Themaat, René Jaume, interim Director of the cartel directorate, Roland Mussard, Head of Division in this directorate, Erich Wirsing from von der Groeben’s cabinet, and Jochen Thiesing of the Commission’s Legal Service. Soon they reached agreement on the following basic principles: the Commission should, in the first instance, only deal with international cartels, whereas vertical agreements, such as license contracts, should, at least at first, not be dealt with at the level of the Community. The aim was to concentrate on the most harmful international cartels.58 Decisions on cartels of this kind should be taken at a central level; ie, by the Commission. The rationale was that, if national authorities had the authority to adopt decisions under Article 85(3), this would lead to contradictory interpretations.59 Centralization was thus first and foremost seen as ensuring homogeneity in the application of Article 85(3). On 27 May 1960, these principles were formulated in a first draft of the regulation.60 Although the drafters were 56 See Pieter VerLoren van Themaat, ‘Einige Betrachtungen über die Entwicklung der Wettbewerbspolitik in Europa vor und seit dem Zustandekommen der Verordnung 17/62’, in Europarecht, Kartellrecht, Wirtschaftsrecht. Festschrift für Arved Deringer, Ulrich Everling, Karl-Heinz Narjes, and Joachim Sedemund (eds) (Baden-Baden: Nomos, 1993), 398–415, 400–1. For a different opinion, see Hambloch, ‘Die Entstehung der Verordnung 17 von 1962’, 882. 57 BAC 71/1988 No. 104, Le Conseil, Projet de Procès-Verbal de la 28ème session du Conseil de la Communauté Economique Européenne tenue à Bruxelles, les 1er et 2 février 1960, Bruxelles, 26 February 1960, 197 ff., 227. 58 BAC 71/1988 No. 104, Schumacher, H., Notiz für Herrn Generaldirektor VerLoren van Themaat, Brussels, 17 May 1960, 315–19. 59 BAC 71/1988 No. 104, Jaume, R., Note pour Monsieur le Directeur Général VerLoren van Themaat, Brussels, 24 May 1960, 387–90, 388. 60 ACDP, I-659 005/2, VerLoren van Themaat, P., Vermerk für Herrn von der Groeben—Mitglied der Kommission, 27 May 1960.

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French, German, and Dutch, there is no evidence in the sources that there were diverging opinions on the gist of the regulation among them.61 The principle of centralization was subsequently strengthened in another draft version, dated June 1960, by the obligation to notify the Commission of an agreement within six months of the regulation entering into force and the Commission’s right to grant an exemption according to Article 85(3). This draft also attributed to the Commission extensive rights of inquiry and investigative powers which remained virtually unchanged in the final version of Regulation 17/62; ie, the right to examine books and other documents and to take copies of these documents, the right to ask for oral clarifications, and the right to enter premises, land, and means of transport. The draft also provided for fines and their amount, and for penalty payments.62 After the draft regulation was discussed and approved by the Commission in September 1960,63 official consultations were held on 6 and 7 October with national senior civil servants, cartel experts, the Union of Industrial and Employers’ Confederation of Europe (UNICE) and trade unions. The reactions of the member states’ governments can best be described by looking at their diverging attitudes and alternative proposals.

2.3.2 Alternatives to the Commission’s Proposal: Legal and Political Debates There were four points of contention regarding the scope of the regulation and the procedural regime it would establish. Since, on each of these controversial points, France and Germany had opposing views, it would arguably not have been possible for either the Commission or any member state to table a coherent alternative proposal which could have rallied a majority, let alone unanimity in the Council. At the same time, these contentious points involved complex legal questions that were discussed not only by politicians and civil servants but also by the legal community.64

61 The slight divergence of opinions between von der Groeben and VerLoren van Themaat in 1958/1959 that Seidel has discussed elsewhere seems to have been resolved by the experience DG IV gained in the first two years of the Community’s existence. Cf. Katja Seidel, ‘DG IV and the origins of a supranational competition policy: Establishing an economic constitution for Europe’, in Kaiser, Leucht, and Rasmussen, Origins of a Trans- and Supranational Polity 1950–1972, 129–47, 134. 62 BAC 71/1988 No. 104, Jaume, R., Note à Monsieur le Directeur Général VerLoren van Themaat, Brussels, 29 June 1960, 171–84. 63 BAC 71/1988 No.107, Direction Générale de la Concurrence, Note sur le projet de règlement de l’article 87, très confidentiel, Brussels, 23 Septembre 1960, 56–61, 59. 64 See, eg, Wohlfarth et al., Die Europäische Wirtschaftsgemeinschaft.

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The first controversy, already mentioned above, concerned the nature of Articles 85 and 86 as law or merely programmatic statements.65 The second controversy was between the partisans and opponents of the notification system. The Dutch and the German governments were in favour of notification. Its opponents were the Belgian, Luxembourg, Italian, and French governments, with the French government maintaining its firm position against the notification system until the final phase of the Council negotiations in December 1961. The main reason why the French government was opposed to notification has already been discussed and lies in the fact that the French abuse system distinguished between ‘good’ and ‘bad’ cartels, whereby a cartel was only prohibited if it behaved in a harmful manner. The Commission’s draft regulation corresponded to the German concept of competition, which did not distinguish between good or bad cartels but which aimed at providing a legal framework, and legal certainty, for the behaviour of economic actors.66 The third point of contention concerned the choice of procedure for the application of the exemptions in Article 85(3): should the prohibition of cartels be operated through a legal exception, or should parties be obliged to apply to the Commission for an exemption?67 The latter, contained in the Commission’s proposal, provided for effective supervision and a high level of legal certainty, but it also posed the risk of being more bureaucratic as the Commission had to decide on the compatibility of the agreement with Article 85(3). The French and Italian governments were in favour of the exception légale approach, with the decision of the Commission having only a declaratory character as it interpreted Article 85(3) as exempting agreements fulfilling its conditions without need for a constitutive decision.68 Cartels should act at their own risk and without authorization. The Commission and the Dutch and German governments rejected this as incompatible with the prohibition of agreements in Article 85(1), the nullity of agreements in Article 85(2), and the phrasing of Article 85(3) that the provisions of Article 85(1) ‘may, however, be declared inapplicable’, which for them implied that a constitutive decision of the Commission was necessary. The fourth point of contention concerned the centralization of powers at the EEC level.69 The Commission’s proposal envisaged that exemptions from the prohibition of cartels in Article 85(1) could only be obtained after 65 See Hambloch, Europäische Integration und Wettbewerbspolitik, 99–102. For the contemporary debate, see Wohlfarth et al., Die Europäische Wirtschaftsgemeinschaft, 237 f. 66 See also Warlouzet, Le choix, 616. 67 For this debate, see Hambloch, Europäische Integration und Wettbewerbspolitik, 103–9. 68 For example, BAC 28/1980 No. 39, Rat der Europäischen Wirtschaftsgemeinschaft, Aufzeichnung. Vertraulich, 7 September 1961, 93–102, 95. See also Pitzer, Interessen im Wettbewerb, 344, 384–5. 69 See Hambloch, Europäische Integration und Wettbewerbspolitik, 109–14.

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a notification and a decision by the Commission. Moreover, the draft contained clauses which attributed powers to the Commission to make inquiries and investigate cases in close collaboration with member states’ authorities and to impose fines in case of non-compliance. All member state governments, apart from the Dutch, were opposed to a centralization of powers within the Commission.70 The French in particular feared the prospect of a supranational administration interfering in their domestic economic affairs. The Germans were concerned that the Commission would not be able to cope with the extra workload such a system entailed.71 However, the aim of centralizing powers has to be seen in the context of the varied experience with the application of the Treaty’s competition provisions in the member states under Article 88 and the need to create a European competition culture. The concentration of important powers in the hands of the Commission also corresponded, conveniently, to the supranational aims of the Hallstein Commission. In the end, Germany and the Netherlands agreed with centralization, as they feared that otherwise the competition rules would be applied in a stricter manner in their own countries than in the other member states.72

2.3.3 The Role of Non-state Actors in Drafting Regulation 17/62 Not surprisingly, organized interests were divided over the issue of European competition law. The trade unions backed the Commission’s draft, hoping that a strict competition policy would benefit consumers and workers.73 European industry, as represented by UNICE, opposed the draft and was in particular opposed to the notification of agreements, fearing that they would lose their economic freedom to conclude agreements and have to subject themselves to time-consuming bureaucratic procedures.74 However, by refusing to cooperate with the Commission and by being unable to agree on a coherent alternative proposal, they were unable to have any influence on the drafting of Regulation 17/62.75 70 ACDP, I-659 006/1, Vermerk über die Konferenz am 6.10.1960, 10.00 in Brüssel. Meinungsaustausch mit Vertretern der Regierungen der Mitgliedstaaten über den Entwurf einer Verordnung nach Artikel 87, undated. 71 Vermerk über die Konferenz am 6 October 1960, 2. 72 Vermerk über die Konferenz am 6 October 1960, 3. 73 ACDP, I-659–008/3 Vermerk über die Konferenz am 7 October 1960, 10.00 h, in Brüssel. Meinungsaustausch mit Vertretern der Gewerkschaften über den Entwurf einer Verordnung nach Artikel 87, undated. See also BAC 71/1988 No. 107, Europäisches Gewerkschaftssekretariat to Hans von der Groeben, Brussels, 10 October 1960, 112–14. 74 BAC 71/1988 No.107, Bericht über die Konferenz am 7.10.1960 in Brüssel (Meinungsaustausch mit Vertretern der UNICE über den Entwurf einer Verordnung nach Art. 87), 147–8. 75 VerLoren van Themaat, ‘Einige Betrachtungen über die Entwicklung der Wettbewerbspolitik in Europa’, 401. For French business, see Laurent Warlouzet, ‘La France et la mise en place de la politique

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While staff in DG IV were of different nationalities bringing in different viewpoints and different national traditions, experts external to the Commission who were involved in drafting Regulation 17/62 were exclusively German and belonged to Hallstein’s and von der Groeben’s network, which again underlines the importance of the German competition law experience for the emerging European competition policy. Although in the early 1960s Hans von der Groeben had appointed a French adviser, Jacques Houssiaux, a young lawyer from the University of Nancy, the archival records do not indicate that Houssiaux played any role in the drafting of Regulation 17/62. It is likely that von der Groeben had appointed Houssiaux for reasons of national balance but consulted him only irregularly, and on issues other than cartel policy. One crucial personality was Eberhard Günther, President of the Federal Cartel Office, and one of the closest collaborators of German Economics Minister Ludwig Erhard.76 Günther discussed the Commission’s draft regulation with VerLoren van Themaat intensively. For example, he supported the Commission’s resolution to centralize powers at the level of Commission, because for him this was essential for ‘activating’ a European cartel policy.77 VerLoren van Themaat also discussed the alternatives of a notification system or abuse system with Günther, who agreed that, although both systems had disadvantages, the notification system was preferable.78 They then ruled out any other system but the notification system and provided for the impossibility of obtaining an exemption from Article 85(1) without prior notification and application for such an exemption.79 Finally, Günther was in favour of setting up an advisory committee in which representatives of industry, trade unions, consumers, and academia could meet.80 Although this was not taken up in the Commission’s first draft, DG IV agreed on this form of collaboration with practitioners. Most likely, the opinion of Germany’s most prominent cartel official, with his close links to the German Economics Minister, strengthened the Commission’s determination to stick to the basic principles for the regulation; namely centralization, notification, and application for an exemption. Other actors who were consulted include Heinrich Kronstein, Erich Steindorff, and Ernst-Joachim Mestmäcker. A friend of Hallstein and of de la concurrence communautaire (1957–64)’, in Europe organisée, Europe du libre-échange. Fin XIXe siècle—Années 1960, Eric Bussière, Michel Dumoulin, and Sylvain Schirmann (eds) (Brussels: P.I.E. Peter Lang, 2007), 175–201, 191. 76 See the biographical note for Günther on the Munzinger Online website. 77 ACDP, 1–659 008/3, VerLoren van Themaat, P., Aktenvermerk über ein Gespräch mit Herrn Günther am 21 July 1960, 25 July 1960, 1. 78 VerLoren van Themaat, Aktenvermerk, 25 July 1960, 3. 79 VerLoren van Themaat, Aktenvermerk, 25 July 1960. 80 VerLoren van Themaat, Aktenvermerk, 25 July 1960, 4.

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Franz Böhm, one of the founders of the Freiburg School, Kronstein was a German emigrant and professor of law at Georgetown University.81 He had already been involved in the drafting of the ECSC Treaty competition rules as a member of Hallstein’s network. During the drafting of Regulation 17/62, Kronstein provided comments on the Commission’s draft regulation.82 Similarly, Steindorff, a former student of law professors Hallstein, Kronstein, and Helmut Coing, had also participated in the drafting of the ECSC Treaty antitrust rules.83 Von der Groeben invited Steindorff, then a law professor at the University of Tübingen, to Brussels to comment on one aspect of the draft regulation; namely the question of publication.84 Finally, Mestmäcker, a pupil of Böhm, advised Commissioner von der Groeben on the drafting, but more importantly on the subsequent application, of Regulation 17.85

2.3.4 Positions and Procedure: The Negotiation of Regulation 17/62 The controversial discussion of the Commission’s draft suggested that a speedy agreement in the Council would be impossible. On 31 October the text was submitted to the Council. At the same time the Commission asked for the proposal to be immediately transferred to the European Parliament (EP). Normally, the transmission of Commission draft proposals from the Council to the EP was routine. However, as the Council members were very critical of the Commission’s draft, they wanted to discuss it first and form an opinion on it, which would then be transmitted to the EP together with the draft regulation.86 Von der Groeben fought hard against this tactic, as it would have weakened the position of both the Commission and the EP in the legislative procedure; first, it could have influenced the opinion of the EP, and second, it would have made the Council a supervisory body mediating between the Commission and the EP. In the end, it was only due to the inability of the 81 See Leucht, ‘Transatlantic policy networks’, 56–73, 67. On the links between the transatlantic network and Commission officials and the ECSC and EEC competition rules generally, see Leucht and Seidel, ‘Du Traité de Paris au règlement 17/1962’. 82 BAC 71/1988 No. 107, Wirsing, E., Vermerk betreffend die Stellungnahme von Herrn Prof. Kronstein zum Memorandum über die Verordnung nach Artikel 87, Strasbourg, 13 October 1960, 4–6; BAC 71/1988 No. 107, Heinrich Kronstein, Bemerkungen zum Kommissionsentwurf einer Verordnung gemäß Art. 87 EWG Vertrag, Washington DC, 7 October 1960, 21–31. 83 Festschrift für Ernst Steindorff zum 70. Geburtstag am 13. März 1990, Jürgen F. Baur, Klaus J. Hopt, and K. Peter Mailänder (eds) (Berlin, New York: de Gruyter, 1990), V. 84 BAC 71/1988 No. 113, Ernst Steindorff to von der Groeben, Tübingen, 19 December 1960, 4–16, 6. 85 See Seidel, ‘DG IV and the origins of a supranational competition policy’, 136. 86 The Council debate and the failure to agree on a common position are discussed in Pitzer, Interessen im Wettbewerb, 358–66.

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Council to agree on a common position that on 8 December the proposal was transferred to the EP and to the Economic and Social Committee without an accompanying Council opinion.87 The Commission’s de facto success in terms of procedure prevented the draft from being deconstructed in the Council at this early stage. The report of the EP’s Internal Market Committee (IMC) was tabled on 7 September 1961.88 The rapporteur of the IMC was Arved Deringer of Germany, a Christian Democrat and a lawyer close to the Freiburg School.89 Deringer and his colleagues in the Committee were of course aware of the diverging opinions in the member states on the Commission’s draft. They therefore aimed at presenting a compromise solution. The work of the IMC did not take place behind closed doors.90 During the summer of 1961 and in parallel to the IMC meetings, national civil servants tried to even out the divergent positions of the member states. Some agreements were reached, for example, on the need to add to the notification procedure the possibility for third parties to file a complaint with the Commission, and for the Commission to act ex officio against agreements.91 There were thus a number of overlapping negotiation groups between which a cross-fertilization of ideas and solutions took place, and which resulted in the elimination of some of the minor controversies. The EP adopted the IMC report after a long debate on 19 October 1961. The theme of preserving ‘economic freedom’ in the preamble of the report reflected the Ordoliberal views of rapporteur Deringer: ‘The freedom of contract is thus only ensured if the freedom of choice is guaranteed by competition. It thus seems certain that the freedom of competition is an indispensable part of freedom in general, as well as an essential condition for a fully functional Common Market’.92 Out of the many different systems available, the Commission had, according to Deringer, chosen a system similar to the German one, a choice with which the IMC agreed. The IMC backed the Commission’s 87 The Economic and Social Council published its opinion on 28 March 1961. See BAC 26/1969 No. 76, Le Comité économique et social, Avis du Comité économique et social sur le ‘Premier Règlement d’application des articles 85 et 86 du Traité’, 28 March 1961, 21–37, 27–8. 88 BAC 26/1969 No. 76, Rapport fait au nom de la commission du marché intérieur ayant pour objet la consultation demandée à l’Assemblée parlementaire européenne par le Conseil de la Communauté économique européenne sur un premier règlement d’application des articles 85 et 86 du traité de la CEE (Document 104/1960–1961), in Assemblée parlementaire européenne, Documents de séance 1961–1962, 7 September 1961, 175–247. 89 On Deringer’s role in the development of Regulation 17/62, see VerLoren van Themaat, ‘Einige Betrachtungen über die Entwicklung der Wettbewerbspolitik in Europa’. 90 Gesprächsnotiz des Herrn Epphardt, 2 June 1961. Published as document 311112 on (last accessed 10 June 2012). 91 BAC 28/1980 No. 39, Rat der Europäischen Wirtschaftsgemeinschaft, Aufzeichnung. Vertraulich, 7 September 1961, 93–102, 97. 92 BAC 26/1969 No. 76, 175–226, 179.

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proposal in its general principles and it even extended the competencies of the Commission by introducing, for example, the option of obtaining from the Commission a negative clearance. By endorsing the concentration of powers, the IMC, like the Commission, aimed for a homogenous EEC competition policy. However, the IMC did not agree with all the provisions of the Commission’s draft. For example, it thought that the transition period for old cartels was too generous, whereas the draft penalized new cartels. Also, according to the IMC, the Commission had simply interpreted Article 85(3) as a Genehmigungssystem (the need to apply for an exemption) and not as Legalausnahme (legal exception) even though the Treaty did not make it explicit which system its drafters had favoured.93 Deringer declared the IMC’s report to be a ‘middle ground’. In order to reconcile proponents of the legal exception theory, the IMC envisaged a retroactivity of authorizations of agreements to the day when the application was filed, and not, as the Commission had envisaged, from the day of the authorization.94 Under the terms of the compromise, while pursuant to the ‘basic provision’ of Article 1 of Regulation 17/62, agreements ‘described in Article 85 (1) of the Treaty [ . . . ] [were] prohibited, no prior decision to that effect being required’, undertakings wishing to obtain an exemption pursuant to Article 85(3) EEC were required to notify agreements to a single body (Article 4(1), Reg. 17/62).95 By virtue of Article 9(1) of the Regulation, that body was the Commission.96 This provision was flanked by the consequence following from Article 1, according to which, if the request for an exemption was rejected, the agreement would be unlawful ab initio (ie, from its inception).97 This is what had been requested by the Federal Republic of Germany on the basis of the ‘prohibition’ principle. However, even if the agreement turned out to be illegal, Article 15(5) Regulation 93

BAC 26/1969 No. 76, 190 f. BAC 71/1988 No. 89, Debate in the European Parliamentary Assembly, 19 and 20 October 1961, 193–228, 201, 204. 95 Article 4(1) (Notification of new agreements, decisions and practices) stated: ‘Agreements, decisions and concerted practices of the kind described in Article 85 (1) of the Treaty which come into existence after the entry into force of this Regulation and in respect of which the parties seek application of Article 85 (3) must be notified to the Commission. Until they have been notified, no decision in application of Article 85 (3) may be taken’. 96 Arved Deringer, Das Kartellrecht des EWG-Vertrages im Verhältnis zum nationalen Recht (Karlsruhe: Verlag C.F. Müller, 1965), 10. See Article 9(1) (Powers), which stated: ‘Subject to review of its decision by the Court of Justice, the Commission shall have sole power to declare Article 85 (1) inapplicable pursuant to Article 85 (3) of the Treaty’. 97 Article 6(1) (Decisions pursuant to Article 85 (3)) provided that: ‘Whenever the Commission takes a decision pursuant to Article 85 (3) of the Treaty, it shall specify therein the date from which the decision shall take effect. Such date shall not be earlier than the date of notification’. See also Case 48/72, Brasserie de Haecht v Wilkin-Janssen [1973] ECR 77, para. 25. 94

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17/62 provided that notification prevented fines from being imposed with regard to the period between notification and the Commission’s decision on the substance.98 This provided a supplementary incentive to notify. Furthermore, Regulation 17/62 provided, as France had requested on the basis of the ‘abuse’ principle, that existing agreements were to benefit from provisional validity until the Commission had taken a decision, irrespective of whether or not they had been notified. However, if the agreement was not notified and was prohibited by virtue of Article 85(1) EEC, it would be illegal ex tunc (again, from its inception), without any possibility of it being evaluated under Article 85(3) EEC. To summarize, following the report of the IMC, the Commission modified its draft and compromised on the following issues: the retroactivity of authorizations to the day of filing the application, the close collaboration between the Commission and member state authorities, the possibility for third parties to file a complaint and ‘press charges’, the possibility to obtain a negative clearance, and the establishment of an advisory committee. In spite of these modifications, the first Council meeting discussing this modified draft confirmed the split in the Council: three member states were in favour of the Commission’s draft (Germany, the Netherlands, and Belgium)99 and three rejected the draft (France, Italy, and Luxembourg). In this meeting, the German delegation managed to make the adoption of the regulation a precondition for agreeing on the transition to the second stage and thus on the Common Agricultural Policy, seen as crucial by the French government.100 The matter was then referred to a group of national experts with the task of drafting a compromise solution.101 During a number of extremely difficult Council meetings, the draft regulation was then completed to meet the most urgent demands of the French government, concerning vertical agreements, exceptions to the notification rule for certain types of agreements, and the possibility of sector studies.102 The Italian delegation also obtained concessions, such as its own exceptions to the notification rule for certain types of agreements.103 On 19 December 1961, 98 Article 15 (5) (Fines) set out: ‘The fines provided for in paragraph 2 (a) shall not be imposed in respect of acts taking place [ . . . ] after notification to the Commission and before its decision in application of Article 85(3) of the Treaty, provided they fall within the limits of the activity described in the notification’. 99 The new Belgian coalition government (elected in April 1961) of Christian Socialists and Socialists with a Socialist Economics Minister Spinoy, who was close to the trade unions, had joined the German and Dutch side. 100 Pitzer, Interessen im Wettbewerb, 396. 101 Warlouzet, Le choix, 606. 102 Pitzer, Interessen im Wettbewerb, 405–6. 103 Pitzer, Interessen im Wettbewerb, 402.

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the Council unanimously agreed on the text, which was officially adopted on 6 February 1962.104 This section has shown how the decision-making process leading to the adoption of Regulation 17/62 was influenced by actors within the Commission who had developed a clear understanding of the elements necessary to realize a unified application of EEC competition law. These included the notification system and centralization of decisions at the Commission. The fact that leading members of the (German) competition law community were involved in the drafting explains the presence of ‘German’ elements in the Regulation. The French government’s resistance to the draft regulation meant that the Regulation had to incorporate modifications during the Council negotiations; however, the compromise did not change the Regulation’s core principles.

2.4 The Enforcement System Established by Regulation 17/62 How, then, did the enforcement system set up by Regulation 17/62 work? This is relevant in order to underline, once again, how Regulation 17 had as its main goal the creation of a centralized and independent public enforcement system organized around the Commission. Regarding the issue of centralization, Regulation 17/62 not only set out procedures on how to apply Article 85(3) EEC, although this was its main task. It also defined other significant features of the antitrust enforcement system (ie, the role and powers of the Commission and of national competition authorities; cooperation and control between the Commission and national competition authorities during the course of procedures enforcing Articles 85 and 86 EEC; the exchange of information between national competition authorities and the Commission; and investigations carried out by national competition authorities at the request of the Commission). All of these were aimed at centralizing the application of both Article 85 and 86 EEC—in marked contrast to today’s Regulation 1/03.105 Regarding the issue of the independence of the Commission in applying both Article 85 and 86 EEC, this was a pivotal feature of the new system. The drafting history of Article 10 of the Regulation (establishing the Advisory

104

Pitzer, Interessen im Wettbewerb, 407–8. On the problem of the decentralization of European competition law, see Lorenzo Federico Pace, ‘Decentralised Application’, in EU Competition Law: Procedure: Anti-Trust, Merger, State Aids, Gian Luigi Tosato and Leonardo Bellodi (eds) (Deventer: Claeys & Casteels, 2006), 215. 105

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Committee) shows how this independence was placed in doubt by the French proposal while Article 10 was being shaped. The French proposal, had it been accepted, would have limited the independence of the Commission by introducing the possibility of a direct and binding intervention by the Advisory Committee in the Commission’s implementation of Articles 85 and 86.

2.4.1 The System of Administrative Implementation of Articles 85 and 86 EEC Pursuant to Regulation 17/62 As noted above, Regulation 17/62 was adopted on 6 February 1962, and it entered into force on 13 March 1962. It remained in force until 30 April 2004, when it was repealed and replaced by Regulation 1/2003. As to its substance, it dealt essentially with the rules on the implementation of Article 85(3) (Article 1), the consequences of Commission decisions (Articles 2–8) and the bodies having power to apply Article 85(3) (Article 9). But it did not otherwise address issues which were not touched upon in the EEC Treaty. In contrast to the system regulated by Articles 88 and 89 EEC, Regulation 17/62 contained rules on professional secrecy (although this was already dealt with in a general way by Article 287 EEC) and rules on the exchange of information between the Commission and national authorities. Regulation 17 almost entirely refrained from addressing the relations between the Commission and the national authorities.106 This omission may be explained as follows. In the first place, this issue was not important at that time, since the main aim was to organize a competition law enforcement system whose application was centralized around the Commission, leaving a very limited role to the national authorities. In the second, not every member state had established a national authority which was empowered to apply EEC antitrust law.

2.4.1.1 The Role and Powers of the Commission Article 9(1) granted the Commission exclusive authority to implement Article 85(3). In reality, the legislature could not have done otherwise. Decentralizing the power to declare Article 85(1) inapplicable would have entailed the risk of practice varying considerably between the member states inter se and between the member states and the Commission. This risk was particularly acute at that time, given the wide divergences in the legal and economic approaches towards cartels in the different member states, in particular, France and Germany. 106 The one exception was Article 9(3), which conferred powers of preemption on the Commission. We highlight this provision below in our discussion of the role and powers of the member states.

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The decisions implementing Articles 85 and 86 EEC that the Commission could issue pursuant to Regulation 17 were the consequence of the two factors referred to above; namely, the system of notifications requesting an exemption under Article 85(3) (Article 4(1)) and the Commission’s sole power to grant such an exemption (Article 9(1)). Indeed, only two of the Regulation’s provisions dealing with Commission decisions did not concern decisions applying Article 85(3) EEC: Article 2 (negative clearance) and Article 3 (termination of infringements). All other provisions related to the notification system.107

2.4.1.2 The Role and Powers of the Member States’ Competition Authorities Regulation 17/62 continued to allow the national competition authorities to apply Articles 85 and 86 EEC, as Article 88 EEC had done. As Article 9(3) of the Regulation stated: ‘As long as the Commission has not initiated any procedure under Articles 2, 3 or 6, the authorities of the Member States shall remain competent to apply Article 85(1) and Article 86 in conformity with Article 88 of the Treaty; they shall remain competent in this respect notwithstanding that the time limits specified in Article 5(1) and in Article 7(2) relating to notification have not expired’. There would have been no reason to abolish that power, especially since the national bodies concerned could cooperate with the Commission to safeguard Community antitrust law. However, in contrast to Article 84 EEC, the powers which Article 9(3) of the Regulation conferred on the national authorities did not extend to Article 85(3). Furthermore, the national authorities could not exercise their own power to apply Articles 85 and 86 EEC if the Commission was exercising them in regard to a given factual situation (Article 9(3)). Thus, if the Commission opened proceedings in respect of a case which a national authority was already investigating, the Commission thereby arrogated the power to deal with the case to itself. Similarly, a national authority could not initiate EEC antitrust proceedings in cases which the Commission was already investigating. However, this did not preclude the different national authorities from applying EEC antitrust powers to the same case in parallel, although while Regulation 17 was in force this possibility was merely hypothetical. On the other hand, as the Court of Justice confirmed,108 Regulation 17/62 did not preclude parallel proceedings 107 These provisions were: Article 4 (notification of new agreements, decisions, and concerted practices), Article 5 (notification of existing agreements, decisions, and practices), Article 6 (decisions pursuant to Article 85(3)), Article 7, (special provision for existing agreements, decisions, and practices), Article 8 (duration and revocation of the immunity of decisions under Article 85(3)) and Article 23 (transitional provisions applicable to decisions of the authorities of the member states). 108 See Case 14/68, Walt Wilhelm and others v Bundeskartellamt [1969] ECR 1.

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with regard to the same case, whereby the Commission applied Community antitrust law and the national authorities applied national antitrust law. As regards the Commission’s powers to take over cases pursuant to Article 9(3), the Court initially clarified the important issue of whether national courts were to be regarded as ‘authorities of the member States’ within the meaning of that provision. The Court first gave an affirmative answer whereby it refused to draw any distinction between national authorities and national courts in the application of Article 85(1) and Article 86 EEC.109 But it later abruptly changed its approach, holding that Article 9(3) of the Regulation did not refer to national courts.110 The Court was influenced by the fact that, had the first approach prevailed, Article 9(3) would have weakened judicial protection of the rights conferred by the Treaty provisions by requiring courts to stay proceedings whenever the Commission opened an investigation into the same factual situation. On the other hand, despite the fact that Article 9(3) of the Regulation conferred powers on national authorities to apply Articles 85(1) and 86 EEC, it did not require member states to establish or designate a body competent to apply Community antitrust law. Furthermore, the fact that a particular national authority could apply national antitrust law did not ipso facto suffice to confer power on it to apply Community antitrust law pursuant to Article 9(3); that power needed (and still needs) to be conferred explicitly by national rules.111

2.4.1.3 Cooperation in the Administrative Antitrust System Between the Commission and the National Competition Authorities Regulation 17/62, provided for rules on cooperation between national authorities and the Commission as well as for control by the latter of the former.112 More specifically, Regulation 17 defined two different kinds of cooperation between the Commission and national competition authorities. In contrast to the kind of cooperation established by Regulation 1/03, these mechanisms aimed deliberately at creating a centralized enforcement system around the Commission. The first means of cooperation between the Commission and national competition authorities was set out in Article 13(1), which required the national 109

Case 43/69, Brauerei Bilger v Heinrich Jehle [1970] ECR 127. Case 127/73, BRT v Sabam and Fonior [1974] ECR 51. 111 By contrast, Regulation 17/62 did require the member states to determine how they would assist the Commission in carrying out its powers under Article 14. They were thus required to determine which bodies would carry out this task. 112 On cooperation in the administrative antitrust system pursuant to Regulation 1/03, see Pace, European Antitrust Law, 219 ff. 110

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authorities to undertake investigations at the request of the Commission.113 In such a case, Article 13(2) gave the Commission the option of sending its own officials to ‘assist’ national officials ‘in carrying out their duties’.114 In one important respect, it can be seen that the goal underlying Regulation 17 differed significantly from the objectives of Regulation 1/03. Specifically, where national authorities undertook investigations at the request of the Commission, they were not entitled to retain and use for the purposes of separate proceedings at national level any information or documents which they had acquired when acting on behalf of the Commission.115 Regulation 17, as interpreted in the Spanish Banks judgment,116 conferred powers only in respect of investigations falling within the scope of that Regulation; ie, for the purposes of the application of Community antitrust law by the Commission. In other words, the material gathered could be used in evidence only by the Commission and not by the national authorities. Another type of ‘vertical cooperation’ regarded the exchange of information between the Commission and the national authorities. In this respect, Regulation 17 provided for two types of exchange of information and documents between the Commission and the national authorities, both of them shaped by the centralization objective. The first one was a ‘vertical ascending cooperation’ related to the sending by the national authorities (and Governments) of all necessary information to aid the Commission in carrying out its powers of investigation (Article 11(1) and Article 13). The second one was a ‘vertical descending cooperation’ where the Commission was obliged to transmit necessary information and documents to the national authorities in order to maintain ‘close and constant liaison’ with them during a Commission investigation (Article 10(1)). In this way, the Regulation provided for a kind of ‘vertical descending’ system of exchange of information between the Commission and the national authorities. Unlike the system later established by Article 12 of Regulation 1/03, whose main aim was to decentralize the application of the Treaty’s antitrust prohibitions, the 113 That provision also provided that ‘the officials of the competent authorities of the Member States responsible for conducting those investigations shall exercise their powers upon production of an authorization in writing issued by the competent authority of the Member State in whose territory the investigation is to be made. Such authorization shall specify the subject matter and purpose of the investigation.’ 114 Given the lack of Community rules on the point, and except insofar as otherwise provided by Regulation 17/62, the investigating powers of the national authorities were regulated by national law. 115 Case C-67/91, Asociación Española de Banca Privada and others (‘Spanish Banks’) [1992] ECR I-4785. 116 Case C-67/91, Asociación Española de Banca Privada and others (‘Spanish Banks’) [1992] ECR I-4785.

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purpose of Regulation 17 was not to use such information for the purposes of a Community antitrust law intervention, but rather to allow the national authorities (in such a highly centralized system) to monitor the Commission’s activity. Regulation 17/62 did not regulate horizontal information exchange between the national authorities (as was later the case pursuant to Article 12 of Regulation 1/03). It was unnecessary to do so in the scheme of Regulation 17, where the national authorities’ role was, in essence, to implement Commission decisions or, at most, to collaborate with the Commission.

2.4.1.4 Control Mechanisms in the Administrative Antitrust System Regulation 17/62 also set out a control mechanism which the member states exercised vis-à-vis the Commission. As will be shown later, this control mechanism was drafted—following the German position—in order to maintain the full independence of the Commission from the member states in deciding competition law cases and from the Advisory Committee. Article 10(2) of the Regulation set forth the principle of ‘close and constant liaison’ with the competent authorities of the member states, a concept which had already been introduced by Article 89 EEC. On the basis of that principle, the Regulation 17/62 set out rules for the participation of the member states at the decision-making phase of Commission proceedings carried out on the basis of Articles 2, 3, and 6 of the Regulation. To that end, the Regulation established an ad hoc body to represent the member states, the Advisory Committee on Restrictive Practices and Monopolies, composed of officials appointed by the member states. The close and constant liaison between the Commission and national authorities took two distinct forms: in the first place, there was the liaison between the Commission and the individual national authorities pursuant to Article 10(1), and in the second, there was the liaison between the Commission and the Advisory Committee as the body representing the member states collectively, pursuant to Article 10(3) et seq. of the Regulation. We should not underestimate the fact that, when Regulation 17/62 was being drafted, the precise rules defining the liaison between the Commission and the member states were anything but clear. We can see from the preparatory work of the Regulation that the member states, in particular France and Germany, had very different ideas as to the appropriate means and the degree of liaison (or, to put it more accurately, the means and degree of appropriate control by the member states). At first, France proposed that the Commission should share the responsibility for implementing Articles 85 and 86 EEC with the member states. According to this conception, the member states would have had a constitutive role in the antitrust decision, thereby limiting the Commission’s autonomy

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(or supranationality).117 At the same time, with the probable aim of guaranteeing the Commission’s independence, Germany maintained that it was necessary to limit the influence that the member states could exert on the Commission in its implementation of Articles 85 and 86. To this end, Germany proposed that the procedure should consist of two separate phases: in the first, the appropriate national authority would adopt a decision on the case under investigation, and in the second, the Commission would take a final decision.118 But the German proposal was rejected as too complex by the Chairman of the relevant subcommittee, Hans von der Groeben.119 At a later juncture, the member states’ positions underwent some change. Nevertheless, France maintained its approach that there should be a division of powers between the Commission and the member states, entailing a direct and binding intervention by the latter in the former’s implementation of EEC antitrust law.120 On the other hand, Germany and the Benelux countries supported the conferral of exclusive powers of implementation on the Commission.121 The detailed rules ultimately adopted clearly reflect the approach advocated by Germany and the Benelux. As mentioned earlier, Article 10(3) established the Advisory Committee, which was composed of officials competent in the matter of restrictive practices and monopolies. The Committee was to ‘be consulted prior to the taking of any decision following upon a procedure under paragraph 1 and of any decision concerning the renewal, amendment or revocation of a decision pursuant to Article 85(3) of the Treaty’ (emphasis added). Pursuant to Article 10(5), the consultation was to take place at a joint meeting convened by the Commission. The Commission’s note convening meeting had to be accompanied by a summary of each case to be discussed, an indication of the most important documents, and a preliminary draft decision. Article 10(6) provided that the consultation was to culminate in the delivery of an opinion, even if ‘some of its members or their alternates [were] not present’. The opinion, which was not binding on the Commission, was annexed to the draft decision, but remained an internal document and was not made public. As we can clearly see, and as Germany and the Benelux countries had proposed partly in order to maintain the autonomy of the Commission, the Advisory Committee did not have significant powers to intervene in the Commission’s decision making. Yet the Committee was the sole formal body capable of representing the member states and putting pressure on the Commission. 117 118 119 120 121

See Schulze and Hoeren, Dokumente, 455. Schulze and Hoeren, Dokumente, 333. Schulze and Hoeren, Dokumente, 333. Schulze and Hoeren, Dokumente, 484. Schulze and Hoeren, Dokumente, 484.

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In particular, it had the function of making known to the Commission the preoccupations of the individual member states regarding the draft decisions submitted to it. This two-tier Community system involving the upper Community tier and the lower member state tier constituted the means whereby the member states exerted influence on and monitored the Community antitrust system.122

2.4.2 Judicial Protection of Articles 85 and 86 EEC Pursuant to Regulation 17/62 Unlike Regulation 1/03, but like Articles 88 and 89 EEC, Regulation 17/62 contained no reference to national courts. This omission applied both to the power to enforce Articles 85 and 86 EEC and to cooperation between national courts and the Commission or the national authorities. As to the first point, the lack of any reference to the power to apply those Articles is understandable given that the courts applied the antitrust prohibitions as a consequence of their direct effect (as confirmed in the jurisprudence of the ECJ). Hence, the courts did not need to have specific powers conferred on them for that purpose. However, the Regulation did resolve, albeit indirectly, one of the problems to which Articles 88 and 89 EEC had given rise with reference to the national courts’ jurisdiction to apply Articles 85 (in particular 85(3)) and 86. Article 1 of the Regulation provided, as we have seen, that agreements of the kind described in Article 85 and the abuse of a dominant position within the meaning of Article 86 were ‘prohibited, no prior decision to that effect being required’. This provision left little doubt that the national courts could and were obliged to apply Articles 85 and 86 as a result of their direct effect. However, although the Regulation clarified this point, the national courts’ power to apply Article 85 was limited significantly by the fact that Article 85(3) did not have direct effect. Some years later, in Delimitis,123 the ECJ established that, under Regulation 17/62, when an agreement had been notified to the Commission, a national court could not decide the case until the Commission had ruled on the notification. If the Commission had rejected the application for authorization, the court could apply Article 85(1). In the case of agreements that had not been notified, a national court could rule forthwith on whether an infringement of Article 85(1) had taken place, but without any

122 In particular, the national authorities were entitled to ‘express their views upon’ the procedures ‘for the purpose of establishing the existence of infringements of Articles 85 or 86 of the Treaty or of establishing negative clearance or a decision in application of Article 85(3)’ (Articles 10(1) and 10(2) of Regulation 17/62). 123 Case C-234/89, Delimitis v Henninger Bräu AG [1991] ECR I-935.

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possibility of assessing whether Article 85(3) could be applicable. All of this led, in some cases, to the sudden notification of agreements during the pendency of national litigation raising competition issues. As to the second point (ie, cooperation), Regulation 17/62, unlike Regulation 1/03, contained no rules on cooperation between the Commission and the national judges. This is attributable to the fact that the Regulation’s main aims were to establish detailed rules for the implementation of Article 85(3) and to define the Commission’s powers to realize the objectives set out in Article 3(1)(f ) EEC in an enforcement system centralized around the Commission.

2.5 The ‘Ebb’ of Regulation 17/62 Throughout the more than forty years in which it was in force, Regulation 17/62 remained substantially unchanged. But in the same period, the Community system as a whole changed considerably. The transformations were both legal and factual. The numerous amendments to the treaties bear witness to the legal changes, which were partly attributable to the increase in the number of member states. An example of a practical change was the increasing number of cases which fell within the scope of Community antitrust law thanks to the ‘completion’ of the Common Market. These changes caused new problems in the Community antitrust system, especially with respect to the vertical relationship between the Commission and the competition authorities of the member states.124 The vertical relationship between the Commission and the national authorities and courts began to assume importance at the beginning of the 1990s as a result of the number of antitrust cases (Article 85(3) notifications, complaints, and ex officio cases, etc.) dealt with by the Commission. Given the limited number of staff working for DG IV, there were simply too many cases for the Commission to deal with.125 On the one hand, the increase in the number of complaints filed with the Commission reflected the growth in the number of cases having an effect on interstate trade. On the other, the number of notifications seeking exemption under Article 85(3) followed from the European competition law regime, which is worth examining briefly. The large number of notifications was attributable to the restrictive way in which Article 85(1) was interpreted. From the enactment of Regulation 124

On this point, see generally Pace, I fondamenti del Diritto antitrust europeo, 253. Christopher Bellamy and Graham D. Child, Common Market Law of Competition, 4th edn (London: Sweet & Maxwell, 1993), 139. 125

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17/62, undertakings frequently notified agreements because they were unsure of how the Commission would interpret Article 85(1). From the beginning of the 1960s, they notified because it became apparent that the Commission’s approach in fact embraced an expansive interpretation of the prohibition (consistent with the objective of centralization). As shown above, non-notified agreements could be unlawful ex tunc, whereas if they were notified no penalties would be imposed even if a request for exemption was subsequently rejected. This factor created strong incentives for undertakings to notify. The high number of notifications was also attributable to the narrow interpretation of Article 4(2) of Regulation 17/62 by the Court of Justice.126 This was a provision which aimed to reduce the number of cases in which a notification had to be made in respect of agreements concluded by undertakings active in one and the same Member State. Initially, the Commission tackled the problem posed by the large number of notifications by means of stopgap solutions. In the 1960s, the first attempted solution was the adoption of a number of block exemption regulations,127 the first being introduced in 1967.128 Undertakings were thus relieved of the need to notify specified categories of agreement.129 The second device to which the Commission had recourse in order to stem the increase in its workload was the so-called ‘comfort letter’. A comfort letter was used to inform companies 126 See Case 43/69, Brauerei Bilger v Heinrich Jehle [1970] ECR 127, and the comment by Koenraad Lenaerts, Le Juge et la Constitution aux États-Unis d’Amérique et dans l’Ordre juridique Européen (Brussels: Bruylant, 1988), 124. 127 See Daniel G. Goyder, EC Competition Law, 3rd edn (Oxford: Oxford University Press, 1998), 130. 128 See Regulation No.67/67/EEC of the Commission of 22 March 1967 on the application of Article 85 (3) of the Treaty to certain categories of exclusive dealing agreements, OJ 1967, L57/849; Commission Regulation (EEC) No.123/85 of 12 December 1984 on the application of Article 85 (3) of the Treaty to certain categories of motor vehicle distribution and servicing agreements, OJ 1985, L15/16; Commission Regulation (EEC) No.2349/84 of 23 July 1984 on the application of Article 85 (3) of the Treaty to certain categories of patent licensing agreements, OJ 1984, L219/15; Commission Regulation (EEC) No. 556/89 of 30 November 1988 on the application of Article 85 (3) of the Treaty to certain categories of know-how licensing agreements, OJ 1989, L61/1; Commission Regulation (EEC) No. 4087/88 of 30 November 1988 on the application of Article 85 (3) of the Treaty to categories of franchise agreements, OJ 1988, L359/46; Commission Regulation (EEC) No. 417/85 of 19 December 1984 on the application of Article 85 (3) of the Treaty to categories of specialization agreements, OJ 1985, L53/1; Commission Regulation (EEC) No. 418/85 of 19 December 1984 on the application of Article 85 (3) of the Treaty to categories of research and development agreements, OJ 1985, L53/5; Commission Regulation (EEC) No. 82/91, 83/91, 84/91, 83/91 of 5 December 1990 on the application of Article 85 (3) of the Treaty to certain categories of Agreements between undertakings relating to computer reservation systems for air transport services, OJ 1991, L10/7; Commission Regulation (EEC) No. 3932/92 of 21 December 1992 on the application of Article 85 (3) of the Treaty to certain categories of agreements, decisions and concerted practices in the insurance sector, OJ 1992, L398/7. 129 See Goyder, EC Competition Law, 242.

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which had notified agreements that they did (or did not) appear to fulfill the conditions for obtaining an exemption or that they fell within the scope of a block exemption regulation. However, the non-binding nature of comfort letters and consequent lack of legal certainty obviously limited their utility for the notifying undertakings.130 By the beginning of the 1990s, the volume of notifications and the enforcement of Articles 85 and 86 became impossible for the Commission to manage. The extra increase in the Commission’s activity is largely attributable to the ‘completion’ of the internal market at the end of 1992. This, in turn, increased the importance of Community antitrust law at a time when the legal barriers between member states had gradually been abolished. The elimination of legal barriers encouraged Community-wide investments and economic activity that had at least a potential effect on trade between member states and to which Community antitrust law was thus applicable. The increased workload, and the limited number of Commission staff, led to the Commission handling requests for exemption extremely slowly. This slowness was recognized by the Court of Justice131 and it even had an influence on the definition of the scope of Italian antitrust law.132 The Commission thus needed to find a way to reduce its workload in this area, quite independently of the question of amending Regulation 17/62. In this period, the issue of the Commission’s inability to cope with its workload assumed importance in the context of the vertical relationship between the Commission and the national authorities. The Commission attempted to solve the problem through its strategy of decentralizing Community antitrust law, opening the door to the repeal of Regulation 17 and the enactment of the new regulation on the implementation of European antitrust law, Council Regulation 1/2003 of 16 December 2002, which entered into force on 1 May 2004.

2.6 Conclusions Despite the important changes in the public enforcement regime brought about in 2004, Regulation 17/62 was, in its time, fundamental for establishing a competition culture in Europe. Following the negotiations of the Treaty of Rome, the negotiations on Regulation 17/62 were one of the first occasions 130

See, eg, Case 37/79, Anne Marty SA v Estée Lauder [1980] ECR 2481. See Case 48/72, Brasserie de Haecht v Wilkin-Janssen [1973] ECR 77. 132 See Lorenzo Federico Pace, ‘Il sistema italiano di tutela della concorrenza e il “vincolo comunitario” imposto al legislatore nazionale: l’art. 1 l. n. 287/90’, Rivista italiana di Diritto pubblico comunitario 6 (2001), 997. 131

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in the history of European competition law where the proponents of the major national economic traditions clashed. The enforcement regime that was ultimately established reflected more the post-war German approach towards competition law than the French conceptions that had strongly influenced the wording of Article 85, although the French position was reflected in some aspects of Regulation 17/62. The actors that discussed and ultimately adopted Regulation 17/62 were quite aware of its relevance for substantive competition law—although they may not have foreseen the great practical relevance that the competition rules would soon have. The fact that the Regulation was adopted nonetheless, and despite strong initial resistance was, to a significant extent, the result of a prototypical exercise of log-rolling, coupled perhaps with a ‘veil of ignorance’ regarding the Regulation’s ultimate impact. Whether it was also a reflection of the window of opportunity that existed in the early 1960s (sometimes referred to as a ‘honeymoon period’) where sometimes Community spirit prevailed over national interests may be a matter of debate.

3 National Traditions of Competition Law A Belated Europeanization through Convergence? Adrian Kuenzler and Laurent Warlouzet

3.1 Introduction In Europe, the emergence of national competition law traditions can be traced back to the end of the 19th century. Germany, the United Kingdom, and France played a pivotal role in exerting a substantial influence on the law in Europe, particularly with regard to the treatment of cartels. The different economic-policy contexts in these countries, along with their own national experiences, were the main factors in the development of diverging approaches in competition law. Apart from that, in 20th-century Europe, the development of national competition laws was partially interlinked with the development of supranational (European) competition policy: in most European countries, national provisions were enacted between 1948 and 1957; the major international treaties that later developed into a genuine supranational framework were signed in 1951 (Treaty of Paris, ECSC) and 1957 (Treaty of Rome, EEC).1 The aim of this chapter is to study the interaction between both dynamics—the different national experiences on the one hand and the mutual influences on the supranational policy on the other. The reciprocal influences of national and European competition policies are tightly linked to what is known as the ‘Europeanization process’, which is threefold in effect. Firstly, today, it is often emphasized that a top-down dynamic prevails, according to which European competition law influenced

1 A general account of the history of European competition policy, including an assessment of the literature, can be found in Laurent Warlouzet, ‘The Rise of European Competition Policy, 1950–1991: A Cross-Disciplinary Survey of a Contested Policy Sphere’, EUI Working Paper RSCAS 2010/80, (last accessed 20 February 2013).

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national competition policies through both informal (intellectual influence) and formal (harmonization and/or the establishment of supranational laws) means.2 However, it is also important to bear in mind that ‘Europeanization’ can on the other hand be associated with a bottom-up movement. As a matter of legal history, what is most notable about this aspect of the formation of European competition law is how national approaches of competition policy shaped and influenced European competition law, and how national concepts in terms of laws, institutions, and economic policies were transposed into European (EEC) legislation. Thirdly, the evolution of national and European competition policies can be perceived as having evolved in parallel. A process of cross-fertilization may explain common features of national and European competition laws. Such common features become apparent upon analysing the evolution of the economic context (eg, the economic crisis of 1973) and its influence on particular designs of national institutions and national competition policies (guiding principles and statutory assessment criteria). This chapter seeks to examine the ‘Europeanization process’ against those three dimensions. From the mid-1980s onwards, EEC competition policy was dramatically strengthened in terms of both intensity (number of cases, level of fines) and scope (from restrictive practices to mergers, state aids, and sectoral deregulation), which accelerated the pace of national ‘harmonization’.3 A strengthening of EEC competition policy forced the national governments to more radically amend their own national regimes, both in order to limit the Commission’s meddling in their purely national affairs, and in response to an institutional requirement for harmonization.4 As a result, today, European competition law operates side by side with national competition laws and both can be applied at the same time;5 in the domain of merger control, by contrast, they are mutually exclusive.6 In fact, a total of twenty-seven national competition laws and one Community competition law compete for application within Europe. 2 Claudio M. Radaelli, ‘The Europeanization of Public Policy’, in The Politics of Europeanization, Kevin Featherstone and Claudio M. Radaelli (eds) (Oxford: Oxford University Press, 2003), 27–56; Claudio Radaelli, ‘The Domestic Impact of European Union Public Policy: Notes on Concepts, Methods and the Challenge of Empirical Research’, Politique européenne 1 no. 5 (2002), 105–36. 3 See the other contributions in this volume. See also Michelle Cini and Lee McGowan, Competition Policy in the European Union (London: Macmillan Press, 1998), 29–35; Laurent Warlouzet, ‘The Rise’, 17–21. 4 In particular, Council Regulation 1/2003 formalized and intensified a European competition network which serves as a tool for the harmonization of the national competition authorities’ activities. 5 Article 1(1), Regulation 1/2003. See also the conflict rules set down in Article 1(2) of the Regulation. 6 Article 1(3), Regulation 1/2003 in conjunction with Regulation 139/2004 (the Merger Regulation).

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In the following account, emphasis will be laid on the period since the Second World War until the mid-1980s. Specifically, we attempt to consider the various systems of competition law in light of different aspects of substantive law, procedural law, and institutional settings, and our discussion will cover particularly the treatment of cartels7 and occasionally merger control.8 In terms of geographic scope, the role of Germany, the United Kingdom, and France will be treated comprehensively because they exerted a substantial influence on the law in Europe. The economic territories of the Netherlands and Italy will also be taken into account, albeit more narrowly since the former was long considered to be a ‘cartel haven’ while the latter was among the last countries to adopt a specific competition law, achieving this only in 1990.9 This principal inquiry will lead to two conclusions. First, as a descriptive matter, there is considerable evidence that the progressive strengthening of European competition policies from 1945 to the mid-1980s stems from converging conceptions and practices rather than from a centralized process. The dynamic of the European Economic Community has been influential but not dominant, and the German model has been extremely important, too. A community of national and European competition policy experts had emerged progressively, fostered by the rise of more market-oriented ideas after 1973. Second, as a normative matter, we contend that European competition law history provides an illustration of how two conceptually different approaches—one that was guided by broadly framed blanket clauses aligned to public interest criteria, and another more judicial-like approach that was squarely directed to competition-related criteria from the start—may fundamentally affect the coherence of regulatory practice and thereby determine the degree of legal certainty and predictability available to market actors with respect to the interpretation of competition law. More broadly, we conclude that this episode in competition law history reveals a valid, but largely unexplored and unexpected source of legitimacy for a categorical pair of opposites in competition law: rule-based versus case-by-case based reasoning of agencies and courts. To establish and defend this inquiry, this chapter proceeds in five parts. Section 2 summarizes the economic context and regulatory framework up 7 This chapter concentrates primarily on the development of statutory frameworks, whereas the practice of cartel law enforcement can only be touched upon in passing. It must be borne in mind, however, that norm development represents only a part of the analysis of competition law. On the influence of the United States on these developments, see Chapter 4 in this volume. For a comprehensive overview see Udo Woll, Die Konvergenz der Kartellgesetze in Europa (Baden-Baden: Nomos Verlagsgesellschaft, 2002). 8 Note that provisions for mergers were often introduced after those concerning cartels. 9 Although the United Kingdom was not a part of the EEC until 1973, the UK’s role was more influential than that of some of the oldest EEC member states such as Belgium, which did not begin to apply a formal competition law framework until the early 1990s.

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to the end of the Second World War, underscoring that a cartel-friendly environment existed in Europe at that time. Section 3 describes in a comparative manner how the national trajectories evolved under these circumstances, noting that (1) different economic policy contexts led to different competition law approaches, (2) that these early advances reveal a variety of structural differences (in terms of guiding principles, statutory assessment criteria, and institutional characteristics) between national competition laws, and (3) that these structural differences have been determinative in the shaping of early European competition law policies. In tracing the underlying reasons for a more progressive development of national competition laws from the 1960s to the 1980s, Section 4 follows the same mode of analysis, revealing that while the national legislators began to take into account European competition law, the particular economic policy contexts and designs of national institutions, as well as a dimension of cross-fertilization, influenced and shaped supranational norms to a significant extent. Section 5 summarizes and draws out more generalized lines of conclusion.

3.2 The Origins of Competition Policy up to the End of the Second World War 3.2.1 Economic Context and General Legal Framework At the end of the 19th century, cartels were considered to be positive and stabilizing phenomena of economic life. That being the case, no legislative provisions to control restraints on competition had yet taken shape. Moreover, the State’s role in economic regulation was quite limited, especially before 1914. Only very specific forms of competitive restraints, ie, those in breach of general norms of civil law or penal law, were subjected to legal scrutiny. In Germany, for example, early cases primarily concerned disputes between cartels and former cartel members:10 the increasing spread of cartels inevitably raised the question of how far their agreements, which were considered to be fundamentally permissible by virtue of freedom of contract, might constitute a violation of freedom of trade.11 According to a well-known judgment of 10 With regard to the origins of Swiss competition law, see Adrian Künzler, Effizienz oder Wettbewerbsfreiheit? Zur Frage nach den Aufgaben des Rechts gegen private Wettbewerbsbeschränkungen (Tübingen: Mohr Siebeck, 2008), 195–201; Roger Zäch and Adrian Künzler, ‘Individualschutz und Institutionsschutz als Aufgaben des Kartellrechts’, in Individuum und Verband. Festgabe zum Schweizerischen Juristentag, Roger Zäch et al. (eds) (Zurich: Schulthess, 2006), 291, 297. 11 Künzler, Effizienz oder Wettbewerbsfreiheit? 195–201; Zäch and Künzler, ‘Individualschutz und Institutionsschutz als Aufgaben des Kartellrechts’, 291, 297.

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1897 by the Supreme Court of the German Reich, ruling on the Saxonian wood-pulp cartel (Sächsisches Holzstoffkartell ), accommodating entry into a cartel did not infringe the freedom of trade of third parties.12 Likewise, cartels did not negatively affect the public interest. Rather, they served to protect against ‘economic excesses’ and ‘excessive competition’ by preventing over-production and guaranteeing adequate prices.13 In France, by contrast, a penal approach was adopted: as early as 1810, the forming of coalitions for price-fixing had been subjected to Article 419 of the Code Pénal. These provisions were the result of a long-standing concern of the state regarding the supply of cheap and abundant food to avoid political unrest, and aimed at prohibiting the hoarding of goods for subsequent price speculation. In other words, collusion with a view to making profits arising not from the ‘normal interaction of the forces of supply and demand’ but from artificial inflation or discounting of prices could be subject to criminal prosecution. Thus, the paramount interest deemed worthy of protection was that of ‘free pricing in competition’. The provisions in the Code Pénal were of particular significance in civil law because they rendered corresponding agreements null and void, and by the same token they opened the door to actions for damages.14 In the United Kingdom, all that existed were a few institutions of the common law. According to the restraint of trade doctrine developed in the 15th century and valid to the present day, contracts which unduly restrained or led to an unreasonable restraint on freedom of economic activity were unenforceable.15 Apart from such a ‘restraint of trade’, the application of the doctrine presupposed some protected interest on the part of the plaintiff (reasonableness). The defendant had to refute the presumption of unreasonableness and, for the restraint of trade to be effective, had to attest that other parties’ interests had been given due consideration. Thereafter, the judge could only refuse to enforce a contract if it was also in violation of the public interest. If this was the case, ineffectiveness of the contract was only upheld between the parties concerned; no third party could assert the invalidity of the agreement. Behaviour governed by this doctrine therefore only came before the courts in cases where one of 12 RGZ 38, 155 ff. See Klaus W. Richter, Die Wirkungsgeschichte des Deutschen Kartellrechts vor 1914 (Tübingen: Mohr Siebeck, 2007), 71–2; Zäch and Künzler, ‘Individualschutz und Institutionsschutz’, 291–7. 13 This was in tune with public opinion at the time. See Richter, Die Wirkungsgeschichte des Deutschen Kartellrechts vor 1914, 72 ff. 14 Louis Vogel, Französisches Wettbewerbs- und Kartellrecht (Heidelberg: Recht und Wirtschaft, 2003), 16 ff., with further references. 15 For an overview, see Michael Jefferson, Restraint of Trade (Chichester/New York/Brisbane/ Toronto/Singapore: John Wiley & Sons, 1996), 9 ff.

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the parties had breached the agreement. As long as the parties adhered to the agreement, there were no means of proceeding against them using the doctrine of restraint of trade.16

3.2.2 Emergence of the First National Competition Law Systems Because of the prevalence of collusive agreements among undertakings, over time, public opinion on cartels began to change.17 From the 1920s onwards, the first means of control over anticompetitive agreements were enacted. The heavy inflation of the early 1920s, particularly in Germany, brought about an almost comprehensive cartelization of the economy, whereby undertakings sought to shift their economic risk, and most of all the risk of currency devaluation, squarely onto consumers. As a consequence, growing political pressure was brought to bear on the government, which led to the enactment of the Cartel Ordinance (Kartellverordnung) of 2 November 1923,18 formally promulgated as an emergency decree justified by the crisis of hyperinflation.19 However, the emergency decree was not intended to combat cartels as such; it merely gave the Minister of Economic Affairs powers to control ‘abusive practices’ for cases in which ‘the economy as a whole or public welfare’ were jeopardized by cartels.20 Similarly, in France, Articles 419 et seq. of the Code Pénal were complemented by the 1926 law. This law added supplemental provisions to the Code Pénal by introducing a mechanism for distinguishing between ‘good’ and ‘bad’ cartels (bonnes ententes et mauvaises ententes). Thereby, the negative effects of their practices were balanced against their potential positive impact on economic development. This macroeconomic balancing test was expected to aid in achieving the economic policy objectives envisaged under the previous law, and to aid in individually assessing cartels in relation to the given circumstances of each case.21 By contrast, prior to the Second World War, the United Kingdom had developed no competition law 16 On the other hand, a different common law device, the tort of conspiracy, could be invoked in cases of illegal collusion depriving a third party of legitimate interests. See Jefferson, Restraint of Trade. 17 Rainer Gömmel, ‘Kartelle in der öffentlichen Meinung bis 1914’, in Kartelle und Kartellgesetzgebung in Praxis und Rechtsprechung vom 19. Jahrhundert bis zur Gegenwart, Hans Pohl (ed.) (Stuttgart: Steiner, 1985), 69, 79. 18 RGBl. 1923 I, 1067, RGBl. 1923 I, 1090. 19 Verordnung gegen Missbrauch wirtschaftlicher Machtstellungen vom 2. November 1923, RGBl. 1923, I, 1067, 1090. See Klaus J. Bremer, ‘Die Kartellverordnung von 1923: Entstehung, Inhalt und praktische Anwendung’, in Kartelle und Kartellgesetzgebung, 111 ff. 20 Bremer, Kartelle und Kartellgesetzgebung, 111 ff. 21 Helmut Sennewald, Kartelle und Wettbewerbsbeschränkungen in Frankreich (Karlsruhe: C.F. Müller, 1964), 14 f.; Alain Chatriot, La démocratie sociale à la française. L’expérience du Conseil national économique 1924–1940 (Paris: La découverte, 2002), 262.

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of its own. As in France, however, existing legal opinions paved the way for subsequent British competition law: the restraint of trade doctrine increasingly embraced a public interest test according to which protection of the public interest became central to legislative aspirations.22 Despite these early developments, in several countries cartelization was further encouraged by the state as a response to the severe economic crisis of the 1930s. In France, the ‘Flandrin-Marchandeau’ bill of 1935 was meant to impose compulsory cartelization with state backing, provided that a majority of companies of a given sector so requested in response to sectoral crises.23 The law did not enter into force, however, unlike in the Netherlands, where the 1935 Business Agreements Act (Ondernemersovereenkomstenwet) was fully enforced. The Act contained provisions that gave the state powers to force cartel membership.24 During the war, systematic cartelization was also strengthened in the German Länder under Nazi rule. And in Vichy France, the comité d’organisation systematically organized production through permanent corporatist consultation of businessmen and civil servants.25 Ultimately, in 1941, the Dutch Cartel Decree established a cartel register.26 Both the corporatist and planiste ideologies of the 1930s and the difficult economic conditions of the war—in particular, the need to allocate a limited pool of resources—reinforced these pro-cartel attitudes.

3.3 The Emergence of Competition Laws after the Second World War (1945–early 1960s) After the Second World War, three major dynamics influenced the relationship between public authorities and the regulation of markets. Firstly, economic liberalism spread largely in the Western world thanks to US influence and to the rejection of post-1929 protectionism. These ideas materialized in international institutions and agreements such as the IMF and the GATT, in commercial and monetary liberalization after the Marshall Plan and in the growing influence of liberal thinkers on the economy.27 Secondly, in 1945, in 22

Jacqueline Wilkinson, Restraint of Trade (London: Fourmat Publishing, 1991), 113. Chatriot, La démocratie sociale à la française, 262–5. 24 Wendy Asbeek Brusse and Richard Griffiths, ‘Paradise Lost or Paradise Regained? Cartel Policy and Cartel Legislation in the Netherlands’, in Competition Policies in Europe, Stephen Martin (ed.) (Amsterdam: Elsevier, 1998), 15–39, 16. 25 Les comités d’organisation et l’économie dirigée du régime de Vichy, Hervé Joly (ed.) (Caen: Centre de recherches d’histoire quantitative, 2004). 26 Asbeek Brusse and Griffiths, ‘Paradise Lost’, 17. 27 On the influence of new liberal ideas in Germany, see Section 3.3.1. With regard to France, see François Denord, Néo-libéralisme version française. Histoire d’une idéologie politique (Paris: Démopolis, 2007). 23

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most Western European countries a consensus emerged that the state should play a more important role in regulating the economy. This consensus resulted in different policy responses among the various European countries: apart from the introduction of genuine competition, planification as well as social, national, and industrial policy measures were established. Thirdly, after the war, economic reconstruction became pivotal. Due to the exigencies of the war economy, many production facilities had been destroyed, and various branches of industry had been reorganized or plundered. Shortages of goods defined the economic conditions. Now, liberal economists in the United States and Western Europe promulgated the belief in competitive markets and the need for appropriate regulation. However, the economic policy approaches with which to tackle the new beginning varied from country to country. In Germany, under the pressure of the Allies, and following a rejection of the statist and cartelized Nazi experience, de-cartelization was chosen as an instrument of reconstruction. By contrast, in France, renewal of the economy was affected by ancient traditions that nurtured concepts of planification and price control. And whereas in the Netherlands and in Italy the positive views towards coordination in the economy began to change slightly, in the United Kingdom a true competition policy was developed, albeit one that followed a pragmatic approach incorporating a variety of different policy objectives. Interestingly enough, a comparison of these early developments reveals a number of structural differences between national competition laws which in turn determined the extent to which particular national competition law traditions shaped European competition policy. Section 3.3.1 describes the national trajectories in more detail. Following on from this, Section 3.3.2 carves out the structural and conceptual differences between national competition law approaches. Section 3.3.3 explains why certain national competition law traditions have been more or less influential in shaping European competition policy at this first important stage in European competition law history.

3.3.1 The National Trajectories 3.3.1.1 De-cartelization as an Instrument of Destruction and Reconstruction in Germany After the war, Germany was still under military occupation. Among some of the most pressing political goals of the Allies was the task to institute legal framework conditions to ensure that past mistakes would not be repeated. After all, heavy market concentration and the all-encompassing cartelization of German industry were blamed for having paved the way for military aggression

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and Hitler’s rise to power. The central concern in Germany was therefore to break up economic capacities for war and to prevent renewed excessive concentration of economic power.28 The Decartelization Laws of 1947 thus strove to establish rules against private restraints on competition at a very early stage—along lines similar to the Sherman Act in the USA—and thereby to emphasize the importance and value of such norms. What is more, very soon, competitive economic structures were to be created, along with a democratic reconstruction of the country. To this end, American Law No. 56, British Ordinance No. 78, and French Ordinance No. 9629 laid down a fundamental prohibition of anticompetitive practices that included gentlemen’s agreements as well as vertical and horizontal contractual provisions.30 At a second stage, the occupying powers transferred responsibility for decartelization into the hands of the German economic administration, and gave instructions to prepare appropriate laws. A restoration of complete sovereignty was only thought to be acceptable on condition that (among other things) Germany adopt a competition law.31 Walter Eucken and Franz Böhm of the Freiburg School of Economics had a formative influence on the development of the post-war competition law regulation in Germany. They believed that freedom of action had to be protected not just from state intervention but also from self-destructive commercial forces. Accordingly, the state was required to impose a regulatory framework by, on the one hand, setting the objective of ensuring maximum competition while preventing, on the other hand, harmful competitive excesses.32 This school of thought is also often referred to as Ordoliberal, as one of its aims was to establish an ‘order-based’

28 Wolfgang Kartte, Ein neues Leitbild für die Wettbewerbspolitik (Cologne: Heymann, 1969), 19; Günther Schulz, ‘Die Entflechtungsmassnahmen und ihre wirtschaftliche Bedeutung’, in Kartelle und Kartellgesetzgebung, 210 f. 29 For the American Occupation Zones, see the decartelization statute of the Military Government Law No. 56 of 12 February 1947, in ABl, 1 April, 1947, at 2, in R. Heinken, Sammlung der vom Allierten Kontrollrat und der Amerikanischen Militärregierung erlassenen Proklamationen (n.d.); for the British Occupation Zone, the decartelization law was the Military Government Ordinance No. 78 of 12 February 1947, ABl 16, at 412; for the French Occupation Zones, the decartelization law was the Military Government Ordinance of No. 96 of 9 June 1947, Journal Officiel, 784. The texts of the US law and the British Ordinance were identical; the French version was slightly different. See Alfred Gleiss and Wolfgang Fikentscher, WuW (1955): 525, with further references. 30 Possible exemptions existed pursuant to Article 6 of Law No. 56 where the character or operation of the company concerned ‘a) [were] not in conflict with the purposes of this law or b) [were] necessary for the furtherance of the defined objectives of the military government’. 31 Eberhard Günther, ‘Gesetz gegen Wettbewerbsbeschränkungen. Stand der Verhandlungen mit der Alliierten Hohen Kommission über den deutschen Entwurf ’, WuW (1952): 281, 281 f. 32 See generally Andreas Heinemann, Die Freiburger Schule und ihre geistigen Wurzeln (Munich: VVF, 1989); Wolfgang Fikentscher, Wirtschaftsrecht II (Munich: C.H. Beck, 1983), 42.

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policy which limits the discretionary powers of politicians in the economic sphere.33 Important German leaders such as Ludwig Erhard (Economic Minister, 1949–1963; Chancellor, 1963–1966) advocated the development of a strong competition regime as a cornerstone of the new democratic order. For Erhard, a strong competition policy embodied political and economic liberalism because its purpose was to defend citizens against an authoritarian threat coming from more powerful actors.34 While Ludwig Erhard and the proponents of the social market economy supported a strict prohibition principle (Verbotsprinzip) as a statutory solution, German industry, and in particular the BDI (Bundesverband der Deutschen Industrie), preferred a less judicial-like system for the control of abusive practices, taking the view that a strict cartel ban would be a draconian approach and would ultimately impede the reconstruction of German industry.35 After a proposal for a Cartel Act was drafted in 1949 by a working group led by Paul Josten,36 in 1952 the Ministry of Economic Affairs put forward a government draft, its aim being to forge a consensus among the different camps.37 Industry staunchly resisted the principle of a general cartel ban, arguing that it would be impossible to promote trustful cooperation between officials and industry leaders in order to achieve economic development and recovery under prohibition legislation;38 yet, ultimately, the prohibition principle prevailed. The stringency of the cartel ban was relaxed considerably, however, with concessions to industry in the form of exemptions on numerous points (export cartels and a number of other sectors of the economy were excluded from the ban).39 At the beginning of July 1957, the Bundestag adopted the first Act Against Restraints on Competition (the Gesetz gegen Wettbewerbsbeschränkungen, or GWB). The GWB was rooted in the thinking of the Freiburg School and its idea of a liberal and democratic economic system. 33 Regarding the influence of Ordoliberalism on German Competition Policy, see David Gerber, Law and Competition in XXth Century Europe. Protecting Prometheus (Oxford: Clarendon Press, 1998), 232–65; Sybille Hambloch, Europaïsche Integration und Wettbewerbspolitik. Die Frühphase der EWG (Baden-Baden: Nomos, 2009), 74 and 81–3; Katja Seidel, ‘DG IV and the origins of a supranational competition policy: Establishing an economic constitution for Europe’, in The History of the European Union. Origins of a trans- and supranational polity, 1950–1972, Wolfram Kaiser, Brigitte Leucht, and Morten Rasmusen (eds) (London: Routledge, 2008), 132. 34 Ludwig Erhard, Prosperity through Competition (New York: Praeger, 1958), 123–8. 35 Viola Gräfin von Bethusy-Huc, Demokratie und Interessenpolitik (Wiesbaden: Steiner, 1962), 43 ff; Gerber, Law and Competition, 273. 36 Eberhard Günther, Entwurf eines deutschen Gesetzes gegen Wettbewerbsbeschränkungen, WuW (1951), 17, 23 ff. 37 BT-Drucksache I/3462; see also WuW (1952), 432 ff. 38 Rudolf Isay, ‘Der deutsche Kartellgesetzentwurf. Eine kritische Stellungnahme’, WuW (1952): 321, 327. See also Rudolf Isay, ‘Die verfehlte Konzeption des deutschen Kartellgesetzentwurfs’, WuW (1952), 694 ff. 39 Rudolf Isay, ‘Die verfehlte Konzeption des deutschen Kartellgesetzentwurfs’, WuW (1952), 694 ff.

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3.3.1.2 Planification, Nationalization, and Price Control in France Although France faced an equally urgent need to rebuild its economy following the Second World War, the French government chose another path, as it had been influenced by an ancient statist tradition, and by the anti-fascist movement’s reflections that put a strong emphasis on the steering role of the state in the economy.40 Unlike in Germany, French officials embarked on forging the closest possible links between the state and the economy, utilizing the instruments of interventionist policy and comprehensive planning as its chosen route for reconstruction and modernization of the economy. More concretely, the French government envisaged extensive state subsidies, the nationalization of major industrial sectors, state planning, and strict price control regulations. The nationalization of firms was thought to underwrite the efficacy of state steering mechanisms and to facilitate the implementation of social policy measures. While the imposition of economic plans (planification) was not intended to entail binding specifications on businesses (French planning was considered to be ‘guiding’ and not compulsory, in contrast to the USSR), it should nevertheless have included specified planning targets for the development of the French economy in that growth rates for a production branch were defined.41 With regard to redressing war damage, competition policy only played a secondary role. It was considered a sub-branch of a strong price policy, a policy that was established by the Ordinance of 30 June 1945. Its main role was to prevent inflation and to counteract the dangers of the emergence of black markets.42 But over time, even in France, pressure to introduce genuine competition laws mounted. Pressure from within, springing from the lifting of interventionist measures taken during the war and the reconstruction, was growing due to external forces such as international law commitments, particularly the signing of the Havana Charter.43 From 1947 onwards, therefore, several 40 On the French economic approach in the mid-20th century, see William James Adams, Restructuring the French Economy. Government and the Rise of Market Competition since World War II (Washington DC: The Brookings Institution, 1989); Richard Kuisel, Capitalism and the State in Modern France: Renovation and Economic Management in the 20th Century (New York: Cambridge University Press, 1981). 41 Günter Hedtkamp, Planification in Frankreich (Cologne: Heymann, 1966), 89 ff.; John H. McArthur and Bruce R. Scott, L’industrie française face aux plans: Harvard ausculte la France (Paris: Les éditions d’organisation, 1970). 42 Michel-Pierre Chelini, Inflation, Etat et opinion en France de 1944 à 1952 (Paris: CHEFF, 1998), 567–8; Louis Franck, La libre concurrence (Paris: PUF, 1967); Sennewald, Kartelle und vertikale Wettbewerbsbeschränkungen in Frankreich, 76. 43 The Havana Charter was signed by fifty-three countries on 24 March 1948 and allowed for international cooperation and rules against anticompetitive business practices. It was ultimately rejected by the US Congress. However, an important element of it survived as a binding international agreement, namely the General Agreement on Tariffs and Trade (GATT, 1947).

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competition law drafts were discussed.44 But since the legislature reached no unanimous agreement, the government finally passed a decree in 1953, which was integrated into Ordinance No. 45–1483 on price control. As a consequence, French competition policy was not established by ordinary laws enacted by parliament, but by means of two exceptional measures—an ordinance and a decree—imposed by the government alone. In this way, competition law was merely able to flank and supplement the rules on price control. The new regulations were, however, not grounded in the belief that competitive structures actually contributed to economic welfare. Rather, the principal concern behind those rules seemed to be some sort of ‘inflation control’ and the prevention of anticompetitive practices that might have lead to price increases.

3.3.1.3 Reconstruction of Competitive Structures in the United Kingdom In the United Kingdom, competition legislation was characterized by a sense of pragmatism. Dating back to 1948, British competition legislation is the most ‘ancient’ in Europe and it emerged from two contradicting forces: on the one hand, part of the Labour movement and a report written by two temporary members of the Board of Trade—Hugh Gaitskell and Professor G. C. Allen (The Control of Monopoly, 1943)—advocated a tightening of cartel controls;45 on the other hand, the British government created an extensive system of state intervention in the post-war economy, based on nationalization and the establishment of the ‘welfare state’. By the time the first competition rules were enacted, however, for both camps competitive principles only played a limited role. In the Gaitskell-Allen report, for example, the control of monopolies was justified on the grounds of achieving full employment. These tendencies were reflected in the Monopolies and Restrictive Practices Act of 30 July 1948. The Act was dominated by an informal procedure of negotiation between the state and businesses. The Monopolies Commission was supposed to enquire into monopolies and restrictive trade practices but the outcomes of its investigations did not give rise to a presumption of

44 On the French debate, see Hans-Peter Wild, Das marktbeherrschende Unternehmen im französischen Recht (Düsseldorf 1969), 18 ff.; Sennewald, Kartelle und vertikale Wettbewerbsbeschränkungen in Frankreich, 43 ff; Matthias Kipping, ‘Concurrence et compétitivité. Les origines de la législation anti-trust française après 1945’, in Etudes et Documents, volume VI (Paris: CHEFF, 1994), 429–55; Dominique Brault, L’État et l’esprit de concurrence en France (Paris: Economica, 1987), 33 ff.; Alain Chatriot, ‘Les ententes: débats juridiques et dispositifs législatifs (1923–1953). La genèse de la politique de la concurrence en France’, in La politique de la concurrence communautaire: origines et développements (années 1930-années 1990), Histoire, économie et société 27 (2008, special issue, Éric Bussière (ed.), Laurent Warlouzet), 18–21. 45 Stephen Wilks, In the public interest. Competition Policy and the Monopolies and Mergers Commission (Manchester: Manchester University Press, 1999), 12.

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illegality.46 Furthermore, the assessment was measured against the public interest, the vagueness of which had regularly been criticized. In reaction to this, on 2 August 1956, the government enacted the Restrictive Trade Practices Act, in which the legislator stipulated the prohibition of certain practices as well as a presumption that certain agreements were contrary to the public interest. At the same time, it introduced an obligation to register cartels with the aim of increasing the level of transparency concerning economic conditions.47 Despite these amendments, the new legislation still contained a large degree of (political and) administrative discretion (due to the vagueness of the ‘public interest’ criterion) and was characterized by a lack of suspicion against cartelization. Although legislation was growing, competition policy remained of secondary importance after the war.48

3.3.1.4 Limited Developments in Italy and the Netherlands In Italy and in the Netherlands, attitudes towards competition and other economic policies were strongly influenced by the prevailing national political, economic, and social context. In both countries, economic structures had been established that often contrasted with competition-related policies. In Italy, the economy was dominated by the state’s holdings in major corporations, which were effectively a means of state intervention in the national economy. Although the Allies exerted pressure on Italy to establish a more competitive economy, and although there had been efforts to introduce norms of competition law, all attempts failed.49 Another reason for these developments was probably the reluctance of the Anglo-American military authorities to remove administrators installed by compromise as church pressure was brought to bear in order to re-establish normal life throughout the peninsula.50 Much later, only the prospect of a European single market could drive Italy to 46 Stephen Wilks, ‘The Prolonged Reform of United Kingdom Competition Policy’, in Comparative Competition Policy: National Institutions in a Global Market, G. Bruce Doern and Stephen Wilks (eds) (Oxford: Clarendon Press, 1996), 139, 146–7. 47 Manfred Schiedermair, Registrierung und gerichtliche Nachprüfung von Wettbewerbsbeschränkungen in Grossbritannien (Karlsruhe: C.F. Müller, 1962), 40 ff; Henry G. C. ‘Haering, Zur Entwicklung der Monopolkontrolle in Grossbritannien’, WuW (1953), 87, 91. 48 Wilks, In the public interest, 13–4, 340, and 347. 49 For an overview, see Lorenzo Federico Pace, ‘The Italian way of tackling the abuse of a dominant position and the inconsistencies of the Commission’s Guidance: not a Notice/Bekanntmachung but a Communication/Mitteilung’, in European Competition Law: The Impact of the Commission’s Guidance on Article 102, Lorenzo Federico Pace (ed.) (Cheltenham: Edward Elgar, 2011), 103–23; V. G. Venturini, ‘Monopolies and Restrictive Trade Practices in Italy’, International and Comparative Law Quarterly 13 (1964), 617, 630 f., 636 f., 640 ff.; Richard J. Torre, ‘Italian Antitrust Law’, The American Journal of Comparative Law 14 (1965), 489, 498 ff.; Carlo Pavesio, ‘Merger Control and Restrictive Practices in Italy’, European Competition Law Review 9 (1989), 568, 571 f. 50 Tony Judt, Postwar. A History of Europe since 1945 (New York: Penguin Press, 2005), 48.

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rethink its economic policy and to anchor its market economy more firmly in competitive structures. After the war, however, Italy continued to rely on the Law of 16 June 1932, which fostered cartelization, and on Article 2598 No. 3 of the Codice Civile of 1942, which contained a provision on unfair competition aimed at anticompetitive agreements. Because of the divergent competition policy objectives and because of the significant role of state enterprises that had exerted a defining influence on the Italian economy,51 substantial competition law reforms would have provoked major protests on the part of those enterprises. In a similar vein, the adoption of exemptions would have outraged the private sector. After all, the existence of large state-owned businesses (the IRI: Istituto per la Ricostruzione Industriale, and the ENI: Ente Nazionale Idrocarburi) was considered, in itself, to be an effective means of combating anticompetitive practices in the private sector.52 Developments in the Netherlands took a different course, although in the end the results were, as in Italy, rather limited. The need to reconstruct the economy prompted the Dutch government to keep the positive, stabilizing aspect of cartels at the forefront of its thinking. Thus, cooperation within industry and a certain amount of regulation of competition by the undertakings themselves were seen as no bad thing. Only in the 1950s did the policy towards coordination in the economy begin to change. Until then, the legislative basis in the Netherlands had been the Cartel Ordinance of 1941, which was based on obligatory registration of cartels. However, there were no sanctions for non-compliance. A so-called Board of Commercial Regulations weighed up the interests that had to be taken into account in the assessment of cartels, and supported the Minister in individual cases by delivering appraisals of the factual position and the competing interests.53 In the 1950s, similar public pressure mounted in favour of tightening up existing regulations. The Dutch government responded by presenting a draft of a new cartel law, which was based on the ‘control of abuse’ principle.54 Its main concern centred on the promotion of economic growth in the post-war phase of economic reconstruction, and the government reserved the option of executing a ‘declaration of general application’ to promote agreements that were deemed positive for the common

51 G. Franco Macconi and Andrew Colvin, ‘Competition Law in Italy. Italy tries Antitrust— Again!’, World Competition 13 (1989), 21, 28. 52 Macconi and Colvin, ‘Competition Law in Italy. Italy tries Antitrust—Again!’, 21, 28. 53 Pieter VerLoren van Themaat, ‘Die Kartellpolitik der Niederlande’, in Internationales Handbuch der Kartellpolitik, Georg Jahn and Kurt Junckerstorff (eds) (Berlin: Duncker and Humblot, 1958), 351, 357; Asbeek Brusse and Griffiths, ‘Paradise Lost’, 17. 54 Georg Czapski, ‘Unlauterer Wettbewerb und Kartellmassnahmen im Lichte der niederländischen Rechtsprechung’, WuW (1954), 321, 331.

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good, and a ‘declaration of invalidity’ to halt restraints on competition with negative impacts. The Competition Act (Wet Economische Mededinging) was adopted in 1956 and entered into force in 1958. At the same time, the cartel register of 1941 was maintained, and the Ministry of Economic Affairs received new powers to suspend or ban cartels if they were considered contrary to the public interest.55

3.3.2 Structural Differences between National Competition Laws Having recalled the first national competition laws, it is clear that restraints on competition were treated with varying stringency under different regimes in the post-war period. To be more specific with regard to their assessment, the following account examines the national approaches according to three independent criteria: the guiding principles underlying each of the national competition laws; their statutory assessment criteria; and the institutions and procedures for the assessment of restraints on competition.

3.3.2.1 Guiding Principles of the National Laws The guiding principles underlying each of the national competition laws formally determined the severity with which national approaches handled anticompetitive restraints. In theory, the most severe form of cartel control prevailed in countries in which the government opted, in principle, for an absolute cartel ban. A far less stringent approach was pursued in countries which subjected anticompetitive agreements to obligatory registration. Classifying the different national traditions along these lines (absolute cartel ban/obligatory registration) allows us to emphasize the particular characteristics of the first national competition law approaches and stresses the (formal) similarities and differences between a first group of competition laws of Germany and France and those of a second group of the United Kingdom and the Netherlands. The absolute cartel ban established in Section 1 of Germany’s Act against Restraints on Competition (GWB) can be seen as a key departure point for the Act. However, as already mentioned, this norm was relaxed considerably in the form of a series of exceptions. The legislator differentiated between sectoral exclusions, whereby specific economic segments were wholly excluded from application of the cartel ban, and individual exemptions, which were only applicable in specific circumstances for individual cases. These were regulated in Sections 2 et seq. GWB and covered, for instance, the terms of trade cartels,

55

Asbeek Brusse and Griffiths, ‘Paradise Lost’, 19.

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rebate cartels, structural crisis cartels, and efficiency cartels.56 The French Ordonnance No. 53–704 of 9 August 1953 also contained an absolute cartel ban. Agreements prohibited by Article 59 bis were, according to its second paragraph, null and void from their inception. The finding of such invalidity by the courts only had a declaratory effect. However, this seemingly strict prohibition was subject to certain qualifications under Article 59 ter. These were formulated as legal exceptions so that, where specific conditions were fulfilled, the practices in question fell outside the scope of the prohibition. By contrast, cartel control under the United Kingdom’s Restrictive Trade Practices Act of 1956 was two tiered. Agreements covered by the statute that contained a relevant restriction initially had to be registered. They could then be examined in an inquiry for compatibility with the public interest. Irrespective of the outcome of such an inquiry, publicity of the register was thought to have a deterrent effect.57 In the Netherlands, the reporting obligation remained the basis for government supervision of restraints on competition. The purpose of this obligation, anchored in the Wet Economische Mededinging of 28 June 1956, was to inform the government about existing restraints on competition and to give it an overview of the agreements in place in the economy. The law also contained an option for the government to declare the competition laws applicable where required by the public interest, or to subject anticompetitive agreements to a declaration of invalidity. Only such a declaration could render an arrangement void pursuant to the civil law, so that the parties to the agreement were no longer able to enforce it through the courts. This effect was limited to a duration of five years (Article 22, para. 2), however, and gave rise to additional implications in penal law.58

3.3.2.2 The Statutory Assessment Criteria Irrespective of the underlying approach to competition law, whether rooted in the assumption of a cartel ban or in the ‘control of abuse’ principle, the majority of national competition laws was designed to consider restraints on competition on a case-by-case basis and to impose negative sanctions accordingly. Often, the criteria for this task were as broadly drawn as possible, so that almost any aspect could be taken into account. Only in Germany was 56 Note, however, that there is a difference in legal nature between an absolute cartel ban combined with clearly defined exceptions and an approach that does not generally restrain market actors’ behaviour unless they ‘abuse’ their freedom in such a way as to infringe legal provisions. See Roger Zäch, Schweizerisches Kartellrecht (Bern: Stämpfli Verlag, 2005), Rz 172; Woll, ‘Konvergenz’, 61 ff.”. 57 Michael Norkus, Die Kontrolle marktbeherrschender Oligopole nach englischem Kartellrecht (Heidelberg: Verlagsgesellschaft Recht und Wirtschaft, 1975), 45. 58 Robert M. Mok, ‘Die heutige rechtliche Lage der Kartelle in den Niederlanden’, WuW (1959), 725, 727.

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the rule of law of primary importance and political instrumentalization of competition law could effectively be avoided from the start. Such instrumentalization of competition law was found, first of all, in the bilan économique used for the assessment of restraints on competition in France (which, as noted earlier, differentiated between bonnes ententes and mauvaises ententes). Anticompetitive impacts were balanced against the positive effects of particular practices on economic development. This ‘macroeconomic balancing test’ allowed for consideration of economic-policy criteria unrelated to competition. Furthermore, the case-by-case assessment inherent in this approach was thought to do justice to the requirements of ever-changing economic policy objectives.59 It did, however, not allow businesses to draw general conclusions about the legality or illegality of their own conduct because similar, or even identical, practices could lead to completely different outcomes in the future. A government authorization of a particular practice was considered to be a reversible decision, which could quite reasonably be revoked if the economic situation changed. Such authorizations were subject to periodic review for the purpose of implementing particular economic policy objectives.60 In the United Kingdom, commercial practices were measured against the criterion of the public interest. Unlike in France, the British legislator used presumptions to single out certain kinds of agreements that were thought to be incompatible with the public interest criterion from the start. If an agreement fell within the scope of a presumption, it was incumbent upon the undertakings concerned to prove that the positive effects outweighed the restraint on competition. By so doing, businesses could only justify their practices by invoking certain legally prescribed advantages (known as ‘gateways’). These included the protection of the public, utility considerations, defences against other restraints on competition, effects on labour market policies, or the maintenance of export opportunities. If an anticompetitive restraint was justified on one of these grounds, it remained to be examined whether the restriction was ‘not unreasonable’; ie, whether it was reasonable under appropriate standards.61 The law contained no guidelines with regard to this balancing test, leaving a broad degree of latitude for decision-making. 59 Dieter Hoffmann, Die Spruchpraxis der französischen Kartellkommission zu wettbewerbsbeschränkenden Absprachen im Vergleich zum deutschen Recht (Diss. Hamburg, 1976), 109 f. 60 Dominique Brault, ‘Grundgedanken des französischen Rechts der Wettbewerbsbeschränkungen’, NJW (1966), 2241, 2243; Wolfgang Wenner and William Garcin, ‘Bemerkungen zu dem Aufsatz ‚Grundgedanken des französischen Rechts der Wettbewerbsbeschränkungen’, NJW (1966), 2241, 2245;Woll, ‘Konvergenz’, 70 ff. 61 Valentine Korah, ‘United Kingdom Law. Commentary’, in Competition Law in Western Europe and the USA. Volume A, Band 3. 10., Martijn van Empel (ed.) (The Hague: Kluwer, 1978), C-10.

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Similarly, the concept of the common interest was central to the Dutch law. The common interest test formed the precondition both for ‘declarations of application’ and ‘declarations of invalidity’ with regard to anticompetitive restraints. The Dutch government made it clear that the concept of the common interest rendered the law serviceable as an instrument of economic policy, which was variable over time and contingent upon regional and industry-specific considerations. This variability made the codification of particular characteristics of the common interest impossible.62 The underlying notion of the Dutch legislator was that too much as well as too little competition could be harmful to the domestic economy. Thus, the Law Regulating Economic Competition of 1956, based on the ‘control of abuse’ principle clarified that the Netherlands did not necessarily regard certain forms of restraint on competition as contrary to the public interest. Only in Germany was an entirely different approach pursued. Here, the individual exemption options set out in Sections 2 et seq. GWB set forth a list of the circumstances in which an exemption from the cartel ban was possible. The criteria were enumerated and contained no element of the kind of blanket provision found in other countries’ laws. As a result—unlike the public interest-centred approach—the application of the GWB was susceptible to judicial review. Only certain factual circumstances could justify deviations from the general prohibition on anticompetitive agreements. At the same time, under the GWB, political influence on competition law decisions was possible. However, already in the first GWB, political discretion was confined to narrowly defined exceptions. Political decision-making was therefore clearly separated from the application of purely competition-related criteria by the Federal Cartel Office. Specifically, Section 8 GWB granted the Minister of Economic Affairs, on request, and ‘for overwhelming reasons of the overall economy and public welfare’, the power to authorize an agreement which would otherwise fall foul of the cartel ban.

3.3.2.3 Institutions and Procedures for the Assessment of Restraints on Competition The potential to exert political influence on competition assessments was not only apparent in the generally worded public interest criteria of the majority of the national competition laws but became particularly obvious with respect to the design of competent institutions and procedural laws of competition legislation at the time. The conceptual breadth of the substantive assessment 62 Georg Czapski, ‘Die Entwicklung der Kartellgesetzgebung in den Niederlanden’, WuW (1956), 290, 296.

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criteria often corresponded with the allocation of decision-making responsibilities to political decision-makers. Although independent decision-making bodies existed and undertook substantive assessments of anticompetitive restraints, in many European states, the actual decision-making power was usually in political hands; ie, it was usually held by the given economic minister, who enjoyed broad discretion by the various competition laws in taking up or dismissing cases. In France, competition law was enforced by an independent specialist body with mere advisory functions and a political authority with real decisionmaking powers. The government had created the Commission technique des ententes by means of Decree No. 54–97 of 27 January 1954. Although the central assessment of anticompetitive restraints was in the hands of this commission, which consisted of five high court judges, four members of professional organizations, and two economic experts from the State Committee for Productivity, the decisive steps to initiate a procedure and to impose final sanctions on particular practices emanated from the Ministry of Economic Affairs. In this way, the minister could not only direct the inquiries but could also, from an early stage on, work towards finding appropriate solutions for a settlement. Substantive reviews of restraints on competition, which culminated in special reports, had the character of expert opinions and were, in themselves, neither enforceable nor capable of exerting any obligatory effect. The final decision in a particular case always rested with the minister, who could either refrain from pursuing a case any further, write an official letter to the undertaking requiring it to cease its anticompetitive practices, or refer it to the courts or the public prosecutor’s department with a recommendation for punishment according to the provisions of the pricing ordinance or the Code Pénal.63 The procedural provisions of the Dutch competition law were similar to those in France in that they required an independent expert body that dealt with the assessment of anticompetitive restraints, but possessed no power of initiative or definitive decision-making authority. The Commission for Economic Competition (Commissie Economische Mededinging) consisted of at least twelve ordinary and extraordinary members who were proposed by the government and appointed for six-year terms. Here, too, only the Minister of Economic Affairs had the power to initiate proceedings and impose sanctions, or to decide on how far the agreement contravened the public interest.64 63 Franck, La libre concurrence ; Peter Friedrich Ohr, Die Konzeption der französischen Kartellkontrolle in der ‘Rechtsprechung’ der Technischen Kommission (Diss. Mannheim, 1972), 47 ff. Heribert Peters, ‘Die Neuordnung des französischen Kartellrechts durch die Verordnung vom 24.06.1958’, WuW (1959), 439 ff; Woll, ‘Konvergenz’, 76 ff. 64 Christian Tonke, ‘Das Wettbewerbsrecht der Mitgliedstaaten der Europäischen Gemeinschaften’, in Die Europäische Wirtschaftliche Interessenvereinigung, ed. Karl-Eduard von der Heydt and Wolf-Georg Freiherr von Rechenberg (Stuttgart: C.E. Poeschel, 1991), 339, 356; Woll, ‘Konvergenz’, 76 ff.

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In the UK, the decision to take up or to dismiss a particular case was delegated to the courts. This allowed the courts to refer to precedents, giving businesses a perceived guarantee of legal certainty and providing for a certain degree of predictability. The Restrictive Practices Court (RPC) was composed of representatives of business, industry, and public service, who could be appointed members on the grounds of expertise pursuant to Section 4 of the Restrictive Trade Practices Act of 1956. The RPC largely enjoyed independence from political and economic pressure, and was able to reach its decisions autonomously.65 However, monopolies and mergers were handled by an administrative body, the Monopolies and Mergers Commission, established in 1948 (and renamed, in 1999, as the ‘Competition Commission’). In Germany, even greater importance was accorded to the implementation of substantive law by an independent institution. One of the central features of the GWB was the establishment of the Federal Cartel Office (ie, the Bundeskartellamt). Its actual decisions were made by its rule-making branches, which were divided up into units responsible for particular economic sectors. The independence of the Bundeskartellamt and its special status outside the conventional administration was reflected in the fact that its decisions were subject to legal review before the courts of general jurisdiction (as opposed to administrative courts). Although the Bundeskartellamt as an official body in its own right was assigned to the department of the Minister of Economic Affairs and subject to his right to issue directions, Ludwig Erhard was the first to make it clear that such a right should only be used in extraordinary circumstances. In this way, the minister’s influence on competition policy was limited from the start, leaving ample room for the Bundeskartellamt to develop an independent practice.66 From its inception, therefore, the Bundeskartellamt was able to interpret the German norms of competition law consistently and in line with established judicial principles. Ultimately, the orders of the Bundeskartellamt were subject to judicial review, though it was first necessary to go through an appeal to the so-called appellate branches of the Bundeskartellamt. The courts themselves could not issue orders, but in case of an action for failure to act, they could rule on the Bundeskartellamt’s obligation to do so.67

65 Hans-Peter Uhl, Die Konzentrationskontrolle in Grossbritannien, verglichen mit der deutschen Kartellrechtsnovelle (1973) (Diss. Munich, 1974), 21. 66 Jean François-Poncet, La politique économique de l’Allemagne occidentale (Paris: Sirey, 1970), 167–70. 67 Hans Würdinger, ‘Rechtskontrolle der Verfügungen der Kartellbehörden durch die Gerichte (§ 70 Abs. 4 GWB)’, WuW (1958), 392 ff.

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3.3.3 The Influence of National Competition Laws on European Competition Law The previous section revealed remarkable differences with respect to the relative significance of actual competition law thinking in the respective national legal territories. Based on this analysis, the influence of national competition laws on early European competition law policy can be gauged more clearly. As we have seen, the developments in Germany are exceptional in that competition policy had taken centre stage in the liberal and democratic post-war legal and economic culture. By contrast, in other European countries, competition policy was either subordinated to price policies and commercial practices, as for example in France and Great Britain, or it was entirely non-existent. In the 1960s, for example, the main legislative measures were the ‘Circulaire Fontanet’ on refusals to deal in France (1960) and the Resale Prices Act in Great Britain (1964). Therefore, it is not surprising that the German approach was of fundamental importance in the formulation of Regulation 17/62 and its prohibition system: essentially, Regulation 17/62 banned all anticompetitive agreements (if capable of affecting intra-EEC trade) unless the competition authority (ie the European Commission) was notified. The Commission had the exclusive power to declare such agreements to be exempt from the prohibition under certain conditions (although the need to notify was later relaxed somewhat by block exemption regulations). Compared to the Bundeskartellamt under the GWB, however, the Commission was even more powerful because no other political authority could overturn its decisions. At the European level, a judicial approach was adopted. Only the ECJ could review the Commission’s decisions. The member states had a consultative voice through the Advisory Committee. But the various national competition laws had an impact not only on the substantive provisions of European competition law but also on their degree of institutional implementation. The German Bundeskartellamt, for instance, with a permanent staff of 180 members and some 1500 decisions in the first three years of its existence alone, left an impression on Louis Franck, the civil servant responsible for establishing French competition policy from 1949–1962.68 The Bundeskartellamt itself benefited from the integrity of its first longstanding president, Eberhard Günther (1958–1976).69 The French Commission technique des ententes, by contrast, had mostly non-permanent staff and a level of activity that was limited to the review of nineteen cases 68

Franck, La libre concurrence, chapter 2.C. Roland Sturm, ‘The German Cartel Office in a Hostile Environment’, in Comparative Competition Policy, 189. 69

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over the five years between its inception in 1954 and 1959.70 The same was true in the Netherlands, where over a period of six years the administration proceeded against only thirty-six cartels, most of which were approved.71 Apart from Germany, only in the United Kingdom, long-standing experience in competition policy enforcement could have been gained. Responsible for this were two important Acts (1948 and 1956) and the obligation to register restrictive trade practices. But in the United Kingdom, unlike in Germany, administrative and judicial enforcement both prevailed. Whereas the actions of the Monopolies and Mergers Commission (MMC) had been criticized for their lack of impact (at least until the MMC was strengthened in 1953) and for the vagueness of its public interest test, the Restrictive Practices Court established bold and audacious policy enforcement during its first ten years.72 Hence, with the British outside the EEC at that time, it seems that from an institutional perspective (as well as with regard to substance), German competition policy was among the most influential in shaping European competition policy: its judicial approach and confinement to competition-related assessment criteria served as a strong and comprehensive dogma from its very beginning. Furthermore, the persistence and success of the Bundeskartellamt with respect to the enforcement of these policies meant that German officials could rely both on a refined theoretical doctrine, and on a growing body of experience as compared to its neighbours. Overall, the impact of German officials on the framing of the Treaty of Rome’s provisions, and most of all in the drafting of Regulation 17/6273 was decisive. Although French decision-makers tried to shape the debate as well, they succeeded only partially, by securing general provisions of the Rome Treaty which were open to a variety of possible interpretations.74 From 1960 to 1961, during negotiations on Regulation 17/62, French officials managed to include in the ‘final deal’ a feature inspired by the French experience;

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Brault, L’Etat et l’esprit de concurrence, 49. Asbeek Brusse and Griffiths, ‘Paradise Lost’, 18. 72 Wilks, ‘The prolonged reform’, 147 and 151; Wilks, In the public interest, 37. 73 On the Regulation 17/62 negotiations, see Chapter 2 this volume. On the Treaty of Rome, see also Sigfrido Ramirez, ‘Anti-Trust or Anti-US? L’industrie automobile et les origines de la politique de la concurrence de la CEE’, in Europe organisée, Europe du libre échange? Fin XIX° siècle—Années 1960, Éric Bussière, Michel Dumoulin, and Sylvain Schirmann (eds) (Brussels: Peter Lang, 2006), 203–28; Brigitte Leucht and Katja Seidel, ‘Du Traité de Paris au règlement 17/62: ruptures et continuité dans la politique de la concurrence européenne, 1950–1962’, in La politique de la concurrence communautaire: origines et développements (années 1930-années 1990), Histoire, économie et société 27 (2008, special issue, Éric Bussière (ed.), Laurent Warlouzet), 42–5. 74 Warlouzet, ‘The Rise’, 8–9; Laurent Warlouzet, Le choix de la CEE par la France. Les débats économiques de Pierre Mendès-France à Charles de Gaulle (1955–1969) (Paris: CHEFF, 2011), 274–6. 71

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a provision that enabled strict control of exclusive dealing agreements. The French law was especially severe with respect to the treatment of such agreements since it had been motivated by the need to rationalize distribution and limit inflation. French officials therefore secured a provision which paved the way for extending Regulation 17/62 to certain kinds of vertical restrictions that otherwise would have been excluded from the notification regime (see Article 22 of the Regulation). These admittedly minor additions became highly important in the 1960s as the Commission encouraged notification of exclusive dealing agreements. They subsequently accounted for the vast majority of all notifications.75 In this regard, French officials played an important role in the early years of European competition policy. However, the general framework of Regulation 17/62 and its prohibition system in particular, was mostly influenced by the German approach. Significantly, the German lawyer and MEP Arved Deringer got the upper hand against the defender of the French vision, André Armengaud in the European Parliamentary Assembly debates.76 These developments notwithstanding, significant discrepancies between the German and the EEC framework prevailed. In institutional terms, for instance, the Bundeskartellamt was established as an independent authority. The EEC Commission, however, was set up as a political body. Not only were its Commissioners mostly politicians; its role was both to propose and implement regulations and directives.

3.4 Progressive Development of National Competition Laws from the 1960s to the 1980s After the first comprehensive competition laws had come into being in the countries of Europe, there followed a second phase from the mid-1960s to the end of the 1980s in which these national competition regimes progressively developed. Over time, the internal dynamic of competition policies made it obvious that certain changes were necessary because in many national contexts the priority accorded to competition by the national regulations had never been clarified. Mostly, it had been left to the Ministers of Economic Affairs, in the practical exercise of their powers under competition law, to ensure an appropriate weighing of the aspects to be considered. Owing to the political nature of the national assessment criteria and the case-by-case method of

75 76

Warlouzet, ‘The Rise’, 11–12; Warlouzet, Le choix, 323–32. Warlouzet, Le choix, 327–9.

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enforcement, few if any tangible standards had been distilled. Consequently, it fell to the legislators to bring about greater clarity in this area, by ensuring that enforcement authorities more clearly focused on competition-related conduct, that the qualification of certain practices was codified, and that the institutional prerequisites were adapted accordingly. After the Second World War, the main factor that allowed for the realization of profound adjustments was the evolving economic context. From the early 1970s onwards, control of inflation and consumer protection became pivotal, and competition policy was increasingly perceived as a useful tool to foster economic growth. Whereas Keynesian ideas had dominated Western Europe in the 1960s, their hegemony eroded after the economic crisis of 1973. Based on the scaling back of the interventionist role of the state in the economy after the 1975 recession in Western Europe,77 the belief that free market dynamics would eventually find a better (or optimal) solution became widespread. Industrial policy and planification tendencies began to decline (despite an outburst of interventionist policies in France from 1981 to 1983). The state was accorded a less interventionist, more limited, or ‘neutral’ (from the free-market dynamic point of view), regulatory role. As a consequence, competition policies could progressively be strengthened, particularly in countries where they had previously played a minor role. This growing importance of new economic policies, and the convergence of ideas and experiences of national legislators resulted in a gradual process of ‘Europeanization’. National legislators began to turn their attention to European competition law for the first time. Since the Bosch ruling of 1962,78 and because Article 177 EEC provided for a ‘preliminary rulings’ procedure, national courts gradually began to apply and implement EEC provisions.79 To explain and illustrate this process, Section 4.1 follows the same line of argument as the previous section’s analysis. First, as a result of these developments, a reorientation of the guiding principles of national competition law 77 Shifting attitudes were reflected in the arrival of new prime ministers more committed to the fight against inflation rates and the national deficits in France (Barre) and the UK (Callaghan and then Thatcher). In Germany, Helmut Schmidt put an emphasis on the fight against inflation during the 1976 elections, and a strict ‘structural’ budget law (Haushaltsstrukturgesetz) was passed. See Dennis L. Bark and David R. Gress, Histoire de l’Allemagne, 1945–1991 (Paris: Robert Laffont, 1992; Oxford and Cambridge, MA: Blackwell, 1989), 781; Hartmut Soell, Helmut Schmidt. 2: 1969 bis heute. Macht und Verantwortung (Munich: Deutsche Verlags-Anstalt, 2008), S. 577 and 624–5. 78 Case 13/61, Kledingverkoopbedrijf de Geus en Uitdenbogerd v Robert Bosch GmbH and Maatschappij tot voortzetting van de zaken der Firma Willem van Rijn [1962] ECR 45. 79 Dominique Berlin, ‘L’application du droit de la concurrence par les autorités françaises’, Revue trimestrielle de droit européen 27 (1991), 2–9. Article 177 EEC, now Article 267 TFEU, enabled national courts (or in the case of courts of last resort, imposed a qualified obligation on them) to submit questions to the Court of Justice in order to obtain an authoritative ruling as to the proper interpretation of Community law.

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regimes became apparent: in most countries, the principle of safeguarding competition as such was brought into focus. Second, the statutory assessment criteria were reformulated more clearly, and third, in many countries, the institutions for the assessment of anticompetitive restraints became more powerful and independent. A consolidated view allows us, in Section 4.2, to evaluate how the development of EEC competition law since the early 1960s has been fed by national traditions.

3.4.1 The National Trajectories 3.4.1.1 Reorientation of the Guiding Principles of Competition Law In the period of progressive development of national competition laws, most European countries fundamentally modified their competition policy goals: for a variety of reasons, the clearest reorientation consisted of the strengthening of competition as such. In the United Kingdom, for example, the motive for the reform of competition law was anxiety about the international competitiveness of the British economy. Competition law was to be made more stringent and effective, and the control and investigative powers of competition law authorities were to be enhanced. To this end, cooperation between firms was subjected to more intense scrutiny. In 1965, merger control was established and put under the supervision of the Monopolies Commission of 1948, which subsequently became the Monopolies and Mergers Commission (MMC).80 At the same time, however, the British government was pursuing an active industrial policy. Competition policy therefore still remained of secondary importance. With respect to cartels, the main problem to be resolved was the possibility of circumventing the legislative goals of the Restricted Practices Act of 1956. Instead of prohibiting pricing agreements, the formal approach previously adopted in British competition law allowed for the establishment of alternative information agreements that were not subject to obligatory registration. In order to prevent such circumvention, the Restrictive Trade Practices Act of 25 October 1968 made information agreements subject to obligatory registration. Initiated by a directive of the Secretary of State, a corresponding regulation was adopted in December 1969.81 The Fair Trading Act of 15 July 1973 further broadened the range of agreements subject to obligatory registration. The scope

80

Wilks, ‘The prolonged reform’, 146–7. Restrictive Trade Practices (Information Agreements) Order 1969. See Martin Howe, ‘Relationships between Competitors under United Kingdom Competition Law’, European Competition Law Review 6 (1986), 327, 329–30; Udo Woll, Die Konvergenz der Kartellgesetze in Europa (Baden-Baden: Nomos Verlagsgesellschaft, 2002), Woll, ‘Konvergenz’, 89 ff. 81

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of application was extended to restraints on competition and information agreements in the services sector. Also, at that time, the legal relevance threshold for monopolies and mergers was lowered and a new office, the Office of Fair Trading (OFT), was created to supervise both consumer and competition policies. But in practice, with inflation reaching 25 per cent in 1975, the OFT’s work was focused on price controls rather than on cartels and merger enforcement.82 In 1979, however, the election of Margaret Thatcher gave liberal impetus to the British government. The grant of state aid to ailing industries was diminished, and major privatization and deregulation initiatives transformed previous legal monopolies (telecommunications, airlines, railways, electricity, etc.). Yet the impact of these reforms on competition policy was limited.83 The Competition Act of 1980 abolished the Price Commission, established in 1973, while the powers of the MMC and the OFT were extended.84 Most of all, this enabled authorities to take up enquiries in nationalized industries (Section 11). The Thatcher government made consistent use of these amendments throughout the 1980s.85 Ultimately, the 1984 (non-binding) ‘Tebbit Guidelines’ (named after Norman Tebbit, the Secretary of State for Trade and Industry at that time) led to a more comprehensive enforcement of merger control.86 In France, following minor amendments in 1963 and 1967,87 a major reform took place with the law of 19 July 1977, promoted by the Prime Minister Raymond Barre, a former economics professor at the University of Paris and former Vice-President of the EEC Commission (1967–1973).88 This law was intended to liberalize the French economy and to move towards the abolition of price controls.89 Although the French competition law provisions were not formally separated from the pricing regulations in which they were embedded, in terms of content they gained a certain autonomy because price effects were no longer a necessary condition for application of the norms of competition law.90 Furthermore, a merger control body was created and assigned to the 82

Wilks, In the public interest, 30, 40, and 186. Wilks, ‘The prolonged reform’, 169. 84 Howe, ‘Relationships between Competitors’, 327 ff. 85 Wilks, In the public interest, 42. 86 Hubert Buch-Hansen, Rethinking the history of European level merger control. A critical political economy perspective (PhD diss., Copenhagen Business School, 2008), 151. Published version: (Frederiksberg: Copenhagen Business School Press, 2009). 87 Law of 2 July 1963 and Ordonnance of 20 September 1967. See Brault, L’Etat et l’esprit de concurrence, 38–41. 88 Brault, L’Etat et l’esprit de concurrence, 55–7. 89 Holger Grauel, Lockerung der Preiskontrollen in Frankreich, WuW (1980): 506 f. 90 Harald Lob, Die Entwicklung der französischen Wettbewerbspolitik bis zur Verordnung Nr. 86–1243 vom 1. Dezember 1986 (Frankfurt a. M: P. Lang, 1988), 166. 83

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new ‘Commission de la concurrence’. However, with respect to both cartels and merger enforcement, the Commission de la concurrence remained a consultative body, the Ministry of Economics being the sole decision-maker. Moreover, as in the UK, control of inflation remained the prime concern throughout the 1970s. Both policies were governed by the same department of the Ministry of Economics. In the Netherlands, despite extensive discussions about a reform of competition law, there was insufficient backing to enact a new regime.91 At the end of the 1960s, the government considered establishing a public register of cartels (whereas, prior to that, only a confidential register existed).92 In order to enforce obligatory registration, it was planned to declare non-registered agreements null and void. But these intentions were never translated into practice. Rather, at the beginning of the 1970s, given the widespread fear of inflation, the government decided to address the abuse of market-dominant positions. Although in a report, the government concluded that a statute focusing on such forms of anticompetitive restraints could be an effective means of combating inflationary prices, the legislator failed to act.93 A further attempt to introduce more stringent competition laws, initiated in 1977 by Minister of Economic Affairs Ruud Lubbers, met with widespread criticism from businesses and was dismissed once more.94 During this period, the Netherlands gradually became a kind of ‘cartel haven’, a term coined by the Dutch economist and competition policy expert H. W. de Jong.95 In Germany,96 the Act against Restraints on Competition (GWB) did not give rise to any major changes in the basic orientation of competition policy. Nevertheless, there followed five revisions of the GWB (in 1966, 1973, 1976, 1980, and 1989) in which its provisions were adapted to current economic developments. The numerous exceptions originally incorporated in the GWB, which had defused industry’s resistance to a cartel ban and had secured the agreement necessary for the Act’s adoption, were now increasingly called into question. For instance, the fourth revision of the GWB of 26 April 1980 broadened the possibilities for supervision in the utilities

91 Michaela Drahos, Convergence of Competition Laws and Policies in the European Community. Germany, Austria, and the Netherlands (The Hague: Kluwer Law International, 2001), 358 ff. 92 OECD, ‘Länderbericht Niederlande (Oktober 1967–Oktober 1968)’, WuW (1970), 497. 93 OECD, ‘Länderbericht Niederlande (Oktober 1972–Oktober 1973)’, WuW (1975), 38, 60 f. 94 Asbeek Brusse and Griffiths, ‘Paradise Lost’, 28. 95 De Jong, ‘Nederland: het kartelparadijs van Europa?’ [‘The Netherlands: Europe’s cartel paradise?’], in Economisch-Statistische Berichten, 14 March 1990 (quoted in Asbeek Brusse and Griffiths, ‘Paradise Lost’, 15). 96 Werner Abelshauser, Deutsche Wirtschaftsgeschichte seit 1945 (Munich: Verlag C.H. Beck, 2004), 297–9.

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sector by more precisely defining the concept of abuse.97 In addition to that, steps were taken to eliminate the exceptions for banking and insurance. In 1973, merger control was introduced into the GWB.

3.4.1.2 The Statutory Assessment Criteria The Europeanization of national competition law regimes brought about a realignment towards more competition related statutory assessment criteria. This realignment was most obviously apparent in countries where the public interest test had previously been considered to be the sole assessment criterion. In British competition law, for the first time, guidelines with respect to the scope and content of the public interest were set out in Section 84 of the Fair Trading Act of 25 July 1973. The previous definition of the public interest was deemed to be too vague, too case-specific, and insufficiently competition-oriented. The British legislator therefore put an emphasis on the importance of consumer interests in competition policy. This was documented in the list of ‘desirable aims’, in which the promotion of competition in the United Kingdom featured prominently as the first aspect listed. However, the government stopped short of providing a clear definition of consumer interests, so that ultimately, competition authorities continued to operate with the greatest possible flexibility and pragmatism.98 In addition to these amendments, a further justification for anticompetitive agreements (‘gateways’) was introduced. Section 10 of the Restrictive Trade Practices Act of 1968 was amended to the extent that it could be argued that a cartel did not, or was not likely to, directly or indirectly restrict or discourage competition to any material degree. In this way, an exemption was granted for the useful exchange of information between undertakings.99 In France, a converse move towards a broader assessment basis took place. French competition policy first had to gradually do away with the price control approach in which it was anchored. The wording of Article 59 ter Ordonnance No. 45–1483 (of 1945) was amended by Ordonnance No. 67–835 (of 1967) to the effect that a restraint on competition could be justified, provided that it met the single condition of bringing about economic progress. The impacts were no longer limited to the device of rationalization

97 Siegfried Klaue, Probleme der Kartellaufsicht aus § 103a GWB, in Probleme der vierten Novelle zum GWB, Bodo Börner (ed) (Baden-Baden: Nomos, 1981), 9, 25 ff. 98 Volker Triebel, Stephen Hodgson, Wolfgang Kellenter, and Georg Müller, Englisches Handels-und Wirtschaftsrecht (Heidelberg: Verlag Recht und Wirtschaft, 1995), 366; Wilks, ‘The Prolonged Reform’, 149–50. 99 Robert Merkin and Karen Williams, Competition Law: Antitrust Policy in the U.K. and the EEC (London: Sweet & Maxwell, 1984), 63.

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and specialization measures. In this way, the legislator sought to widen the authorities’ discretion thereby allowing for more appropriate accommodation of modern developments in the economy. On the positive side of the bilan économique it was now possible to take into account the most diverse benefits of economic advancements, which could acceptably balance out the anticompetitive effects of an agreement.100 Simultaneously, Ordonnance No. 67–835 included for the first time the possibility to prohibit a cartel without considering its impact on price. As a result, Ordonnance No. 67–835 constituted the first step from price to competition policy in France.101 In Germany, despite adherence to the fundamental prohibition of cartels, specific forms of anticompetitive restraints were exempted; other forms of anticompetitive restraints were removed from the exemption provisions. The second revision of the GWB, for instance, exempted from the cartel ban agreements aimed at increasing the efficiency and productivity of smalland medium-sized undertakings unless they substantially impaired competition on relevant markets.102 In the fourth revision of the GWB, the control of export cartels was strengthened. The fifth revision aimed to make it easier for small- and medium-sized enterprises to engage in joint purchasing, ie restraints on demand-side competition with respect to purchasing and procurement were exempted from the cartel ban.103

3.4.1.3 Institutions and Procedures for the Assessment of Restraints on Competition In view of the increasingly prevalent tendency to take more efficient action against restraints on competition, most European countries modified their institutional settings with a view to strengthening professionalization, providing additional advisory functions, and offering a higher degree of independence and transparency. Only in Germany, where the Bundeskartellamt had successfully established itself as an independent authority with extensive responsibilities, no substantial institutional change took place. In France, Law No. 77–806 of 19 July 1977 replaced the Commission technique des ententes by the Commission de la Concurrence. The shift was quite radical, as the new Commission benefited from a permanent staff and enlarged 100 Robert Plaisant, ‘Die Verordnung Nr. 67–835 vom 28.09.1967 über den lauteren Wettbewerb’, WuW (1968), 360 ff. 101 Brault, L’Etat et l’esprit de concurrence, 40. 102 Franz-Jürgen Säcker, Zielkonflikte und Koordinationsprobleme im deutschen und europäischen Kartellrecht (Düsseldorf: Verlag Handelsblatt, 1972), 11 f. 103 Wernhard Möschel, ‘30 Jahre Kartellgesetz—erneuter Prüfungs- und Handlungsbedarf?’, in Wettbewerbspolitik und Wettbewerbsrecht. Zur Diskussion um die Novellierung des GWB, Herbert Helmrich (ed.) (Cologne: Heymanns, 1987), 3, 5.

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powers. More actors were able to refer a matter to the Commission, and the Commission acquired the capacity to publish its decisions and to impose stronger sanctions on businesses. The Commission became a ‘quasi-juridical authority’, as described by its main promoter, Raymond Barre.104 Likewise, the British legislator introduced a new competition law official, the Director-General of Fair Trading (DGFT), in the Fair Trading Act of 1973. The Director-General of Fair Trading had the Office of Fair Trading (OFT) at his disposal and could deploy staff at his discretion.105 The growing importance that national competition authorities ascribed to independent offices and commissions was evidenced in the additional amount of work conferred upon them. In many countries, the authorities’ mandates gradually grew beyond the enforcement of existing competition laws, and began to take on a more comprehensive advisory role in matters relating to competition policy. In France, Law No. 77–806 of 19 July 1977 assigned to the Commission de la concurrence the task of advising both the government and parliament on concrete draft bills as well as on general questions with a bearing on competition.106 In the UK, the Fair Trading Act of 1973 provided the newly created Director-General of Fair Trading with the task of informing and supporting the minister on matters of competition and consumer protection law, and of recommending actions to be taken.107 In these new regulations, the right to initiate investigations of anticompetitive agreements was no longer the sole preserve of the Ministers of Economic Affairs but was extended to independent institutions or affected third parties. For example, the French Minister of Economic Affairs had to accept a distinct curtailment of his power to initiate competition law investigations under the provisions of Law No. 77–806. Under these provisions, even local authorities and professional associations could take action. According to Article 52 para. 4 of Ordonnance No. 45–1483, their right to initiate investigations was, however, limited to cases which affected the pursuit of these organizations’ legitimate interests in accordance with their statutes.108 The role of the Director-General of Fair Trading was similarly strengthened in the Competition Act of 1980. The initiation of a preliminary procedure to investigate the extent to which an anticompetitive effect was attributable to a particular practice was now at the 104 Brault, L’Etat et l’esprit de concurrence, 52–4; Harald Lob, ‘Der französische Wettbewerbsrat. Eine Bilanz der ersten Amtsperiode’, RIW (1995), 272, 273. 105 Denys J. Gribbin, ‘Erster und zweiter Bericht des Britischen Generaldirektors für Wettbewerb’, WuW (1977), 395, 406. 106 Section 1, Law No. 77–806. 107 Section 2, para. 3 lit. a, b, Fair Trading Act 1973. 108 Hélène Bricks, ‘Wettbewerb und Verbrauch’, in Aspekte des Wettbewerbsrechts in Deutschland und Frankreich (Montpellier: Centre de droit de l’entreprise, 1982), 361.

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sole discretion of the Director-General of Fair Trading. He alone could now take the decision to initiate the second phase of the procedure, which was a referral to the Monopolies and Mergers Commission for investigation.109 Along with these changes, the duty to give reasons and the transparency of procedures were expanded. In France, the Commission de la concurrence was compelled by Decree No. 68–1027 of 23 November 1968 to deliver an annual public report on its activities in the Journal Officiel. Similarly, the British Competition Act of 1980 introduced a duty of the Director-General of Fair Trading to publish a regular report on the anticompetitive effects of commercial practices. However, one of the main limitations of these institutions did not entirely disappear. In France, although a stronger Commission was created, it remained a consultative body. The Ministry of Economy held on to both the inquiry process and the final decision-making power. Therefore, the Commission was not, strictly speaking, an independent authority. It relied largely on the expertise of the Ministry’s administration, whose priority remained price controls rather than competition policy. This situation changed only with the subsequent reform of 1986.110 In the UK, cartels and restrictive trade practices were subject to the Restrictive Practices Court (Restrictive Trade Practice Acts, 1956 and 1976) and to the High Court (Resale Prices Act 1976). Monopolies, oligopoly, and mergers, on the other hand, were evaluated by the Monopolies and Mergers Commission (Monopolies and Restrictive Practice Act 1948, Monopolies and Mergers Act 1965, Competition Act 1980) and the Office of Fair Trading (Fair Trading Act 1973). As a result, the British system was characterized as a ‘web of Byzantine complexity’.111

3.4.2 A Limited ‘Europeanization’ As these developments illustrate, from the 1960s onwards, the national competition laws sought to respond to some of the most pressing economic issues that each country faced—from growing concerns about international competitiveness and liberalizing national economies to a general fear of price

109 To enable the competition authorities to take action against restraints on competition more effectively, the means of investigation and the sanctioning instruments were also expanded. 110 Brault, L’Etat et l’esprit de concurrence, 52–5; Laurent Warlouzet, ‘Les réformes de la politiques de la concurrence françaises en 1977 et 1986’, in Ministry of Economy and Finance Historical Committee (CHEFF) seminar (directed by Florence Descamps and Laure Quennouëlle), 23 March 2011, Paris. 111 Paul Craig, ‘The Monopolies and Mergers Commission’, in Regulation and Public Law, Robert Baldwin and Christopher McCrudden (eds) (London: Weidenfeld and Nicolson, 1987), 202, quoted in Wilks, ‘The prolonged Reform’, 145.

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increases coupled with the risk of inflation after the economic crisis. On the other hand, the national competition laws were shaped by the attention that European competition law began to receive. This latter aspect can be observed with respect to the wording and content of national and EEC competition law provisions. As early as the late 1950s, in France, there was a discussion of adapting the norms of French competition law to the wording of Articles 85 and 86 EEC. In 1963, the concept of ‘dominance’ modelled on Article 86 was integrated into the French Law.112 Moreover, the modifications included in Ordonnance No. 67–835 of 28 September 1967 were designed to more closely resemble the provisions of EEC competition law113 so that French undertakings were to be guided according to the requirements of European law.114 The growing significance of European competition law had an impact in the UK as well. The Competition Act of 1980 approximated European competition law from its underlying approach to its wording.115 In Section 2, para. 1, second sentence, an anticompetitive practice was defined as conduct which ‘has or is intended to have or is likely to have the effect of restricting, distorting or preventing competition in connection with the production, supply or acquisition of goods in the United Kingdom or any part of it or the supply or securing of services in the United Kingdom or any part of it’. For the first time, the anticompetitive object or effect of an agreement was considered to be the measuring rod for anticompetitive restraints, which was a departure from the approach based solely on the form of an agreement which had previously characterized British competition law.116 In the Netherlands, in the context of the reform debates, the government stressed the goal of converging common markets. The harmonization of procedures with respect to the countries with which it maintained close economic relations provided the stimulus for debating a statutory amendment. The Economic and Social Council was therefore commissioned to prepare an opinion on the question of how far a transition to the prohibition principle, at least with regard to major restraints on competition, seemed useful for Dutch competition policy.117 In Germany, in the final version of the second revision of the GWB of 3 August 1973, 112

Law of 2 July 1963; See Brault, L’Etat et l’esprit de concurrence, 38–9. Jacques Azema, Le droit français de la concurrence (Paris: PUF, 1981), 266. 114 Lob, Die Entwicklung der französischen Wettbewerbspolitik, 166. 115 A full-scale adaptation of British competition law to European law had not been anticipated, however. See Wilhelm Bierling, ‘Neuorientierung der britischen Wettbewerbspolitik’, WuW (1979), 560; Wilks, In the Public Interest, 41–2. 116 Michael B. Hutchings, ‘The United Kingdom Competition Act 1980’, European Competition Law Review 1 (1980), 81, 87. 117 ‘OECD Länderbericht Niederlande (Oktober 1972–Oktober 1973)’, WuW (1975), 58, 61. 113

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Section 1 GWB according to which ‘any coordinated behaviour of undertakings or associations of undertakings which according to this law may not be made the object of a contractual commitment’ was prohibited was brought in harmony with Article 85 EEC’s concept of ‘restriction of competition’.118 However, Europeanization occurred not only through the influence of the EEC Treaty provisions but also via cross-fertilization through international institutions such as the OECD Committee of Experts on Restrictive Business Practices, where European, American, and Japanese experts exchanged their practical experiences. In late 1973, for example, a few weeks after the first oil shock, the OECD discussed possible relationships between competition policy and inflation control.119 Another example involves deliberations of French officials with respect to the reform of their own provisions in 1976–1977 (ie, prior to the 1977 law), where they conducted an inquiry into several other competition policy systems in Europe (the German case was thoroughly analysed) and elsewhere (the American and Japanese systems were also studied).120 On the other hand, the growing Europeanization of the intellectual debate on competition policy led to instances of ‘national-’ and ‘counterEuropeanization’. In France, Prime Minister Barre was the main promoter of a strengthening of French national competition law at that time.121 As some commentators speculated, he may have pushed to incorporate merger control into French law in order to prevent the adoption of provisions contradictory to those liable to be adopted at the European level.122 Indeed, in 1973 a merger control regulation had been proposed by the Commission. The initiative was endorsed by the European Parliament and was continuously discussed by the Council.123 Here, the strengthening of French competition law did not stem from a top-down process imposed by the EEC institutions, but from the willingness of the national actors themselves to avoid contradictory policies. In Germany, there was a desire to keep national competition law intact. This became especially apparent with regard to merger control. In the 1980s, Germany 118 On the debate in general, see Wernhard Möschel, ‘70 Jahre Deutsche Kartellpolitik’, RGZ 38, 155 ‘Sächsisches Holzstoffkartell’ zu BGHZ 55, 104 ‘Teerfarben’ (Tübingen: Mohr/Siebeck, 1972), 4–5. 119 OECD archives, 473, Draft Progress Report on action against inflation in the field of Competition Policy, 23 November 1973. 120 Warlouzet, ‘Les réformes de la politiques de la concurrence françaises en 1977 et 1986’. 121 Brault, L’Etat et l’esprit de concurrence, 55–7. 122 Gerber, Law and Competition, 192; Frédéric Jenny, ‘Du contrôle des prix à la politique de la concurrence en France’, Annales de l’économie publique, sociale et coopérative 69 No. 4 (1981): 486; Antoine Lyon-Caen, ‘Le contrôle des concentrations: étude de la loi française et de la proposition européenne’, Revue trimestrielle du droit européen 15 (1979) 440 (cited in Louis Vogel, Droit de la concurrence et concentration économique (Paris: Economica, 1988): 23). 123 Warlouzet, ‘The Rise’, 13–17.

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was one of the Commission’s main opponents with respect to the adoption of a merger regulation on the European level. German officials feared that such a regime would allow the Commission to decide exclusively on the most important merger cases (ie, those with a ‘European’ dimension, the ‘national’ cases being referred to national regulators). A hesitant Commission, prone to political meddling and to national bickering, was regarded sceptically next to the efficient, highly independent Bundeskartellamt.124 These efforts of counter-Europeanization were successful until the mid-1980s.

3.5 Conclusions The development of European national competition laws until the early 1980s—in Germany, France, Great Britain, the Netherlands, and Italy—was moulded on the one hand by general developments of the socio-economic context of that time, and on the other hand by each country’s national specificities. Competition policy was developed for various political (support of the democratic and liberal order, protection of weaker against stronger actors) and economic (limitation of inflation, fostering of economic growth) reasons. To bring about a clear elucidation of the parallels and differences that characterized the national competition laws in Europe, perhaps the most conducive schematization of this chapter’s argument consists of a comparison of competition law approaches that were public interest-centred and approaches that were competition-related from the start; or, in terms of institutions, a comparison of approaches where enforcement was subjected to political powers and approaches where enforcement was more independent and akin to tribunals. The former, which clearly predominated in the post-war period—except in Germany—were typically designed for the implementation of competition law regulations by political decision-makers, who acted in accordance with their own particular economic policy agendas. Vaguely formulated provisions allowing the prohibition of actions deemed contrary to the public interest left a great deal of scope for interpretation. For the businesses concerned, though, it was difficult to predict which types of practices were banned by the norms. Assessments made according to the elastic criteria of these competition laws were entirely case-specific, with the result that undertakings were unable to obtain legal certainty. 124 On the negotiation of the Merger Regulation, see, eg, Buch-Hansen, Rethinking the history of European level merger control, 162–7; Tim Büthe and Gabriel T. Swank, ‘The Politics of Antitrust and Merger Review in the European Union: Institutional Change and Decisions from Messina to 2004’, Center for European Studies Working Paper Series 142 (2007); Warlouzet, ‘The Rise’, 19–21.

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Furthermore, under the public interest-centred approaches, the establishment of competition law rarely yielded any concretization of standards. The power to initiate investigation procedures fell to political decision-makers, who were able to resolve issues by means of informal negotiations without engaging standard procedures. A more judicial-like approach, on the other hand, meant that the statutory assessment criteria and procedures were more squarely oriented toward competition-related aspects, so that both the substantive assessments and the procedures of competition law could be kept at arm’s length from the economic policy decision-making arena. Although this approach still made use of blanket clauses in order to account for the diversity of possible policy issues arising, the aspects enshrined in them nevertheless concentrated on a defined set of criteria. Norms were framed in detail, specifying required factual elements and legal consequences, so that their relevance could be inferred more precisely. Generalized political issues seldom intruded into the actual process of assessing the practices under scrutiny. Instead, decisions were taken purely by reference to competition related criteria. Similarly, the initiation of investigations and the decisions on possible sanctions fell within the remit of an independent competition authority or a court. The initiation of a procedure was decoupled from discretionary judgment informed by public policy. This permitted the evolution of a transparent decision-making practice, which guaranteed the affected undertakings greater legal certainty and predictability as to the interpretation of competition law. However, in practice, none of these approaches existed in an ideal form: in Germany, for example, exceptions to the basic orientation of competition policy remained numerous, and a risk of political meddling—with the Ministry of Economics as the ultimate decision-maker—was still present. Overall, both of these approaches had a strong bearing on European competition law. Whereas before 1973 competition policy remained a secondary public policy in most European countries, in the 1970s the process of mutual influence between the different national practices and the supranational experiences grew, as competition policy became a useful tool in the fight against inflation. The general move away from public interest to competition-related principles created a basis for subsequent harmonization of national competition laws with European competition law. Conversely, in the phase prior to actual harmonization, individual aspects of European competition law had been incorporated into the detailed provisions of national norms. This was true, for example, in Germany during the second revision of the Act Against Restraints on Competition (GWB) of 1973, where coverage of coordinated practices was included into the GWB with reference to the provisions of Article 85 EEC; in France, where Ordonnance No. 67–835 of 1967 attempted to establish conformity with European law; and in the

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United Kingdom, where parts of the Competition Act of 1980 were clearly borrowed from the European rules. Although these developments suggest that the national and European systems converged—particularly because the rule of law became of prime importance at both national and supranational levels—there were quite a number of idiosyncratic elements in the national competition laws. Above all, Germany wanted to keep an integral national competition law. On the other hand, the German model was perhaps the most influential in the development of early EEC competition policy but there was no process of ‘Germanization’, as the complex interaction between the national and the supranational institutions, policies, and reflections suggests. A specific French influence can be observed on distribution agreements, whereas, on the other hand the institutional setting at the European level did not make it possible to reproduce the distinctive status of the Bundeskartellamt as an independent agency. These conclusions not only exemplify the reciprocal influences of the formation and development of national and European competition laws. Rather, they also reflect an effort to re-imagine the sources from which the legitimacy of today’s norms and judicial decisions in European competition law is derived. In an economic territory where national courts apply not just their own national provisions but also supranational norms, and where national courts sometimes seek the counsel of supranational institutions, it is important to keep in mind that, through their particular design, their declarations of assent or disapproval impact the enduring validity of both systems’ decisions.

4 American Influences on EEC Competition Law Two Paths, How Much Dependence? Brigitte Leucht and Mel Marquis*

4.1 Introduction David Gerber has nearly single-handedly wired common perceptions of the fabric of European competition law to its indigenous intellectual traditions.1 In doing so, he has helpfully put a bold-font question mark over what may have been conventional wisdom in earlier times; namely, the assumption that Community competition law ‘paternity’ belonged to the United States (US) and its talismanic Sherman Act. Yet the focus on indigenous traditions has been so illuminating and comprehensive that one can’t help but wonder whether the role of US competition law has been eclipsed to a greater extent than necessary, and whether the corrective scholarship of Gerber has had the unintended consequence of obscuring links between European competition law and its American counterpart.2 Recently, historians have shed additional light on the role of US actors and US (legal) ideas in the negotiations of the European Coal and Steel Treaty.3 * This chapter and we ourselves have benefited a great deal from the perceptive comments of our fellow EULAH participants. We are especially grateful to Kiran Klaus Patel, Heike Schweitzer, and Antoine Vauchez for providing detailed remarks that helped us to improve the text. We dedicate it to the memory of a learned teacher, practitioner, and shaper of law, Ivo Van Bael (1939–2013). 1 See David Gerber, Law and Competition in Twentieth Century Europe (Oxford: Clarendon Press, 1998, reprinted 2003). 2 For Gerber’s views on the influence of the US, see Law and Competition in Twentieth Century Europe, 3, 172, 177, 214, 268–70, 299, 332, 338–42, 429, 431, and 433–4. 3 See Brigitte Leucht, ‘Transatlantic policy networks in the creation of the first European anti-trust law: mediating between American anti-trust and German Ordo-liberalism’, in The History of the European Union. Origins of a trans- and supranational polity, 1950–72, Wolfram Kaiser, Brigitte Leucht, and Morten Rasmussen (eds) (Abingdon: Routledge, 2009), 56–73.

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We propose to explore whether and how US law had a role to play in the development of the competition law of the European Economic Community (EEC), taking as our period of inquiry the 1960s and 1970s. Several factors appear to make the reception of US antitrust law in Europe quite plausible. For example, there is the rich antitrust history in the US, famously dating back to 1890; there was the ‘hegemonic’ position of the US (in the West and in parts of Asia) in the period following the Second World War;4 for many Europeans there was a capacity to understand English, allowing access to US decisions and to related commentary, reports, policy statements, international conferences, and so on; and there was a common perception that high-standard legal education could be obtained in the United States, following which a young scholar returning to Europe could set about disseminating (as legal advocate, policy-maker, scholar, or judge) what he or she had learned about the art of American-style antitrust. In broad terms, throughout the period under investigation, and due in part to the factors just described, it seems clear that there was a certain asymmetry in transatlantic relations insofar as antitrust law was concerned, in the following sense. While US antitrust law often served as an important object of study for Europeans, and while Europeans gained knowledge and social status by training in US law schools, this process was typically one-sided. On the other hand, the mere prominence or relative maturity of the US in the antitrust sphere is no reason to assume that ideas or institutions originating there would necessarily be replicated elsewhere. In terms of cultural ‘alterity’, Europeans have often regarded America with ambivalence, and sociocultural opposition to the American way of life ran (and runs) deep. Political forces on the Left and conservatives of the Right rejected American materialism and rejected the mass consumerism characterizing American society. These ‘defense mechanisms’ insured against any social or cultural acquiescence to the American empire, and they throw a more sober light on the idea of a seemingly natural reception or integration of American ideas, including the US antitrust model, within Europe.5 With regard to our particular subject, one may add that the need to build a single market put the EEC in a starting position quite different from that of the US, a largely integrated national market already in 1890.6

4 See Geir Lundestad, The United States and Western Europe since 1945. From ‘Empire by Invitation’ to ‘Transatlantic Drift’ (Oxford: Oxford University Press, 2003). 5 See, eg, Richard Kuisel, Seducing the French: The Dilemma of Americanization (Berkeley: University of California Press, 1993). 6 See Lorenzo Pace, European Antitrust Law (Cheltenham: Edward Elgar, 2007), 6.

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In exploring the role of transatlantic interaction and of US law for the development of EEC competition policy and law in the 1960s and 1970s on the basis of archival sources, we are entering what we believe to be new investigative territory.7 To narrow down the scope of our study we focus first on the drivers of the development of competition policy, on the one hand, and on the material legal dimension, on the other. This mode of analysis leads us to concentrate on two primary institutional actors: the Directorate-General for Competition (DG IV) of the European Commission and the European Court of Justice (ECJ). These institutions—and particularly DG IV—should not be regarded as tightly sealed and self-contained; rather, they are embedded in a wider social arena or ‘field’ of transatlantic antitrust. This field has consisted of member states, firms, the Commission, and other European-level institutions, professional associations and individuals, all of whom contributed, in varying degrees, to shaping (or reacting to, or both) the emerging Community competition law regime.8 We are equally interested in the exchange of ideas between the US and Western Europe. At the broadest level we explore the influence of US antitrust ideas. We generally regard ‘influence’ as meaning some degree of transfer and reception, in the competition law and policy of the EEC, of ideas originating from the US antitrust tradition. The term ‘reception’, beloved by comparatists and legal historians, suggests the integration of foreign (legal) ideas and manners of thinking into local rules and legal systems.9 Of course, this need not imply any kind of copy and paste operation: the term ‘integration’ should be elaborated in a manner similar to concepts such as translation of (legal) ideas into local idioms that can be meaningful within contexts of local values and institutions. At times this may result in a degree of hybridization of foreign and local ideas and concepts. Where US-generated ideas were consciously or indifferently avoided or neglected in the EEC, we denote this by the term ‘resistance’. 7 American influence in relation to the competition rules in the Treaty of Paris has been studied by others including, from a legal perspective, Giuliano Marenco, ‘The Birth of Modern Competition Law in Europe’, in European Integration and International Co-ordination: Studies in Transnational Economic Law in Honour of Claus-Dieter Ehlermann, Armin von Bogdandy, Petros C. Mavroidis, and Yves Mény (eds) (The Hague: Kluwer Law International, 2002), 279–304. 8 For the notion of a ‘field’, see Niilo Kauppi, ‘Bourdieu’s political sociology and the politics of European integration’, Theory and Society 32 (2003), 775–89; Pierre Bourdieu and Loïc J. D. Wacquant, An Invitation to Reflexive Sociology (Chicago: University of Chicago Press, 1992). See also Christèle Marchand and Antoine Vauchez, ‘Lawyers as Europe’s Middlemen: a Sociology of Litigants pleading to the European Court of Justice’, in A Political Sociology of the European Union. Reassessing Constructivism, Jay Rowell and Michel Mangenot (eds) (Manchester and New York: Manchester University Press, 2010), 68–85, 69. 9 See, eg, Wolfgang Wiegand, ‘The Reception of American Law in Europe’, American Journal of Comparative Law 39 (1991), 229.

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Our exploration of US antitrust ideas circulating among actors within and close to DG IV in particular is also inspired by the concept of epistemic communities. Epistemic communities debate common sets of ideas and they are characterized by a shared set of normative and principled beliefs; shared causal beliefs; shared notions of validity; and a common policy enterprise.10 The sense of ‘shared’ or common beliefs is a relative concept, as it would be difficult to find epistemic communities with uniform views. For example, among the community of antitrust intelligentsia it is not uncommon to find radically different perspectives and normative positions. We propose to advance our understanding of the role US antitrust law played in the relevant period by shedding light on what motivated actors to draw on ideas from the US tradition. We will demonstrate that European actors used US antitrust ideas for a number of different purposes which include taking some reassurance from the longer-standing American experience; restoring the confidence of the US government that the European integration project would break with the expansive cartel tradition, and with the dark sociopolitical legacy associated with that tradition; and achieving a greater degree of convergence between the US and EEC antitrust regimes. The use of US antitrust thus fulfilled particular functions, which also varied over time. The same holds true for the rejection of US antitrust ideas, particularly where they did not fit easily within the project of building a specific European ‘antitrust identity’—part of the broader process of assembling Europe’s composite collective identity as a relatively new, and only partially defined and understood, legal and political order.11 From the first perspective (DG IV and policy), we will demonstrate that there was continuity in the transatlantic intellectual and communicative exchanges involving DG IV and competition policy experts affiliated with it throughout the 1960s and 1970s. However, we argue that the motivations guiding this process changed over time, as did the functions US antitrust ideas assumed for the development of EEC competition policy. From the second perspective (the ECJ and the law), we identify a number of instances where (legal) ideas originating in the US which might have been ‘received’ were instead disregarded or ‘resisted’. Such resistance or indifference 10 Peter Haas, ‘Introduction: Epistemic Communities and International Policy Coordination’, 46 International Organization 1 (1992), 1–35; Frans van Waarden and Michaela Drahos, ‘Courts and (epistemic) communities in the convergence of competition policies’, Journal of European Public Policy 9 (2002), 913–34. 11 We propose this approach in order to assess rather than to ‘measure’ the influence of US antitrust law on EEC competition policy. It is always problematic to measure or quantify influence on the basis of written records, since these are only fragments of history, and since, furthermore, only selected records could be investigated for this chapter.

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may lie in the fact that the ECJ was motivated by a quest for autonomous, non-derivative understandings of competition law as part of an effort to express its constitutional mission (and a central source of its legitimacy)12 of laying the building blocks for a collective European identity. It therefore seems that, first of all, ideas about antitrust often migrated from the US to Europe, where they circulated among the European epistemic antitrust community in the 1950s and early 1960s. Since then, this migration pattern has generally persisted, although in the last two decades it has occurred within an evolving and increasingly densely networked global context (a development we do not discuss here). But the legal analysis in Section 4.3 of this chapter also suggests that in the relevant period not all migrant ideas fared well before the Court of Justice. In terms of impact on the law one might regard the 1970s as a period in which the influence of US antitrust law was on the decline, and it may even have reached a low point. Events that post-date our analysis—such as an international spread of neo-liberal ideas by the latter part of the 1980s, and especially the developments in the EC/EU context collectively known as ‘modernization’, which is generally traced to the early 1990s—suggest that this decline in influence was a temporary state of affairs. We will not present that longer narrative here. On the basis of the analysis in this chapter we hope to convey the simple message that the influence of US antitrust on EEC competition law during the material time frame should be neither overestimated nor underestimated.

4.2 DG IV and US Antitrust Ideas in the Development of EEC Competition Policy The time period covered in the first part of our chapter begins with the entry into force of the Treaty establishing the EEC and finishes in 1980, when Frans Andriessen became the Commissioner responsible for competition policy. The arrival of Andriessen and especially that of his successors, Peter Sutherland and Leon Brittan, contributed significantly to the reinvigoration of competition policy at a time when politics on both sides of the Atlantic, but in the US and Britain in particular, began converging on the mantra of market liberalization and deregulation, all of which was punctuated by

12 On market integration as a foundation for legitimacy in the European context (and for the understandable but with hindsight questionable assumption that the internal market was completed by 1992), see David Gerber, ‘The Transformation of European Community Competition Law’, Harvard International Law Journal 35 (1994), 97.

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the expectation of intensified cross-border activity in the era of the Single European Act. From the perspective of American influence on the development of EEC competition law, it is remarkable that the time between the entry into force of the Treaty of Rome and the ‘neo-liberal turn’ of the 1980s can be characterized as a period of continuous transatlantic interaction: between US and European experts of different traditions protecting competition, on the one hand, and between concepts inspired by US and by European domestic legal traditions, on the other. We analyse instances of American influence on EEC competition law over two consecutive time periods (sections 4.2.1 and 4.2.2) before drawing some tentative conclusions about the different motivations guiding transatlantic interaction over time (section 4.2.3).

4.2.1 DG IV Within the Transatlantic Antitrust ‘Field’, from 1958 to the mid-1960s The Treaties of Rome gave rise to institutionalized interaction between American and European-level officials on both sides of the Atlantic. In Brussels, officials in the US Mission to the European Communities were in direct contact with officials in DG IV. In Washington, EEC officials communicated regularly with US civil servants involved in the enforcement of antitrust law, in particular the Antitrust Division of the US Department of Justice (‘DOJ’) and the Federal Trade Commission (‘FTC’).13 For transatlantic interaction during this period it seemed more important, however, that officials in DG IV could build on previously established—informal as well as institutionalized—channels for transatlantic exchange.

4.2.1.1 Transatlantic Interaction in Different Fora Informal transatlantic collaboration already impacted on the negotiations on the antitrust provisions for the coal and steel pool at the interstate conference on the Schuman Plan (1950–1951).14 The High Authority of the European Coal and Steel Community (ECSC), established in 1952, plays no major part 13 Report of Robert Schaetzel, 8 July 1971, National Archives and Records Administration (NARA), Record Group (RG) 84, US Mission to the European Communities (USEC), ARC 4477493/MLR P 58, Container 1. For the connections between US and European officials, see Pascaline Winand, Eisenhower, Kennedy, and the United States of Europe (New York: St. Martin’s Press, 1993); Pascaline Winand, ‘The US Mission to the EU in “Brussels D.C.”, the European Commission Delegation in Washington D.C. and the New Transatlantic Agenda’, in Ever Closer Partnership. Policy-Making in US-EU Relations, Eric Phillipart and Pascaline Winand (eds) (Brussels: Peter Lang, 2001), 107–53. 14 Leucht, ‘Transatlantic policy networks’.

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in our story but it served as the institutional home for a number of actors who assumed a pivotal function in the development of EEC law after 1958. The most significant case in point is the French lawyer Michel Gaudet, who worked for the Legal Service of the High Authority before he became the director of the joint Legal Service of the European Communities. In 1959, Gaudet used Jean Monnet’s Action Committee for the United States of Europe to press for the drafting of regulations implementing the competition provisions of the Treaty of Rome.15 It appears that Gaudet did not coordinate his transatlantic lobbying with the concurrent efforts of DG IV to draft what became Regulation 17/62. This episode shows however that attempts to flesh out the EEC Treaty’s competition provisions went beyond the activities of DG IV, which are analysed in the chapter by Lorenzo Pace and Katja Seidel.16 Gaudet was also linked to another transnational network, the Fédération internationale pour le droit européen (FIDE). This pan-European association of lawyers was created in Brussels in 1961 to promote European integration through law.17 Its diverse membership also included key players in DG IV, among them its first Director-General, the Dutch antitrust expert Pieter VerLoren van Themaat.18 However, apart from the occasional conference featuring a comparative approach to EEC and US law,19 FIDE did not (and does not) have a transatlantic orientation. Furthermore, institutionalized transatlantic dialogue between European and American antitrust experts on competition law occurred within an expert group on restrictive business practices in the Organisation for European Economic Cooperation (OEEC), the European arm of the Marshall Plan administration. This group was first set up in 1953 in the framework of the European Productivity Agency (EPA) of the OEEC.20 It was regarded as 15 F. Schonfeld to Pierre Uri, 26 October 1959, European Union Archives, Personal papers Pierre Uri (PU) 82; M. Gaudet, Note sur les règles anti-trust des Traités européens, 20 October 1959, PU 82. Gaudet and his role in the Communities are explored in Antoine Vauchez, L’en-droit de l’Europe. Champ juridique européen et institution d’un ordre politique transnational (Habilitation, Université Paris I-Sorbonne, 2010), 29–35. 16 See Chapter 2, this volume. 17 See also Vauchez, L’en-droit de l’Europe. 18 For his background, see Katja Seidel, ‘An Economic Constitution for Europe. The Commission’s DG IV and the Origins of a European Competition Policy’, in Kaiser, Leucht and Rasmussen, History of the European Union, 129–47. With regard to the role of his views within DG IV, see also Chapter 1, this volume. 19 See, eg, ‘Brevets et marques au regard du droit de la concurrence en Europe et aux Etats-Unis’, Institut d’Etudes européennes de l’Université libre de Bruxelles, 15–16 novembre 1966, Cahiers de droit européen (1967/4), 469–76. 20 Final resolution: Action in the field of restrictive business practices and establishment of a group of experts, C(61)047, 6 November 1961, EU Archives, Records of the OEEC/OECD, OECD/1002; Notes of meeting 12–14 November 1959, 19 January 1960, OEEC/OECD 1293 (alternative file reference: EPA 1293).

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‘primarily an instrument for the exchange of information on country developments and on selected problems’,21 and began meeting biannually in 1956. Experts were nominated by the member state governments and were usually civil servants in the national economics and justice ministries or, in the few cases where they existed, representatives of the authorities enforcing antitrust policy. Following the transformation of the OEEC into the Organisation for Economic Cooperation and Development (OECD) in 1961, the group continued its work as the Committee of Experts on Restrictive Business Practices.22 For our account, the OEEC expert group is significant because it involved experts not only from ‘the Six’ but also from the United Kingdom, Scandinavian countries, and the US. For example, economics professor Jesse Markham of Princeton, who had published articles on the concept of ‘workable competition’, participated in one such meeting in April 1956.23 Moreover, the OEEC expert group proved useful for officials involved in the development of national competition law for the exchange of ideas and information about topical antitrust issues in their respective countries even before the launch of the common market project in 1958. One notable individual profiting from this intergovernmental framework for socializing with colleagues from other European countries who shared a commitment to trade and market liberalization was, here again, VerLoren van Themaat. He actively participated in the debates concerning an antitrust law for the Netherlands (1956),24 having already advised the Dutch Government during the Schuman Plan conference. During his tenure as the first Director-General of DG IV (1958–1967) under the leadership of Commissioner Hans von der Groeben,25 VerLoren van Themaat began representing the EEC rather than the Netherlands in the OEEC/OECD expert group meetings.26 His mutual affiliation with the intergovernmental expert group and with DG IV represented only one important link between these two forums. However, VerLoren van Themaat was not the only official within DG IV with transatlantic expertise. 21 Note by the Secretary-General to the Council on the establishment of a group of experts on restrictive business practices, 6 November 1961, OECD/1002. 22 The early work of the group led to the publication of a three-volume Guide to Legislation on Restrictive Business Practices (1959–1960); a four-volume set became available in 1962. 23 Director EPA to heads of national delegations, 5 July 1956, OEEC/OECD 1293 (alternative file reference: EPA 1293). 24 See, eg, Pieter VerLoren van Themaat, ‘Cartel policy in the Netherlands’ (manuscript), Archiv für Christlich-Demokratische Politik (ACDP), Personal papers Hans von der Groeben (I-659)074/1; Seidel, ‘An Economic Constitution for Europe’, 133–4. 25 VerLoren van Themaat also later served as an Advocate General at the ECJ (1981–1986). 26 For the meetings in 1958–1960, see OEEC/OECD 1293 (alternative file reference: EPA 1293).

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4.2.1.2 Transatlantic Antitrust Expertise in DG IV Another case in point was Ivo Schwartz, whose notable background is worth recounting here. Schwartz joined DG IV in 1960, when the young authority was faced with the task of implementing the competition rules of the EEC Treaty and when, in the process, it necessarily became another important platform for the discussion of different approaches to competition policy. Schwartz had studied economics at the University of Freiburg under Walter Eucken and Leonhard Miksch, and he obtained a master’s degree in antitrust law at Harvard University. One of Schwartz’s professors at Harvard was Donald Turner, who with Carl Kaysen had co-authored Antitrust Policy. An Economic and Legal Analysis,27 ‘the most influential work on antitrust in the 1960s and 1970s’.28 Kaysen and Turner’s study emerged out of the discussions of an interdisciplinary group of lawyers and economists that had taken place over several years.29 The group was chaired by Edward Mason, one of the first systematic promoters of a structure-conduct-performance chain of reasoning. The group also included law professor Robert Bowie, who has become part of the folklore of competition law in Europe.30 In 1966, many years after studying at Harvard, Schwartz impressed his colleagues at DG IV when Turner, by then the Assistant Attorney General at the Antitrust Division, paid a visit to Brussels.31 But another important figure Schwartz met during his stay in the US, and with whom he closely collaborated, was Heinrich Kronstein.32 Kronstein was an antitrust expert who not only participated in informal transatlantic cooperation with European actors in 1950–1951 but also later functioned as an advisor to DG IV.33 A German émigré, who held German and American law degrees and who combined the practical experience of an attorney working on cartel law 27

Cambridge, MA: Harvard University Press, 1959. Rudolph Peritz, Competition Policy in America. History, Rhetoric, Law, revised edition (Oxford and New York: Oxford University Press, 2000), 184. 29 See Kaysen and Turner, Antitrust Policy, xix. 30 See, eg, Marenco, ‘Birth of Modern Competition Law in Europe’; Tony Freyer, Antitrust and Global Capitalism, 1930–2004 (Cambridge: Cambridge University Press, 2006), 272–5; Angela Wigger, Competition for Competitiveness: The Politics of the Transformation of the EU Competition Regime (PhD diss., Amsterdam, 2008), 135–7; Leucht, ‘Transatlantic policy networks’. 31 Veronika Heyde and Myriam Rancon, Interview with Ivo Schwartz, 16 January 2004: (last accessed 21 April 2011); P. VerLoren van Themaat, Vermerk für Herrn von der Groeben, Betr: Informelles Gespräch mit den Vertretern des Kartellausschusses der UNICE, (day illegible) May 1966, EU Archives, CEE/CEEA Commissions, Fonds BAC, 089/1983. 32 See, eg, Heinrich Kronstein, John T. Miller, Jr, and Ivo Schwartz, Modern American Antitrust Law: a Guide to its Domestic and Foreign Application (New York: Oceana, 1958). 33 With regard to Kronstein’s input as Regulation 17/62 was being drafted, see Chapter 2, this volume. 28

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in Mannheim with first-hand experience pursuing cartels in the Antitrust Division during the tenure of Assistant Attorney General Thurman Arnold (1938–1943), Kronstein was well equipped to mediate between German Ordoliberal and US antitrust ideas.34 He also knew one of the Ordoliberal founding fathers, Franz Böhm, who since his school days had been a close friend of Kronstein’s older brother Max.35 From his academic base at Georgetown University, where he was appointed as a law professor in 1940, Kronstein maintained strong contacts with his native Germany and particularly the University of Frankfurt. These two universities cooperated by organizing an exchange programme and joint academic venture (the International Law Institute in Washington; the Institut für Ausländisches und Internationales Wirtschaftsrecht in Frankfurt) in which Kronstein as well as Walter Hallstein, the future first President of the European Commission, participated in the late 1940s.36 But no account of the early days of EEC competition policy would be complete without discussing, however briefly, the role of Hans von der Groeben. It is well known that, as Commissioner, von der Groeben promoted an institutional culture that drew liberally on Ordoliberal approaches to competition policy.37 He did not share the US educational background or the American contacts of some of his co-workers at DG IV. What is less well known is that von der Groeben, in his official capacity, travelled to the US in 1960 and 1963. These US trips provided von der Groeben with ample opportunity to meet specialists of US antitrust law. Within DG IV, he consulted VerLoren van Themaat on various issues in connection with these visits, including the matter of which individuals in the US to meet.38 In a letter to Ernst Albrecht, von der Groeben’s chef de cabinet, Lord Tennyson of the Washington-based Information Service of the European Communities acknowledged the Commissioner’s ‘apparent interest in seeing people at Harvard’.39 Indeed, 34 See Eckard Rehbinder, ‘Heinrich Kronstein (1897–1972)’, in: Juristen an der Universität Frankfurt am Main, Bernhard Diestelkamp and Michael Stolleis (eds) (Baden-Baden: Nomos Verlag, 1989), 253–67. 35 Rudolf Wiedhölter, ‘Franz Böhm (1895–1977)’, in Diestelkamp and Stolleis, ibid., 208–52, 219. 36 Matthias Schönwald, ‘Hinter Stacheldraht—vor Studenten: Die “amerikanischen Jahre” Walter Hallsteins, 1944–1949’, in Begegnung zweier Kontinente: die Vereinigten Staaten und Europa seit dem Ersten Weltkrieg, Ralph Dietl and Franz Knipping (eds) (Trier: Wissenschaftlicher Verlag Trier, 1999), 31–54. 37 Seidel, ‘An Economic Constitution for Europe’, 131–3. But see Chapter 1, this volume (claiming that the Ordoliberal wing of DG IV was to a large degree neutralized by a ‘Keynesian’ wing, and portraying von der Groeben’s tenure in general as one of few accomplishments). 38 P. VerLoren van Themaat, ‘Vermerk für Herrn von der Groeben, Betrifft: Ihre Reise nach den Vereinigten Staaten’, 23 March 1960, I-659–176/4. 39 15 May 1960, I-659–176/4.

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von der Groeben’s itinerary in 1960 included a visit to Harvard (among other universities) and a meeting with Robert Bowie.40 He also met Thurman Arnold, a contact that Kronstein helped to establish.41 While the individual actors introduced here for the most part had a background in law, economists as well as lawyers participated in the discourse on competition policy in the early days of transatlantic interaction. Each of these groups of specialists tended to formulate different questions, to focus on rather different problems, and to rely on and develop different bodies of literature. Yet it is also true that a significant number of actors approached the discussions with an interdisciplinary mindset. We have also seen that actors included academic experts and policy-makers (practitioners)—a distinction that was somewhat more problematic than the distinction between lawyers and economists. It is safe to say that all actors who participated in the debates provided expertise, which underlines the notion that an expert community steered the development of early competition policy, although other actors and institutions played a role as well.42 Furthermore, the frontiers between the spheres of academia and policy-making were fluid; the simultaneous affiliation of actors with both spheres was (and remains) quite common. The fluidity between academia and policy-making in the formative years of DG IV could be clearly seen in an international conference on restraints of competition held at the University of Frankfurt in 1960. As the next section will show, this conference also pulls together the threads of our story and contextualizes the transatlantic expertise that accumulated in the young DG IV within the wider transatlantic antitrust field.

4.2.1.3 The Frankfurt Conference on Restraints of Competition The Frankfurt conference followed up on a conference at the University of Chicago in 1958. Both conferences were organized by the Committee of Experts on Restrictive Business Practices, and they were funded by the European Productivity Agency.43 The driving force behind the Chicago conference was Corwin D. Edwards, an economics professor (and previously an

40 Letter Shirley Cole (Harvard University Center for International Affairs) to von der Groeben, 3 May 1960, I-659–176/4. See also Tentative Schedule for Commissioner von der Groeben, US Visit, 17 April–15 May 1960, 15 April 1960, I-659–176/4. 41 Letter Kronstein to von der Groeben, 23 April 1960, I-659–176/4. 42 For example, from the perspective of EEC legislation, and in particular with regard to Regulation 17/62 (and, later, Regulation 19/65), the Council of Ministers—even if it could not act unilaterally and impose all its preferences (see Chapter 2)—was of central importance. 43 Final resolution: Action in the field of restrictive business practices and establishment of a group of experts, C(61)047, 6 November 1961, OECD/1002; Notes of meeting 12–14 November 1959, 19 January 1960, OEEC/OECD 1293 (alternative file reference: EPA 1293).

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official at the Antitrust Division, 1939–1944) and a significant contributor to the debate on workable competition and corporate ‘bigness’. In 1959– 1960, Edwards conducted research for an international comparative study on cartels and monopolies which included West European countries and the European Communities.44 At the Frankfurt conference, Edwards chaired the ‘working group’ on ‘concentrations of enterprises and cartel law’, one of the four conference working groups. VerLoren van Themaat chaired the working group dealing specifically with issues of competition under the ECSC and EEC Treaties. The establishment of working groups rather than panels, the latter being more customary at academic conferences, may suggest that academic experts were regarded as part of the policy-making process. There were also three plenary reports, which were delivered, respectively, by Frankfurt’s own Franz Böhm, who at the time was also a Christian Democrat delegate to the German Bundestag (report on democracy and economic power); by von der Groeben (early experiences with EEC competition law); and by the president of the German Federal Cartel Office Eberhard Günther (drawing on the early experience of German antitrust policy).45 The decision to hold the conference at the University of Frankfurt can be regarded as an extension of the ongoing joint academic venture between Georgetown and Frankfurt. Heinrich Kronstein, for example, contributed a paper to VerLoren van Themaat’s working group dealing with ‘The significance of the provisions concerning restraints of competition within the total perspective of the European Coal and Steel Community Treaty and the European Economic Community Treaty’.46 Also participating at the conference were Kronstein’s former boss, Thurman Arnold, by then a Washington lawyer, and Jesse Markham.

44 See Corwin D. Edwards, Cartelization in Western Europe (Washington, DC: US Department of State, 1964); Corwin D. Edwards, Trade Regulation Overseas: The National Laws (Dobbs Ferry/NY: Oceana, 1966); Corwin D. Edwards, Control of Cartels and Monopolies. An International Comparison (Dobbs Ferry/NY: Oceana, 1967). Edwards’ views on market concentration and bigness were in part shaped by his study of the Japanese zaibatsu in the 1940s, a precursor to the US-imposed antitrust law of 1947 which initially called for their dissolution (although antitrust law and policy in Japan soon softened, particularly when the Cold War emerged and changed US priorities). See, eg, Alex Seita and Jiro Tamura, ‘The Historical Background of Japan’s Antimonopoly Law’, University of Illinois Law Review (1994), 115–86, 148–9. 45 The conference proceedings were published in an edited two-volume set, Cartel and Monopoly in Modern Law. Reports on Supranational and National European and American Law. Institut für ausländisches und internationales Wirtschaftsrecht an der Johann-Wolfgang-Goethe-Universität Frankfurt am Main in cooperation with the Institute for International and Foreign Trade of the Georgetown University Law Centre Washington, DC (eds), 2 vols., (Karlsruhe: C.F. Müller, 1961). 46 Published in Cartel and Monopoly in Modern Law, 131–49.

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But the conference also opened up the transatlantic discourse by including actors previously unconnected with the exchange programme between the two universities and the OEEC expert group. In addition to Ivo Schwartz, who functioned as conference secretary, a number of civil servants and experts affiliated with DG IV took part in the conference. They included the Frenchman Jacques Houssiaux, a lecturer at the Faculty for Law and Economics at Nancy; the German economics professor at Munich, Hans Möller; and Ernst-Joachim Mestmäcker, Böhm’s best-known and most influential student, who was at the time a law professor at Saarbrücken.47 The Frankfurt conference stirred great interest among the wider transatlantic antitrust field. The list of participants shows that this field had a remarkable German-American dimension. Participants also included, among others, Jochen Thiesing of the Commission’s Legal Service and Advocate General Karl Roemer of the ECJ. At the same time, the conference reflected the wider composition of the OEEC expert group, on the one hand, and the increasing interest practitioners of law took in the nascent EEC competition policy, on the other. A number of French, British, and American lawyers also participated in the conference.48 The presence of lawyers serves as a reminder that the Treaties of Rome not only gave rise to an expert community within DG IV but also led to American investment in the common market. Responding to the needs and preferences of US multinational corporations, some of the leading US law firms arrived in Brussels in the 1960s.49 As has been noted by Antoine Vauchez, these law firms led to the further expansion of the transatlantic legal field and included, in particular, a significant number of Belgian lawyers holding degrees from prestigious US law schools. A case in point was Geneva-born Michel Waelbroeck, who obtained an LL.M in international law from New York University. A member of the Brussels Bar since 1958, Waelbroeck worked for the US firm Dewey Ballantine in the 1960s and, among his other contributions, he collaborated in 1966 with an American lawyer, organizing a conference that stressed a comparative approach to EEC and US law.50 Over the next forty years, Waelbroeck established himself as a leading authority on 47 For Mestmäcker, see Seidel, ‘An Economic Constitution for Europe’, 136; Franz Bönker, Agnès Labrousse, and Jean-Daniel Weisz, ‘The Evolution of Ordoliberalism in the Light of the Ordo Yearbook: A Bibliometric Analysis’, in Institutional Economics in France and Germany. German Ordoliberalism versus the French Regulation School, Agnès Labrousse and Jean-Daniel Weisz (eds) (Berlin: Springer, 2001), 159–81, 165. 48 Cf Cartel and Monopoly in Modern Law, XXI–XXX. 49 On US law firms in Brussels, see note 95 following. 50 Vauchez, L’en-droit de l’Europe, 67–76. The conference was reported in the Cahiers du droit européen (1967/4).

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EEC antitrust at the Université Libre de Bruxelles, and as a named partner in a successful Belgian firm (Leidekerke Wolters Waelbroeck & Kilpatrick). Returning briefly to the Frankfurt conference of 1960, we can observe that a number of contributions to the conference had a transatlantic dimension. For example, in their respective discussions on the prohibition against discrimination laid down in Article 60 of the ECSC Treaty, Kronstein and Mestmäcker both referred to US antitrust law for comparative purposes. Kronstein contrasted Article 60 with the Robinson-Patman Act of 1936, and highlighted ‘the completely different purposes and economic systems’ of these laws.51 Mestmäcker contextualized the prohibition against discrimination within the wider framework of the ECSC Treaty, which included a general ban on discrimination in Article 4. He then contrasted the methods of pricing stipulated by the Treaty and by US antitrust law, drawing on Section 2 of the Clayton Act of 1914.52 More relevant for the development of ideas concerning the interpretation of EEC competition law, however, were the discussions of the working group on the competition rules of the EEC Treaty, which were summarized by VerLoren van Themaat. VerLoren van Themaat drew particular attention to ‘a thesis that caused a great deal of surprise’; namely, that Article 85(1) could be read to include the prohibition of merger agreements. Arguments in support of this thesis included the wording of the relevant paragraph as well as the decision made by the US Supreme Court to apply Section 1 of the Sherman Act to mergers.53 One of the arguments deployed by participants of the working group against this thesis was that the object of a merger agreement is the transfer of property rather than the restriction of competition.54 There is no indication in VerLoren van Themaat’s report that the working group participants reached any common position on this issue, although with hindsight it is easy to see that the scope of Article 85(1) covered more than just an agreement’s object. The US merger experience was also the subject of a separate paper by Edward Tait, a Commissioner of the US Federal Trade Commission. Finally, in a summary of the proceedings of the working group dealing with business concentration in relation to laws on restraints of competition, Corwin Edwards went beyond addressing efforts to control concentrations, and discussed efforts to prevent the abuse of economic power. 51

Kronstein, ‘Significance of the Provisions’, 145. ‘The Prohibition against Discrimination in the European Coal and Steel Community Treaty’, in Cartel and Monopoly in Modern Law, 323–34, 324, and 327–32. 53 ‘Final Report Working Group I’, in Cartel and Monopoly in Modern Law, 949–56, 954–5. The reference made by VerLoren van Themaat was probably an allusion to Northern Securities Co. v United States, 193 U.S. 197 (1904). 54 Final Report Working Group I. 52

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During the initial period, experts working in DG IV drew on the American experience with regard to two themes in particular: the first concerned the definition of competition; and the second concerned the problem of market concentration. In the following two subsections we will briefly elaborate on the attempts by DG IV officials to incorporate the concept of workable competition within their policy and doctrinal agenda before turning to the initiative concerning economic concentration launched by DG IV in 1963 (ie, the background to the Memorandum on the problem of concentration).

4.2.1.4 Workable Competition A number of American economists whose scholarly work was closely associated with attempts to define ‘workable competition’ contributed to the debates on EEC competition law, notably including, as seen earlier, Corwin Edwards and Jesse Markham. The contemporary theoretical debate in the US focused on the consequences of a corporation’s size, the implications of the structure of the market, and the criteria by which to assess economic performance.55 Against the backdrop of Chamberlin’s influential theories of oligopoly and monopolistic competition published in 1933, economist John M. Clark of Columbia University proposed the concept of workable competition a few years later in an article published in The American Economic Review.56 Clark tried to conceptualize an alternative to the model of perfect competition by trying to overcome what he claimed was a lack of ‘reliable guidance to the factors which are favourable to the closest available working approximation to that ideal, under actual conditions’.57 In his article Clark highlighted ten principal factors that condition competition—ranging from the standardized or un-standardized character of the product to methods of price formation and selling to the flexibility of productive capacity, and focusing in particular on the notions of rivalry among sellers and of a buyer’s choice between different sellers. On the basis of these factors, Clark established a typology of different forms of competition which were subsumed and differentiated under the headings of ‘pure, rigorous, unmitigated’ competition, on the one hand, and ‘modified, intermediate, hybrid’ competition, on the other.58 Edwards, in 55 Peritz, Competition Policy, 183. For discussion of the broader debate, see also Competition Policy, 182–7. 56 J. M. Clark, ‘Toward a Concept of Workable Competition’, The American Economic Review 30 (1940), 241–56. Clark’s earlier work, Studies in the Economics of Overhead Costs (Chicago: University of Chicago Press, 1923), laid some of the groundwork and induced many economists to start rethinking the economics of sectors characterized by high fixed costs and minimum efficient scale such as, in particular, the railroad industry. Serious questions were thus raised about the usefulness of a perfect competition model. 57 Clark, ‘Toward a Concept’, 241. 58 Clark, ‘Toward a Concept’, 243–5.

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turn, proposed seven structural characteristics aimed at identifying workable competition in a specific market.59 In the US, the notion of workable competition seems to have faded, very possibly as a result of the increasingly intense debates between the Harvard and Chicago schools, from which Chicago emerged, in its heyday, largely triumphant. But the concept of workable competition has retained currency in certain quarters including, notably, among German economists. The theme of workable competition also appealed to officials in DG IV. This is evidenced, for example, in a working document which the Directors of the divisions of DG IV presented to von der Groeben and VerLoren van Themaat to prepare for a meeting on 15 December 1960. Taking as its point of departure the need to arrive at a definition of competition policy, the paper sketches four competition models: the classical model, the neo-liberal (Freiburg) model, workable competition, and ‘countervailing powers’. According to the authors of the paper, it was inappropriate to apply only one of these models to the modern market. They argued that workable competition, which according to Clark or Edwards is not so much a model as a theoretical formula[,] can only create dynamic conditions. The Freiburg School and the theory of countervailing powers, in turn, are able to generate the conditions for a genuine [echten] competition suitable to produce a state of war in the area of consumption.60

With regard to the unsuitability of adopting a single discrete model for the EEC competition policy, the findings of the working paper resonate with a statement of expertise by Hans Möller, the economics professor.61 In sum, the working paper underlines the interest DG IV officials had in drawing on the American experience and scholarly discourse. It also indicates that experts were likely to have been seeking reassurance from the already ‘adult’ US antitrust tradition even as they attempted to generate a specific European ‘antitrust identity’. Experts were at least partly guided by the same motivation

59 Corwin Edwards, Maintaining Competition: Requisites of a Government Policy (New York: McGraw-Hill, 1949), 9–10. 60 Arbeitsprogramm für die Sitzung über Wettbewerbspolitik am 15. Dezember 1960, IV/6833/60-D, I-659–001/3, here 31. Without calling into question this nuanced approach, von der Groeben saw value in the pragmatism of ‘workable competition’ and with the help of his staff soon began to weave the formula into his articles and speeches. See, eg, ‘Policy on competition in the EEC’, EEC Bulletin (Supplement) no. 7/8 (July/August 1961), 24, (last accessed 20 February 2013). In at least one publication, ‘workable competition’ appears as a litany. See von der Groeben, ‘Competition Policy as Part of Economic Policy in the Common Market’, Antitrust Bulletin 10 (1965), 911. For workable competition in the context of DG IV, see also Sibylle Hambloch, ‘EEC Competition Policy in the Early Phase of European Integration’, Journal of European Integration History 17 (2011), 237–51, 240. 61 Gutachten Prof. Möller, (undated) X/554/61-D, I-659–001/3.

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when they began to focus on the question of merger control in the EEC, our next subject.

4.2.1.5 Background to the Memorandum on the Problem of Concentration EEC competition policy officials began exploring the question of concentrations in earnest in 1963, when they developed a questionnaire for the ‘investigation into the concentration of enterprises in the common market’.62 The questionnaire consisted of five parts: the first related to possible interpretations of Article 86; the second concerned the relationship between Article 85 and concentrations; the third considered the relationship between company law and concentrations; and the fourth and fifth parts examined the reasons for large-scale economic concentration. For the first two parts of the questionnaire, teams of four professors each from the six member states were appointed. With respect to the third part on company law, it was envisaged that an Institute for Comparative Law would be contacted. Similarly, it was anticipated that the statistical data of the European Communities and a number of commissioned studies by independent institutes and economists would be used to explore the economic problems of industrial combination. To begin with, from a transatlantic perspective, the studies prepared for the Commission concerning economic concentration and the size of enterprises in the EEC proved to be most interesting. It was here, rather than in the reports interpreting the substance of Articles 85 and 86, that experts tried to learn from the American experience. An appendix to the report elaborated on the application of US antitrust policy to large enterprises and concentrations.63 In contrast, the statements of expertise that the external experts produced for DG IV contained only a few references to US antitrust law. In his report on the relationship between cartel policy and corporate concentration, Giorgio Bernini, a professor of comparative private law at the University of Ferrara, developed the argument that it would not be possible to distinguish conclusively between cartels and concentrations of undertakings. He supported his argument with a reference to US antitrust law of that period, which also tended not to make clear-cut distinctions in this respect.64 Bernini listed his LL.M and SJD degrees from Michigan Law School on the title page of his 62 Mitteilung von Herrn von der Groeben, ‘Untersuchung über die Unternehmenskonzentration im Gemeinsamen Markt’, 16 May 1963, Archives of the European Commission in Brussels (ACOM), BAC 71/1988 165. 63 ‘Vermerk über die Konzentration und die Grösse der Unternehmen in der EWG’, 14548/IV/64-D, (no exact date) 1964, ACOM, BAC 71/1988 165. 64 Professor Giorgio Bernini, Vorläufiger Bericht, (undated) 11507/IV/63-D, ACOM, BAC 71/1988 168.

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report, an indication that he expected his audience to credit the recipient of a degree from a prestigious US law school with an air of authority and perhaps a certain social status. French professor Henri Mercillon contextualized his report on the relationship between Article 85 and concentrations more broadly within the transatlantic debate on antitrust policy. Mercillon cited a particularly wide range of literature including the Kaysen/Turner volume of 1959 (see p. 133) as well as publications by Edward Mason, Jesse Markham, Joe Bain, and Jacques Houssiaux.65 The group of experts came to the conclusion that Article 85 could be applied to a concentration if it resulted from a joint agreement between two undertakings and if those undertakings continued to constitute different legal personalities following the transaction.66 It is not possible to reconstruct in detail the genesis of the Memorandum the Commission submitted to the member state governments in late 1965 within the scope of this chapter. Suffice it to say that the Memorandum diverged from the legal arguments submitted by the experts and found Article 85 to be an inadequate instrument for merger control.67 According to the Memorandum, it was Article 86 that could serve as a tool to control concentrations if they had the effect of monopolizing a market.68 In its 1973 judgment in Continental Can, the European Court of Justice held that Article 86 could apply to acquisitions by a firm already dominant on the market if this resulted in a degree of dominance that substantially fettered competition. The Continental Can judgment is discussed in section 4.3.2 of this chapter. Before we turn our attention to the Court, however, we will provide a brief overview of the transatlantic activities of DG IV during the second part of our time period.

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Professor H. Mercillon, Untersuchung, (undated), 12221/IV/63-D, ACOM, BAC 71/1988 168. See the analyses and the summary of the statements of the four professors, ACOM, BAC 71/1988 168 and 169. 67 Mémorandum de la Commission de la Communauté Economique Européenne sur la concentration dans le Marché Commun Revue trimestrielle de droit européen 2 (1966): 651–77. Contemporary legal literature agreed on the inapplicability of Article 85 to concentrations. See in particular Ernst-Joachim Mestmäcker, ‘Die Beurteilung von Unternehmenszusammenschlüssen nach Artikel 86 des Vertrags über die Europäische Wirtschaftsgemeinschaft’, in Probleme des europäischen Rechts. Festschrift für Walter Hallstein zu seinem 65. Geburtstag, Ernst von Caemmerer, Hans-Jürgen Schlochauer, and Ernst Steindorff (eds) (Frankfurt am Main: Klostermann, 1966), 322–54, 323, footnote 5. 68 Official Spokesman of the Commission, ‘Concentration of firms in the Common Market’, Information Memo P-1/66, January 1966: (last accessed 20 April 2011). See also Ethan Schwartz, ‘Politics As Usual: The History of European Community Merger Control’, Yale Journal of International Law 18 (1993), 607–62, 614–16. 66

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4.2.2 Towards Institutionalized Transatlantic Interaction, 1970–1981 The starting point for this period was the arrival of Albert Borschette as Commissioner and Willy Schlieder as Director-General of DG IV. US officials in Washington and Brussels welcomed the change of administration in DG IV. According to Wayne Adams, an official in the US mission to the EEC, Schlieder pursued ‘a much more activist policy than his predecessors’, which may have been a reference to DG IV’s policies on cartels and abuse of dominance. Adams reported that the German Director-General planned to focus on finalizing a regulation on licensing agreements (under Article 85) and on testing the scope of Article 86 with regard to merger policy. He added that although Schlieder had taken action against two American firms—Continental Can and Commercial Solvents—in the first years of his tenure, this did not reflect an anti-American bias: ‘Indeed, it is commonly believed that [Schlieder] would have preferred that the second company be non-American’.69 Adams’ remarks need to be contextualized within the increasing strains put on transatlantic economic relations since the mid-1960s. Tensions first arose when US multinational corporations began taking advantage of the European common market.70 In the face of the ‘American challenge’,71 the DG for Industrial Affairs under Robert Toulemon attempted to enhance European competitiveness through the promotion of transnational ‘European champions’.72 Another potential friction in transatlantic relations resulted from the possibility (and reality) of the extraterritorial application of EEC law. Arguably, these tensions did not favour the interaction of US antitrust concepts and EEC competition law. They did, however, necessitate and perhaps even intensify transatlantic dialogue through official channels. First, it is important to 69 Letter Wayne T. Adams to Eugene L. Baker, 26 June 1972, NARA, RG 84, ARC 4477493/MLR P 58, Container 1. 70 For an introduction to the problem of US multinationals from a global rather than a European perspective, see Vernie Oliveiro, ‘The United States, Multinational Enterprises and the Politics of Globalization’, in The Shock of the Global: The 1970s in Perspective, Niall Ferguson, Charles S. Maier, Erez Manela, and Daniel J. Sargent (eds) (Cambridge/MA and London: The Belknap Press of Harvard University Press, 2010), 143–55; Thierry Grosbois, ‘La stratégie des quelques multinationals à l’égard des Traités de Rome et du Marché Commun 1957–1972’, in Inside the European Community. Actors and Policies in the European integration, 1957–1972, Antonio Varsori (ed.) (Brussels: Nomos, 2006), 227–54. 71 On the background to this phrase, see Oliveiro, ‘The United States, Multinational Enterprises and the Politics of Globalization’, 143. 72 Eric Bussière, ‘Competition’, in The European Commission 1958–1972. History and Memories (Luxembourg: Office for Official Publications of the EC, 2007), 303–16, 311. See also Chapter 5, this volume.

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note that the OECD continued to provide a forum for transatlantic exchange throughout our time period. For example, in a meeting in 1973 the Committee of Experts on Restrictive Business Practices discussed cooperation among OECD members to deal with restrictive business practices affecting international trade based on a Council Recommendation of 1967.73 Second, it appears that the actions DG IV took against American firms led to an increase in institutionalized cooperation rather than a cooling-off of transatlantic intergovernmental relations. The proceedings DG IV initiated against Continental Can, for example, called for ongoing attention to the case by US officials in Brussels.74 Similarly, DG IV followed every step of the US antitrust proceedings against IBM, which first originated in 1969. US Mission official Adams regularly forwarded information about US antitrust complaints to DG IV’s Jacques Vandamme, the head of DG IV’s Inspections Division (1968–1973).75 IBM was also the target of proceedings initiated by the Commission, which was the topic of bilateral talks when Commissioner Andriessen visited the US in 1981.76 Third, US officials noted that DG IV would be striving for a greater degree of antitrust convergence between the US and the EEC. For example, Robert Schaetzel, the Ambassador to the US Mission in Brussels, anticipated that the activities of DG IV under Article 85 would shift from exclusive dealing agreements to patent and know-how licenses. Schaetzel argued that this would be [ . . . ] a new field for the Community and one which they believe to be very important from an industrial policy viewpoint. They intend consciously to parallel American law. Their concern is to prevent a situation whereby US law would prohibit agreements to license patents and share knowledge while Community law permitted the same type of agreement.77

The motivation to draw on US law may have been driven by concerns about divergent legal rules in the two systems, and perhaps by implication a relatively greater compliance burden for globally active undertakings. 73 Agenda for the 24th Session of the Committee on 18 May 1973, 19 April 1973, NARA, RG 59, Bureau of European Affairs, Office of OECD, European Community and Atlantic Political-Economic Affairs, Box 8. 74 It is of course difficult to measure the intensification of relations. Moreover, it would require additional archival research covering the two decades more systematically to arrive at a solid conclusion. 75 Memorandum Wayne T. Adams to A.A. Hartmann, ‘IBM Anti-Trust Case’, 17 October 1972, NARA, RG 84, ARC 4477493/MLR P 58, USEC, Container 1. Between 1961 and 1967, Vandamme had been the head of the Controls Division. 76 Manfred Caspari, Note to file, 8 December 1981, ACOM, BAC 104/1993 38. 77 Ambassador Robert Schaetzel (USEC) to Department of State, 8 July 1971, EC-A-242, NARA, RG 84, ARC 4477493/MLR P 58, Container 1, here p. 5.

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On the whole, transatlantic dialogue within institutionalized channels indicates that American and European officials considered the exchange of opinion on US antitrust law and EEC competition law as one between equal partners. We find further evidence for this proposition in the attempts of the Subcommittee on Antitrust and Monopoly of the Committee on the Judiciary in the US Senate to invite Commission officials to testify before them with regard to the relationship between industrial organization and antitrust policy. One competition policy expert who accepted such an invitation was Ernst-Joachim Mestmäcker.78 Finally, in the 1970s as in the previous time period, there were certain DG IV officials with partial US socialization. A case in point is Peter Duesberg, who participated in the ‘Leaders Programme’ and visited the US in 1969 to discuss antitrust matters before he became the assistant to Directors-General Ernst Albrecht (1970) and Willy Schlieder (1971–1981).79

4.2.3 Changing Motivations for Transatlantic Interaction Our analysis of archival sources suggests that there were at least three different motivations for transatlantic interaction. First, there was the aspiration to take some reassurance from the American (antitrust) experience. This motivation guided actors—within DG IV and beyond—for example, when they were developing interpretations of the Treaty’s competition provisions. The motivation to draw on the American experience remained strong throughout the founding period of EEC law and through the mid-1960s. Second, a need for coordination and mutual understanding became apparent, as it was realized that EEC-based, and especially US-based undertakings might be subject to the extraterritorial application of foreign antitrust laws. This motivation is different from the first one—taking reassurance from US antitrust in developing a specific European ‘antitrust identity’—in that it assumes that US antitrust law and EEC competition law were of equal status from the perspective of international law. We do not find this second motivation until the mid-1960s, when the extraterritorial application of EEC law became a significant concern for multinational firms of American origin. The realization on the part of actors on both sides of the Atlantic that EEC law might be applied extraterritorially had an impact on the dynamics of their interaction and, more broadly, on the dynamics of the transatlantic relationship.80 78 Delegation of the Commission of the European Communities in Washington, 5 October 1973, ACOM, BAC 253/1991 167. 79 Memorandum Myerson to Wendt, ‘Leader Grants’, 8 June 1972, NARA, RG 84, ARC 4477493/ MLR P 58, Container 6. 80 See also note 132 following on the Dyestuffs case.

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Third, there are rhetorical references to the US antitrust experience. In contrast to the other two motivations, each of which can be pinned to a certain time period, we find instances of rhetorical references throughout the relevant time period (essentially, the 1960s and 1970s). The motivation to consider and refer to the US experience was particularly strong in the background period for this chapter, ie, the period following the Second World War when European policy-makers and competition law experts sought to restore the confidence of their US counterparts that European integration would follow the course of a liberal market economy. Yet the same motivation guided policy-makers even after the late 1940s and 1950s. For example, it is very likely that European policy-makers paid lip service, at least, to the US antitrust tradition in the 1970s when they attempted to achieve a greater degree of international antitrust convergence, particularly between the US and the EEC.

4.3 The European Court of Justice and its Encounters with Substantive US Antitrust Law Here we review certain ECJ judgments from the early years following the activation of the EEC competition law regime. From the case law of that era, we select three areas of substantive law under the EEC competition rules (distribution (section 4.3.1), reinforcement of a dominant position via acquisition (section 4.3.2), and refusal to deal (section 4.3.3)).81 Underlying our investigation is the assumption that the ECJ and its Advocates General matter a great deal, as they accept, modify, politely ignore, or ‘veto’ arguments that may reflect broader discourses, and thereby shape and may be shaped by those discourses while shaping the law itself. From this perspective, the ECJ is a crucial actor that can mediate and arbitrate between various values and ideas, and often channels the discourses through which values and ideas travel. We also focus on the views of certain Advocates General, whose arguments are generally more transparent and discriminating than the aggregated and often conclusory utterances of the Court. The implicit dialectic between

81 Perhaps the most notorious encounters in the antitrust field between US law and EU law have related to the issues of ‘recoupment’ in the context of predatory pricing by dominant firms and the use of ‘leveraging’ and ‘range effects’ theories in the context of non-horizontal mergers. Undoubtedly, there are many other issues of transatlantic interest that could be discussed as well, such as the price/ cost tests for predatory pricing, ‘conscious parallelism’, blanket copyright licensing, and many others. For reasons of space and (specifically with regard to predatory pricing and non-horizontal mergers) of the relevant time frame covered by the research, we leave a broad set of issues untouched.

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these two institutional actors (which is itself often influenced, of course, by the submissions of the parties) has always been a key feature of judicial decision-making and judge-made law at the level of the EEC/EC/EU.

4.3.1 Distribution: Grundig, White Motor, Schwinn, Sylvania, and Metro I 4.3.1.1 Grundig and White Motor Consten and Grundig v Commission82 is of particular importance, both for its implications in relation to vertical restraints and as a key to understanding the psychology of European antitrust. The judgment indicates a distinct sensitivity to efforts by private operators to limit the circulation of goods throughout an idealized ‘single market’. As will be seen, in the Schwinn case83—just a year after the adoption of the Grundig judgment by the ECJ—the US Supreme Court too embraced a relatively hard line with regard to territorial restrictions imposed on independent dealers, but for different reasons. The fragility of this hard line was revealed when a new generation of Justices repudiated the methodology employed in Schwinn and turned toward a more effects-conscious (and defendant-friendly) approach. Yet on the European side, Consten and Grundig, subject to certain technical qualifications, remains very ‘good law’. In this case, the ECJ could have annulled the Commission’s decision on the ground that the Commission had not fully investigated the intensity of competition between product brands, and hence was not properly in a position to judge the competitive effects of restrictions on parallel imports of German products from other member states into France. This point was highlighted by Advocate General Roemer,84 who relied in part upon the judgment of the US Supreme Court in White Motor Co. v United States.85 In his earlier Opinion of 22 March 1966 in Italy v Council and Commission,86 Roemer had alerted the ECJ to the White Motor judgment in the following terms: I should like to remind you of a decision of the Supreme Court of the United States of America (‘White Motor’) on 4 March 1963 which criticizes the ruling on a system 82 Cases 56 and 58/64, [1966] Rec. 429. On Consten and Grundig, see also Chapter 1, this volume. 83 Arnold, Schwinn & Co. v United States, 388 U.S. 365 (1967). 84 Roemer served as Advocate General from 1953 to 1973. For a discussion of Roemer’s contributions and analytical methodology during his time at the ECJ, see Antonio Grilli, ‘Aux origines du droit de l’Union Européenne: Le “ius commun” national dans les conclusions des avocats généraux Karl Roemer et Maurice Lagrange (1954–1964)’, Revue d’Histoire du Droit 76 (2008), 155–72. 85 372 U.S. 253 (1963). See also, eg, Leon De Keyser, ‘Territorial Restrictions and Export Prohibitions under the United States and Common Market Antitrust Laws’, Common Market Law Review 2 (1964–1965), 271–99. 86 Case 32/65, Italy v Council and Commission [1966] ECR 389.

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of exclusive dealings given by the Court of first instance (District Court). The judgment declares that no reliable opinion can be formed on the acceptability of such a system prior to an exhaustive investigation of its economic importance and of its factual repercussions on competition.87

A day later, in STM,88 Roemer went into some detail to point out the benefits of exclusively assigned sales territories.89 In his Opinion in Grundig, dated 27 April 1966, Roemer again referred to White Motor in support of the same proposition. The ECJ therefore had a full opportunity to consider the US approach as it stood at that time. In White Motor, a relatively small truck manufacturer had established an exclusive distribution system that divided California into separate counties. White Motor’s 300 dealers agreed ‘not to sell [White brand] trucks except to individuals, firms, or corporations having a place of business and/or purchasing headquarters in said territory’. The US DOJ claimed that this restriction on intrabrand competition (a rough equivalent of ‘absolute territorial protection’, in European parlance) constituted a per se violation of the Sherman Act. White Motor pleaded that ‘in order to obtain maximum sales in a given area [it] must insist that its distributors and dealers concentrate on trying to take sales away from other competing truck manufacturers [ie, stronger ones, notably GM, Ford and Chrysler] rather than from each other’. Declining to transpose the previously established per se prohibition against horizontal market-sharing to the vertical context at summary judgment stage, Justice ‘Wild’ Bill Douglas, writing for the Supreme Court, explained that ‘we know too little of the actual impact [ . . . ] of that restriction [ . . . ] to reach a conclusion on the bare bones of the documentary evidence before us’.90 We need not dwell on the ECJ’s judgment in Consten and Grundig, which unsurprisingly made no explicit reference to White Motor.91 Suffice it to recall two reasons driving the ECJ toward an approach quite different from that of the Supreme Court. Formally, Article 85(1) EEC prohibited agreements that

87 Opinion of the Advocate General in Case 32/65, Italy v Council and Commission [1966] ECR 422 (emphasis in original). 88 Case 56/65, Société Technique Minière v Maschinenbau Ulm [1966] ECR 235. 89 Opinion of the Advocate General in Case 56/65, Société Technique Minière v Maschinenbau Ulm [1966] ECR, at 257–8. 90 White Motor, 261 (emphasis added). The Court did not begin from a Chicago-style presumption according to which restrictions on intrabrand competition are likely to be trivial if there is interbrand competition. A trial was necessary to explore, first of all, the risk of collusion among distributors (who might have insisted, as part of a conspiracy, on the imposition of such restraints); or whether, conversely, White Motor’s claim that the sales restrictions improved interbrand competition was supported by the facts (see the concurring opinion of Justice Brennan). 91 The ECJ almost never cites US antitrust cases.

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had as their ‘object or effect’ the restriction of competition; therefore, even the prospect of positive net market effects could not preclude the application of Article 85(1) if the object of an agreement was to restrict competition. On a deeper and more famous level, allowing manufacturers to ‘carve up’ the common market by means of territorially defined sales restrictions would have been an affront to European integration.92 It was this aspect of the case that illustrated so superbly the unique function of European antitrust, and the limits of the analogy to the US experience in the context of vertical agreements. Consten and Grundig did not pass unnoticed by the wider antitrust community as it existed in the 1960s. One can hardly be surprised at the close attention given to the case by European lawyers and their clients since the judgment was bound to be a fateful landmark in the area of distribution contracts. But several US-based observers also followed the case and were even publishing comments on the Commission’s prohibition decision adopted in 1964.93 Several factors may have been at play here. For scholars, for example, there was the novelty of EEC law and the instinctive appeal of comparing the European experience, with its unique institutional framework and unique blend of antitrust and market-making free trade principles (the effet utile reading of the Treaty’s competition rules), to the American experience, particularly in light of the fact that the ‘rule of reason’ was invoked by Consten and Grundig and rejected by the Court for its poor fit with the structure of Article 85 EEC.94 92 For an early discussion of the effet utile role of the competition rules, see the Opinion of Advocate General Lagrange in Case 13/61, Kledingverkoopbedrijf de Geus en Uitdenbogerd v Bosch and van Rijn [1962] ECR 45, 69–70. From the perspective of individual rights, it is said that ‘the fundamental economic freedoms together with competition rules determine the community’s economic constitution’. Ernst-Joachim Mestmäcker, ‘The development of German and European competition law with special reference to the EU Commission’s Article 82 Guidance of 2008’, in The Impact of the Commission’s Guidance on Article 102, Lorenzo Pace (ed.) (Cheltenham: Edward Elgar, 2011), 25–62, 47. 93 See, eg, Stephen Ladas, ‘Exclusive Distribution Agreements and the Common Market Antitrust Law’, Antitrust Bulletin 9 (1964): 761–74. Some of these commentators were Europeans who had emigrated to the US: see Carl Fulda, ‘The First Antitrust Decisions of the Commission of the European Economic Community’, Columbia Law Review 65 (1965), 625–45; Maurice Hahn, ‘Exclusive Distributorship Agreements in the European Common Market: Antitrust Laws on the Move’, American University Law Review 16 (1967), 367–85. A broader, comparative analysis was carried out by René Joliet in preparing a Master’s thesis at Northwestern University and he published the work while continuing there with a doctoral programme. See The Rule of Reason in Antitrust Law: American, German and Common Market Laws in Comparative Perspective (The Hague: Faculté de Droit, Liège and Martinus Nijhoff, 1967). 94 See David Cohen, ‘The Application of Article 85 of the Treaty Establishing the European Economic Community to Exclusive Dealing Agreements’, Western Reserve Law Review 18 (1967), 826–61. History repeated itself more than thirty years later when the Court of First Instance reacted coldly to the US-style concept of a rule of reason, again for reasons linked to the bifurcated structure of what by that time was Article 81 EC. See Case T-112/99, Métropole télévision (M6) and others v Commission [2001] ECR II-2459.

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In addition, the ‘transatlantic’ attention given to Consten and Grundig coincided with what may be described as a nascent opportunity structure presented by the activation of EEC competition law in 1962. Recognizing that the new competition regime could have major (regulatory and financial) consequences for business, there was ample motivation for legal practitioners on both sides of the Atlantic to examine the legal implications of the case, particularly since published legal analysis sometimes functions as a competitive technique to advertise expert services, win clients, and attract investment. Furthermore, the expression ‘both sides of the Atlantic’ should be qualified since, as noted at page 137, the new opportunities arising from the establishment of EEC law prompted certain US law firms to set up shop in Brussels in the 1960s and literally operate on both sides.95

4.3.1.2 Schwinn, Sylvania, and Metro I In an accident of history, the US Supreme Court ‘followed’ the ECJ in its 1967 judgment in Schwinn96 by rejecting, in its turn, the ‘rule of reason’ approach to the imposition of sales restrictions on independent dealers. The Schwinn judgment represents the free-trade paradigm in US law; it stands for dealer independence and, for critics, ‘formalistic line-drawing’. And the critics were vociferous.97 With the efficiency-propelled tide of revolution drawing close to shore, Schwinn’s lifespan was all of ten years.98 As explained below, the judgment was swept aside by what was then an increasingly popular intellectual paradigm based on certain (controversial) assumptions. To put these assumptions in the briefest terms, manufacturers know best how to source inputs and get their products to market; they maximize profits and their interests are generally aligned with those of consumers, and not necessarily with those of

95 For example, Cleary Gottlieb, having had an office in Paris since 1949, opened its Brussels doors in 1960 (and counted among its clients the European Commission, which apart from consultations on EEC initiatives also occasionally requested advice on US antitrust law). Other US firms followed, such as Coudert Brothers in 1965, White & Case in 1967, Dechert in 1968, and Oppenheimer, Wolff & Donnelly in 1969. However, most of the well-known US law firms in Brussels were attracted at a later stage, in particular during the run-up to the ‘completion’ of the internal market in 1992. See, eg, L.A. Times, 4 December 1990 (number of US firms ramping up from nine to 25 in the period 1989–1990 amid what was expected to be a ‘gold rush’ in legal services). For details on the firms, see also Christopher Stoakes, ‘Brussels’ Supranational Law Firms’, International Financial Law Review 3 (1984), 9–17 (recounting government-prescribed investment incentives in the 1960s and a loosening of regulatory constraints for law firms in the 1980s, although quotas for lawyers from third countries persisted). 96 Cited earlier, note 83. 97 See, eg, Stanley Robinson, ‘Recent Antitrust Developments’, Columbia Law Review 75 (1975) 243–81. 98 The judgment that laid Schwinn to rest is mentioned at pp. 151–2.

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intermediaries; and concerns related to their exercise of market power are misplaced because markets, unless tampered with by public authorities, are generally characterized by adequate (actual or potential) competitive pressures and are thus endowed with self-healing properties. We will not venture into a more elaborate discussion of the ‘Chicago school’, and we abstain from stories of pendulums and double helices that would require too much space to describe. What seems relevant here is that Chicago-oriented scholars sought to find, and then invariably claimed to have found, legitimate business reasons that explained behaviour and concentrated market structures previously thought to be harmful to rivals, consumers, and society. In Schwinn, a bicycle manufacturer (in a fairly open market, with growing demand and significant import competition) had established various distribution channels, most of which involved sales to franchisees and independent retailers. In an opinion by Justice Fortas, the Court condemned, as per se illegal, all territorial restrictions imposed by a producer on independent distributors or retailers. Implicitly overturning White Motor, the Court stated that (vertical) territorial restrictions were ‘so obviously destructive of competition that their mere existence is enough’ to justify per se illegality, unless they applied only to sales through agency or consignment.99 Thus, for a short while in the late 1960s and 1970s, the antitrust treatment of (vertical) territorial restrictions in the US and in the EEC spontaneously converged, almost.100 But soon there followed a famous confluence of events: new appointments to the Supreme Court, including Lewis Powell and William Rehnquist and (from 1969 to 1986) a new Chief Justice, Warren Burger, succeeding Earl Warren; a stalled economy reeling from worldwide disruptions and, in some industries, menacing competition from progressively lower-tariff imports; and, in the law and economics scholarship, the growing influence of commentators such as Stigler, Demsetz, Brozen, and Posner, to name just a few scholars associated, each in his own way, with the ‘new learning’ to which we alluded above. Continental T.V. v GTE Sylvania was the iconic case in which Justice Powell, known as a moderate on the Court, announced that the legality of non-price vertical restraints was thereafter to be evaluated under the rule of reason. Powell specified, in footnote 19, that interbrand competition was the primary concern of the law, and in 99 388 U.S. at 379 (rule of reason appropriate for such sales, since in the consignment or agency context the producer retained ‘dominion’ and risk of loss). 100 More precisely, the Community policy was more flexible than the Schwinn rule: already in Article 2(1)(b) of Commission Regulation 67/67, the Commission began to distinguish between active and passive sales restrictions, allowing the block exemption to apply even where the parties to an agreement provided for active sales restrictions (a somewhat daring gesture in light of the Consten judgment, devoid as it is of any such distinction).

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that light the opinion underlines the pro-competitive potential of non-price restraints on dealers. To be clear, the Sylvania opinion was not an unambiguous victory bell for the Chicago Enlightenment. While citing Posner extensively, the majority in Sylvania neither expressed agreement with Posner’s view that the law should treat price and non-price restrictions in the same manner,101 nor of course did it suggest that per se legality for vertical restraints was the way forward, an approach that would have leapfrogged Posner himself.102 On the other hand, it seems equally clear that the Court was determined to distance itself from its earlier emphasis on market structure and on dealer freedom during Earl Warren’s tenure.103 The Supreme Court published its opinion in Sylvania on 23 June 1977. Did it have any repercussions on the first Metro case,104 decided on 25 October 1977 by the ECJ? In Metro the ECJ considered the legality of a selective distribution network in competitive markets for electronic products and accepted that a variety of vertical restraints may be either consistent with Article 85(1) or exempt under Article 85(3), such as customer restrictions linked to objective criteria. In assessing the application of Article 85, the ECJ was looking backward to the time the Commission adopted its exemption decision of 15 December 1975; ie, a time prior to the Supreme Court’s judgment in Sylvania. Still, we note that the Court showed few outward signs of being swayed by, or even cognizant of, the latest US developments concerning non-price vertical restraints. One might speculate that, following the Sylvania judgment, the ECJ in Metro might have felt more secure in stating that rigid sales prices ‘do not, especially in view of the existence at the same time of competition between products of the same brand (intra-brand competition) and the existence of effective competition between different brands, permit the conclusion that competition has been restricted or eliminated on the market in electronic equipment for leisure purposes’.105 This explicit reference to intrabrand and 101

See Richard Posner, Antitrust Law (Chicago: University of Chicago Press, 1976), 165. See Posner, Antitrust Law, at 165, stating that ‘we don’t yet know enough about restricted distribution to adopt a rule of per se legality either, and consequently I believe that the Justice Department (and other antitrust plaintiffs) should be permitted to continue to bring cases challenging restrictions in distribution.’ For a different view, see Posner, ‘The Next Step in the Antitrust Treatment of Restricted Distribution: Per Se Legality’, University of Chicago Law Review 48 (1981), 6–26, 23–6. 103 Lawrence Sullivan’s argumentation on behalf of Sylvania’s franchisee (Continental T.V.) drew heavily on traditional themes of market pluralism and dealer independence, tying them subtly to allocative efficiency arguments. Cf Victor Goldberg, ‘The Law and Economics of Vertical Restrictions: A Relational Perspective’, Texas Law Review 58 (1979), 91–129, 107. 104 Case 26/76, Metro SB-Großm ärkte GmbH & Co. KG v Commission [1977] ECR 1875. 105 Metro, para. 22. Waelbroeck and Frignani, for example, considered (approvingly) that such language ‘echoed the trend discernable in U.S. case law’. Michel Waelbroeck and Aldo Frignani, European Competition Law (Vol. IV, Mégret Commentary), Françoise Gamet-Pol (trans.) (Ardsley: 102

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interbrand competition might be perceived as echoing Justice Powell’s footnote 19 (see p. 151), or as drawing on the Sylvania judgment in general. But even this slender thread seems doubtful.106 What is not in doubt is that in the Metro litigation the US case law on vertical restrictions, and in particular the stringent approach adopted in Schwinn, was relied on by the applicant (ie, Metro, a self-service wholesaler excluded from SABA’s selective distribution system) in seeking an annulment of the Commission’s exemption decision. Schwinn was cited, for example, as representing the importance of free competition among distributors.107 More specifically, Schwinn was interpreted by Metro as establishing a per se prohibition on vertical customer restrictions.108 While the Court did not react to this, Advocate General Reischl considered the argument just long enough to reject it. In his view, Schwinn was inapposite both on the facts and in terms of the ‘legal situation’.109

4.3.2 Reinforcement of a Dominant Position by Acquisition: Continental Can One of the momentous early issues of European competition law was how to interpret the prohibition on the abuse of dominance, and in particular how to define its field of application. The question was whether to interpret the scope of Article 86 EEC narrowly (‘exploitative abuses’ only) or broadly (‘exclusionary abuses’ too, including by means of structural reinforcements through acquisitions). The corresponding scholarly debate in the 1960s was summarized in 1976 by Pierre Vogelenzang: Professor Joliet presented his view on Article 86 in a very thorough study comparing the American concept of monopolization with the EEC concept of [abuse of a] dominant position. He distinguished two methods of dealing with market power. Transnational Publishers, 1997), 640. Cf also Roger Goebel, ‘Metro II’s Confirmation of the Selective Distribution Rules: Is This End of the Road?’ 24 CMLR 24 (1987), 605–34, 610 (‘The Court of Justice undoubtedly knew of the shift in U.S. rules, but one can only speculate as to how much influence Sylvania had on the Court’s opinion in Metro I ’). 106 The intrabrand/interbrand dichotomy had been part of the standard European antitrust lexicon since the 1960s thanks to Consten and Grundig. In the latter judgment, adopted many years prior to the accession of Ireland and the UK to the Community, the Court understandably did not use the standard English terms ‘interbrand’ and ‘intrabrand’; however, it did refer to ‘la concurrence entre les produits similaires des differentes marques’ and la concurrence ‘entre distributeurs de la même marque’. 107 See Metro, Report for the Hearing, 1893. The Commission disputed the relevance of the Schwinn judgment. Metro, Report for the Hearing, 1894. 108 See the Opinion of Advocate General Reischl in Metro, at 1932, point 4(f ). 109 See Opinion of Advocate General Reischl in Metro, at 1932, point 4(f ). Reischl further pointed out that the proper interpretation of Schwinn was ‘evidently contested even in the USA’, a reference to the appeal in Sylvania, decided by the Supreme Court two weeks after Reischl issued his Opinion.

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The first method was to attack the creation, maintenance or expansion of market power, in order to preserve competitive structures; the second method was government control over and regulation of its exercise. Although Joliet admitted that the methods did not necessarily exclude each other, he concluded that Article 86 [ . . . ] did not cover exclusionary practices directed against (potential) competitors. [ . . . ] The broader view was taken by Professor Mestmäcker. He considered Articles 3f, 85 and 86 as parts of one system, and therefore refused to interpret Article 86 in an isolated manner.110

Recently, Mestmäcker recalled that his broader reading of Article 86 was inspired in part by the US experience with the Sherman Act: ‘Article [86] was to be interpreted in light of the prohibition of monopolization under Section 2 Sherman Act and the treatment of mergers as possible instruments of restraint of competition’.111 The prevailing conception of US antitrust law in the 1960s, with its general emphasis on the maintenance of competitive markets, may have been seen as a plausible guideline for interpreting the significance of both ‘undistorted competition’ as contemplated by Article 3(f ) and the residual competition imperative in the fourth condition under Article 85(3). The debate regarding the scope of Article 86, which the Commission had also interpreted as including certain types of mergers in its 1966 Memorandum (see p. 142), was decided by the ECJ in Continental Can.112 There the Court found the Commission’s arguments about a proper systematic and purposive interpretation of the EEC Treaty (the approach elaborated by Mestmäcker) to be more persuasive than the circumstantial inferences that could have been drawn from the absence of merger control provisions in the Treaty. Apart from emphatic references to the aims of the Treaty, the Court also presented the issue as one of tying up a possible loophole: with no merger control, an enterprise might, by means of a takeover of a rival, eliminate direct competition in a manner akin to horizontal collusion while evading the application of Article 85.113 Since unilateral behaviour was untouchable as far as Article

110 Vogelenzang, ‘Abuse of a Dominant Position in Article 86: The Problem of Causality and Some Applications’, CMLR 13 (1976), 61–78, 62–3 (emphasis in original) (citing classic studies by Joliet and Mestmäcker published, respectively, in 1970 and 1966). See also Heike Schweitzer, ‘The History, Interpretation and Underlying Principles of Section 2 Sherman Act and Article 82 EC’, in European Competition Law Annual 2007: A Reformed Approach to Article 82 EC, Claus-Dieter Ehlermann and Mel Marquis (eds) (Oxford: Hart Publishing, 2008) 119, especially 138–40. 111 Mestmäcker, ‘German and European Competition Law’, 38. 112 Case 6/72, Europemballage Corporation and Continental Can v Commission [1973] ECR 215. 113 Continental Can yielded only a partial solution to the apparent gap in the Treaty, since a takeover of a rival by a non-dominant undertaking remained beyond the scope of Article 86, even after Continental Can. Furthermore, unlike a modern ‘best practices’ merger control regime, Article 86 could only be applied ex post. These lacunae were more fully addressed when the Community adopted its Merger Control Regulation in 1989.

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85 was concerned, the latter provision could only be applied, supposing all the relevant criteria were satisfied (existence of an agreement, restriction of competition, etc.), to concentrations following which two (or more) independent entities remained on the market. This point was not fleshed out in Continental Can but had been noted by the external experts retained by DG IV to work on market concentration issues and was confirmed by the ECJ in prominent case law many years later. These and similar considerations led the Court to pronounce lines which law students still rehearse, and which remain relevant to the ECJ’s modern jurisprudence: ‘[ . . . Article 86] is not only aimed at practices which may cause damage to consumers directly, but also at those which are detrimental to them, through their impact on an effective competition structure [ . . . ]’.114 For the sake of brevity we pass over the facts of Continental Can, and the interesting variety of arguments that were raised before the Court by the parties and by Advocate General Roemer.115 The question that interests us for present purposes is this: in opting for the broader reading of Article 86, was the Court influenced by the path taken by the US in relation to Section 2 of the Sherman Act? It seems that the spectre of Section 2 was to be found at least in the submissions of the Commission.116 As the Commission lawyers handling the case had been advised by Mestmäcker,117 this is not surprising. As the Commission was the clear winner in Continental Can in terms of how Article 86 was to be interpreted (even though technically its decision was annulled due to a flawed market definition),118 one might be tempted to conclude that the ECJ was indeed indirectly influenced by American antitrust. However, reading the judgment one is struck by the Court’s methodology: with a fair amount of rigour, the Court sought to understand the role of Article 86 in terms of its content, of course, but above all by considering its relationship to other key Treaty provisions. There is little in the Court’s mode of reasoning that evokes the legacy of US courts interpreting the Sherman Act. However, the reasoning in Continental Can seems very much in tune with the Court’s characteristic hermeneutic approach, established to spectacular effect in its Van Gend en 114 Continental Can, para. 26. In some cases the words ‘impact on an effective competition structure’ are replaced by ‘impact on competition’. 115 These matters are discussed in Chapter 1, this volume. 116 See Report for the Hearing, at 228 (describing the applicants’ criticism of the Commission’s reliance on US antitrust principles, a criticism based on the different sources, philosophy, and history behind the Treaty rules). 117 See Schweitzer, ‘History, Interpretation and Underlying Principles’, 139. 118 The Commission’s setback on this superficial level led to a remarkable misunderstanding of the judgment’s significance on the part of certain commentators. Illustrative is Jean Guyénot, ‘The Continental Can Case: A European View’, Journal of World Trade Law 8 (1974), 107–12.

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Loos judgment of 1963.119 In that judgment, the Court explained that the interpretation of the EEC Treaty was to be guided by its ‘spirit’ (telos) and its ‘general scheme’ as well as its wording. The Van Gend en Loos judgment, insofar as it was a declaration of Kompetenz-Kompetenz with regard to the Treaty, did have certain antecedents in US law, but we doubt that the American antitrust canon was among them.120 The ‘teaching’ of Continental Can was that Article 86 could be used to prohibit exclusionary conduct by a dominant firm, including by means of an acquisition that eliminated an important source of potential competition vis-à-vis the dominant acquirer, leaving the dominant firm with an unassailable market position.121 This was entirely consistent with Mestmäcker’s US-inspired approach. However, it seems to us that the ECJ would have been able to arrive at the same basic legal conclusions irrespective of how Section 2 of the Sherman Act had been interpreted and applied throughout the 20th century. In Continental Can, the Court did not appear to be drawing on foreign wisdom but rather seemed to be developing a home-grown construction consonant with its own jurisprudence and self-understanding as a ‘constitutional court’.

4.3.3 Unilateral Refusal to Deal: Otter Tail and Commercial Solvents A prominent issue that arises in the antitrust context is whether a dominant undertaking should be subject to a ‘duty to deal’, and if so, with whom, under what circumstances, and on what terms. Such questions emerged in the EEC 119

Case 26/62, NV Algemene Transport- en Expeditie Onderneming van Gend & Loos v Netherlands Inland Revenue Administration [1963] ECR 1. For the background to the Van Gend en Loos judgment, with particular reference to a variety of academic, political, administrative and economic actors, see Antoine Vauchez, ‘The Making of the European Union’s Constitutional Foundations: The Brokering Role of Legal Entrepreneurs and Networks’, in Transnational Networks in Regional Integration: Governing Europe 1945–83, Wolfram Kaiser, Brigitte Leucht, and Michael Gehler (eds) (Basingstoke: Palgrave Macmillan, 2010), 108–28. 120 At most it may be said that the ECJ was motivated to empower the nationals of the six member states with ‘individual rights to participate in the internal market’ (Mestmäcker, ‘German and European Competition Law’, 47). Here, certain principles of US antitrust at that time may have resonated with the Court’s vision of a Community based on the rule of law (to use the term adopted much later by the Court). Such resonance need not imply any reliance whatsoever on US antitrust law. 121 This far-reaching implication of Continental Can—ie, its relevance to a host of unilateral conduct problems and not just for merger control—is sometimes overlooked. For example, the fact that the Commission’s decision was annulled for incorrectly defining the relevant market leads Warlouzet and Witschke to conclude that the Court gave the Commission ‘only lukewarm, partial support’ and the fact that the Commission’s 1973 proposal for a merger regulation languished for years leads them to conclude that the Commission was ‘unable to take advantage’ of the judgment. Warlouzet and Witschke, ‘The Difficult Path to an Economic Rule of Law: European Competition Policy, 1950–91’, Contemporary European History 21 (2012), 449 and 454 respectively. (On a similarly

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context in a case decided in 1974, Commercial Solvents v Commission.122 The particular issue was whether a dominant manufacturer of raw chemical materials, essential for making a tuberculosis medicine, was entitled to stop supplying a long-term customer (a downstream producer of the medicine) as a corollary to the manufacturer’s decision to integrate forward and begin producing a rival product. As Article 86 EEC said nothing specifically about either refusals to deal or termination of supplies, it was for the ECJ to decide whether to bring such scenarios within the provision’s reach.123 Just a year before, the US Supreme Court had decided a case called Otter Tail Power Company.124 The latter case arose from a double refusal by a dominant regional electricity supplier (Otter Tail), when so requested by certain municipalities, to either transmit power purchased from a different supplier along its wires or to supply its own electricity to those municipalities at wholesale. In those circumstances, the Supreme Court accepted the US Government’s claim that Otter Tail had infringed Section 2 of the Sherman Act. Compared to Commercial Solvents, the Otter Tail case bore several features which made it only a rough analogy. In Otter Tail, the dominant electricity supplier was a natural monopolist at the level of transport capacity and there was no evidence of a prior course of dealing, as there was in Commercial Solvents.125 Furthermore, in Otter Tail any risk of post-judgment administrative burden for the courts was limited by the fact that the dominant supplier’s transmission and wholesale activities were subject to oversight by a federal regulator. However, the issue of involuntary sharing of assets and the issue of vertical foreclosure126 were common to both cases. If a precedent existed that might have been likened to Commercial Solvents, it was Otter Tail.127 narrow reading, the authors also portray the Consten judgment as essentially a defeat for the Commission since the ECJ partially annulled its decision on severability grounds.) In reality, Continental Can empowered the Commission and set the stage for its increased attention in the 1970s and early 1980s to the area of exclusionary conduct. 122 Joined Cases 6 and 7/73, Commercial Solvents v Commission [1974] ECR 223. 123 A refusal to supply may be seen to limit production or markets, or to limit technical development, depending on the facts of a given case. See Article 102(b). 124 Otter Tail Power Company v United States, 410 U.S. 366 (1973). 125 The lack of a prior commercial relationship is often regarded as a distinctive element of ‘essential facilities’ cases, while long-standing commercial relations are sometimes viewed as making a duty to deal less objectionable. Cf Commission, Discussion Paper of 2005, § 9.2.1. On the US side, prior dealing between the parties seems to have played a role in Aspen Skiing Company v Aspen Highlands Skiing Corporation, 472 U.S. 585 (1985) (also referring to predatory, ‘profit sacrificing’ behaviour on the part of the defendant). 126 While Commercial Solvents sought to produce and sell a therapeutic drug without competition from its customer Zoja, Otter Tail sought to maintain its grip on local electricity distribution, free of competition from the municipalities concerned. 127 Cf Valentine Korah, ‘Istituto and Commercial Solvents v. Commission’, CMLR 11 (1974), 248–72, 263.

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Even putting Otter Tail to one side, the general issue of the propriety of compulsory access to ‘essential’ facilities had been the subject of judgments by the US Supreme Court going back six decades before Commercial Solvents. The seminal US case was Terminal Railroad,128 where the Supreme Court ordered a consortium of railroad companies controlling access to certain arguably non-duplicable railroad facilities (such as the only track crossing the Mississippi River) to offer non-discriminatory membership to rivals. Although these judgments too may be distinguished from Commercial Solvents for various reasons, broadly speaking the issues were not dissimilar. Given the jurisprudence in the US prevailing as of 1974, and with Otter Tail still fresh in the minds of the (internationally well-informed) legal community, one might have thought that the US discourse would play a significant role in the Commercial Solvents case. Yet Advocate General Warner, in his Opinion of 22 January 1974, was more interested in how the laws of the EEC member states treated refusals to deal than he was in what US law had to say. Referring briefly to the laws of France, Belgium, Denmark, Germany, and the Netherlands, and citing a report by the UK’s Monopolies Commission, he stated: ‘[M]y Lords, I do not think that it is necessary to refer to authorities in other countries, such as the USA, to justify the view that there would be nothing startling in the Court upholding the interpretation of Article 86 on which the Commission rested its Decision in this case’.129 For its part the ECJ held, without reference to the laws of any country, that terminating the supply of a necessary input to an existing customer could indeed constitute an abuse under Article 86 if the withdrawal would risk forcing the customer from the market.130 The fact that the withdrawal might be logically connected to a decision to integrate vertically was immaterial. Since the time of Commercial Solvents, issues of vertical foreclosure resulting from a refusal to deal have arisen in Europe several times. And US law and scholarship did seem to play a role, at least judging by the Opinion of Advocate General Jacobs in Oscar Bronner.131 The Bronner case did not on the facts involve an essential facility, but it yielded relatively clear principles 128

United States v Terminal Railroad Association, 224 U.S. 383 (1912). Opinion of the Advocate General in Joined Cases 6 and 7/73, Commercial Solvents v Commission [1974] ECR 223, 270. Valentine Korah was disappointed ‘that the Advocate General did not think it necessary to refer to the experience or theory developed in the United States’. Korah, ‘Istituto and Commercial Solvents’, 261. 130 It was questionable whether on the facts the customer faced any real risk of having to exit the market. The raw material in question (ethambutol) could apparently be acquired from other undertakings. 131 Opinion in Case C-7/97, Oscar Bronner v Mediaprint [1998] ECR I-7791, paras. 45–47 (citing several US judgments, including Otter Tail, and citing Robert Bork’s Antitrust Paradox (New York: Free Press, 1978/1993), 346, for the proposition that efficiency motives may justify such refusals). 129

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for (tangible property-based and services-based) essential facilities cases. The circumstances in Bronner concerned a dispute over access to a nationwide home delivery system for newspapers in Austria, a ‘facility’ that seemed quintessentially non-essential to economic survival in the newspaper publishing business, and the ECJ was generally inclined to agree. But Bronner came much later. The ECJ’s classic ‘refusal to deal’ jurisprudence in the 1970s appears to have taken shape in isolation from US influence.

4.3.4 Brief Remarks on the Foregoing Case Studies The cases reviewed above arguably suggest a pattern of behaviour on the part of the ECJ in the period under scrutiny. In most of those cases, the members of the Court had at their disposal a meaningful reservoir of experience from the US on which they might have drawn. Yet the posture of the judges was cautious. Certainly it is not in the style of the ECJ to trot out citations to foreign judgments, and there is nothing remarkable in the lack of explicit reference to what US courts do. Nevertheless, our impression is that US-style solutions were, for the most part, politely ignored or at times deliberately passed over. Most vivid in this respect was Consten and Grundig, where a US-inspired approach was specifically commended to the Court, in vain, by Advocate General Roemer.132 An important qualification must be made here since, particularly in the Continental Can case, one sees that US monopolization law influenced European scholarship on a conceptual level and then, on a practical level, this translated into a winning litigation strategy before the ECJ. The pivotal ruling in the latter case continues to define the path of the European law on abuse of dominance, even though merger approval is today regulated by more specific EU legislation. However, in relation to Continental Can we have queried whether the ECJ might have developed the same approach to Article 86 even without this indirect American influence. If the impression that emerges—one of a court that is cautious about importing foreign solutions despite an abundant corpus of foreign law—is 132 In the field of procedural law, see also the Dyestuffs case where, in relation to the extraterritorial application of Article 85, the ECJ declined to embrace a rough variant of the US-inspired ‘effects’ test (made famous in the 1945 Alcoa judgment of the 2nd Circuit) that had been suggested as a solution by Advocate General Mayras. The facts of the case permitted the Court to proceed more conservatively on a theory of parental liability; jurisdiction was thus exercised on the more traditional basis of territorial links. See Case 48/69, Imperial Chemical Industries Ltd v Commission [1972] ECR 619. An approximate facsimile of the effects test was later adopted by the ECJ with regard to the antitrust rules, but in a manner that might be called ‘selective adaptation’; there seem to remain some differences due to the requirement of a ‘consummating act’, which may reflect the enduring influence of the territoriality principle. The situation in the field of EC/EU merger control is rather different, but we digress here no further.

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correct, then, as suggested in the introduction, we attribute this reticence to the efforts the Court had to make, particularly in the early years of the Community, in order to define its own role and, simultaneously, to shape EEC law in a manner according to its understanding of that role. As a supranational court of diverse legal (and political and linguistic) cultures, and as a court charged with the task of overseeing the construction of a European ‘domestic’ market—punctuated at times by the slow progress of the Community legislator—the ECJ, ‘inoculated’ by the nature of the tasks assigned to it by the Treaty of Rome, may in general have regarded the categories and concepts of US antitrust law as quite distant or inappropriate guideposts.

4.4 Conclusions Our findings on transatlantic interactions involving DG IV and competition policy experts affiliated with it have underlined the continuity of a transatlantic dialogue throughout the 1960s and 1970s. We have also highlighted that the different motivations leading competition policy officials to engage with US antitrust law changed over time. However, while the European ‘epistemic’ antitrust community in the 1950s and early 1960s was certainly receptive to US antitrust ideas, this did not always apply to the Court of Justice. The boldest claim that we can make is the following. The US approach to monopolization conduct, which developed over decades of application of Section 2 of the Sherman Act, appears to have provided an important means of developing the intellectual basis for a broad understanding of the nature of Article 86 EEC despite significant differences in the text of the two provisions. That broader interpretation set the stage for a critical juncture, which determined the path taken in Europe with regard to the law on abuse of dominance. Whereas the Court in Continental Can had the option of construing Article 86 narrowly, limiting its application to exploitative exercises of market power, the Court instead favoured the broader interpretation, and still does today. On the other hand, we are unaware of any evidence suggesting that the Court itself had any concern about the nature or application of Section 2 of the Sherman Act. Only in an indirect sense did the Court ‘receive’ the idea that the law on unilateral misconduct naturally embraces acts on the part of a dominant firm that exclude or marginalize competitors or otherwise raise or reinforce entry barriers, all of which would normally tend to enhance the dominant firm’s market power (or insure against a loss of it). Of course, if the Court is influenced indirectly, that is still an influence. But this instance of indirect influence should be considered in light of the overall picture that seems to present itself, which is that of a court that was

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not exceedingly preoccupied with drawing on or applying solutions developed in the context of US antitrust law. Indeed, we do not see any strong link between the US antitrust experience and the modes of reasoning employed by the Court. More determinative factors, in Continental Can, were the spirit, general scheme, and wording of the Treaty of Rome. In the other judgments examined, we have found little evidence of any particular receptiveness to antitrust solutions originating in the US. We have attached great importance to the role of the Court. By and large we have treated the Court as a black box, and we have neglected the socialization and personal characteristics of individual judges. The background, mental formation, and juridical ethos of those judges were in some cases, if not most, very different from that of antitrust specialists, including those active within the wider transatlantic antitrust field. Such differences can be significant due to the Court’s fairly unique capacity to explicitly or implicitly veto entrepreneurial attempts by policy-makers and litigators to import US legal ideas, or hybridized forms of them, into European law.

5 Competition Law and Industrial Policy Conflict, Adaptation, and Complementarity Thorsten Käseberg and Arthe Van Laer

5.1 Introduction The relationship between competition policy and industrial policy has always been characterized by tensions. Even before the development of an explicit industrial policy, antitrust had been bedevilled by the question whether its core mission—the protection of competition on ‘domestic’ markets and the prevention of harm to ‘domestic’ consumers—should be superseded by other potentially conflicting domestic economic goals, such as the pursuit of ‘national champions’. In Europe, competition and industrial policies have interacted on three levels: First, competition policy advocates in member states have been at odds on a national level with industrial policy activists who usually favour a more lenient competition policy. For example, before the German Act against Restraints of Competition was adopted in 1957, there was a fierce debate between advocates of a strong competition regime and the business community on what ambitions German competition law should pursue.1 Second, member states’ national industrial policies have conflicted with European competition policy.2 Indeed, one of the raisons d’être for European competition policy has been to limit certain forms of national industrial policies such as the creation of 1 On the opposition to the original Josten draft of 1949, in particular from the German industry and the subsequent legislative process, see, eg, Lisa Murach-Brand, Antitrust auf deutsch (Tübingen: Mohr Siebeck, 2004), 107–13. 2 For an overview of merger cases where member states have intervened to prevent a takeover of ‘domestic’ firms, see Thorsten Käseberg and Anja Kuhn, ‘Patriotisme économique vs. Fair Play— Europarechtliche Grenzen von Maßnahmen der Mitgliedstaaten bei grenzüberschreitenden Zusammenschlüssen’, Aktiengesellschaft (2007), 65.

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‘national champions’ by ‘waiving’ mergers or granting state aid. This explains a sizeable amount of resistance by the member states which, for example, had been very reluctant to transfer competencies in the field of merger control to the European level. Third, in particular since the beginning of the 1970s, a European industrial policy has evolved, and has inevitably interacted with European competition policy.3 This chapter focuses on the latter two relationships; ie those of, on the one hand, European competition policy and, on the other, national and European industrial policies. The policies have interacted in both possible directions: European competition policy-makers and enforcers can indeed claim some success in having kept industrial policy at the national and the European level to some extent ‘horizontal’ (see pp. 173–85). At the same time, and this is the focus here, European competition policy-makers and enforcers to a larger extent have managed to fend off industrial policy influences on their own policy- and decision-making and only to a lesser extent adapted competition policy to industrial policy goals. We propose to look at both ‘decisions on rules’, ie (the negotiations on) primary law (the Treaties) and secondary law (in particular regulations such as the Merger Regulation), as well as at ‘decisions within rules’, ie in particular individual decisions in the field of competition. The perspective on the two policies’ interaction is legally and economically informed, but ultimately historical. This means that the extensive normative discussions on their relationship, in particular by competition lawyers and micro-economists, are only referred to as far as they have influenced the thoughts, words, and deeds ‘of ’ historic actors.4 The focus here is on the period from the negotiations on the Rome Treaty until the entry into force of the Maastricht Treaty.5 Our analysis suggests that the principal determinants that influenced the relationship between competition policy and industrial policy in the EEC include the Treaty of Rome and its system of ‘undistorted competition’ (implemented in part by Regulation 17/62),6 which installed a competition regime 3 European industrial policy has, of course, also interacted with national industrial policies. This relationship, however, will not be dealt with here. 4 On the necessary conditions for economic ideas to become influential, see Peter A. Hall, The Political Power of Economic Ideas (Princeton: Princeton University Press, 1989), 371–4. 5 For an analysis of the telecommunications sector and the compatibility of competition and industrial policy in its liberalization and the harmonization of the regulatory framework, see Wolf Sauter, Competition Law and Industrial Policy in the EU (Oxford: Oxford University Press, 1997), 159–223. For an overview of the liberalization processes in the energy and telecommunications sectors, see The EC Law of Competition, 2nd edn, Jonathan Faull and Ali Nikpay (eds) (Oxford: Oxford University Press, 2007), 1361–572. See also Lee McGowan, ‘Competition and Industrial Policies’, in European Politics, Arnand Menon and Colin Hay (eds) (Oxford: Oxford University Press, 2007), 346–62. 6 For a contextual history of Regulation 17, see Chapter 2, this volume.

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with a strong, ‘constitutional’ character. Industrial policy was introduced as a Community activity only years later, and with thinner legal and institutional foundations. The interaction of competition policy and industrial policy was also shaped by the personal characteristics and relationships of individual Commissioners, and by the broader economic context, a factor that became particularly important when it was realized that the plight of certain industries was not only acute but structural as well. Another determinant is the contingent way in which industrial policy is understood and ‘practised’. As we will see, the nature of industrial policy, once it had entered into the sphere of the Community policy, evolved significantly, with more or less positive consequences for the degree of compatibility with competition policy during our period of study. The basic structure of the chapter is as follows. In Section 5.2 we return to the definitional difficulty raised by the term ‘industrial policy’, an ambiguous expression whose meaning can shift significantly according to context. The centrepiece of the chapter is Section 5.3, where we present our narrative with regard to different phases relevant to the interaction between competition policy and industrial policy from 1958 until the beginning of the 1990s. In Section 5.4 we conclude the chapter by suggesting an overall interpretation of this interaction, and of the impact each of these policies has had on the other.

5.2 Notions of ‘Industrial Policy’ While European competition policy has evolved and changed over time, its scope is relatively clear. Today it encompasses the enforcement of (i) the prohibition of anticompetitive agreements (now Article 101 TFEU), (ii) the prohibition of abuses of dominance (Article 102 TFEU), (iii) the Merger Regulation, and (iv) the prohibition of distortive state aid (Article 107 TFEU) as well as legislative and soft law activities (in particular through regulations and guidelines) to provide further guidance in these basic areas. Except for the Merger Regulation (which entered into force in 1990), these provisions were already part of the Treaty of Rome. The Directorate-General for Competition (known as DG IV until 1999) has existed since the launch of the European Economic Community. By comparison, European industrial policy is a ‘younger’ policy. What was historically called DG III (today known as DG Enterprise and Industry), the institutional ‘driver’ of industrial policy, did not spring to life until 1967. And it was only much later that the Treaty of Maastricht introduced a Title on industrial policy and granted the Community formal competence in this area.

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Furthermore, ‘industrial’ policy in the EEC always eluded easy definitions.7 Both at European and national level (not to mention jurisdictions beyond Europe), very different policies have been subsumed under the notion of ‘industrial policy’; and vice versa, policies that could reasonably have been called industrial policy have gone by different labels for various reasons. Industrial policy itself has been labelled over time as competitiveness policy, enterprise policy and, inevitably, ‘new’ industrial policy.8 Definitions of industrial policy are legion and have also changed over time. Today, it is typically understood broadly as ‘the set of measures applied by governments to deal with the process of structural adjustment associated with changes in comparative advantage’.9 A ‘pure’ competition policy approach would only regard the preferences of market actors on the supply and demand side as the ‘legitimate’ drivers of structural change. The (only) market failure that a pure competition policy approach recognizes as justification for intervention is the inefficient exclusion of competition by market actors. From this perspective, industrial policy measures can be ‘selective’ or ‘discriminatory’10 in various dimensions. The most relevant (to some extent overlapping) factors for ‘special treatment’ have been: (i) the sector, (ii) the use of inputs (eg R&D investment), (iii) more generally, a firm’s activities (eg environmentally beneficial activities), (iv) other characteristics (such as a firm’s ‘nationality’ or the location of its headquarters, its size or its capacity to innovate), and (v) the relevant region. Innovation (or technology) policy can therefore both be seen as part of industrial policy. In the 1960s, the original focus of industrial policy was on the (industrial) sector and ‘domestic’ firms. As such, there was significant potential for conflict with competition policy, as we highlight in our historical narrative (see Section 5.3). However, in its policy statements, the Commission has often painted a picture of a more harmonious relationship of competition and industrial policy, as it did in its 1973 Memorandum on the technological and industrial policy programme: The industrial policy and the competition policy pursued by the Commission complement each other closely. The intensification of the measures to combat cartels and 7 See, eg, Dennis Swan, Competition and Industrial Policy in the European Community (London and New York: Methuen, 1983), 3: ‘It is true that academic economists still attend conferences in the hope that they might acquire a clearer view of what it really consists of and of course, and in fairness, what rationale if any lies behind it’. 8 See Jacques Pelkmans, ‘European industrial policy’, in International Handbook on Industrial Policy, Patrizio Bianchi and Sandrine Labory (eds) (Cheltenham: Edward Elgar, 2006), 45–78. 9 Pierre Buigues and André Sapir, ‘Community Industrial Policies’, in Industrial Policy in the European Community: A Necessary Response to European Integration?, Phedon Nicolaides (ed.) (Dordrecht: Martinus Nijhoff Publishers, 1993), 21. 10 See, eg, Robert E. Driscoll and Jack N. Behrman in their ‘Introduction’ to National Industrial Policies (Cambridge, MA.: Oelgeschlager, Gunn & Hain, 1984), 1–24, at 5, quoted in Lawrence E. White, ‘Antitrust and Industrial Policy: A View from the U.S.’, NYU Law and Economics Working Paper 118 (2008).

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the efforts made to eliminate the abuse of dominant positions are essential to supplement the encouragement that the Community must give to the cross-frontier harmonization of undertakings. Both are aimed at increasing the efficiency of Community industry through structural improvements and the stimulation of competition. (emphasis added)11

In the Commission’s Thirteenth Report on Competition Policy (1984), the competition policy mission was linked to the goal of ‘competitiveness’: The decisions the Commission took [ . . . ] reflected a continuing determination to rigorously enforce the competition rules, but also a desire to encourage industrial restructuring, to improve the competitiveness of European industry, to promote research and development and innovation, and to accelerate the progress towards a single Community market. As this shows, the Commission’s work of administering competition policy cannot be encapsulated by the sole objective of removing distortions caused by anticompetitive practices or State aids which are liable to interfere with inter-State trade. Competition policy also contributes to improving the allocation of resources and raising the competitiveness of Community industry, and thanks to this greater competitiveness, secured largely by encouragement of research and development, to enabling the Community at length to overcome the economic problems now facing it and in particular to combat structural unemployment. (emphasis added)12

Similarly, in more recent years, Competition Commissioners and officials have reiterated the complementarity view.13 However, policy statements on the highest abstract level, ie, in reports and speeches, do not necessarily reflect and are sometimes even intended to gloss over conflicts in concrete cases. As the analysis below will suggest, there have sometimes been heated debates between industrial policy advocates (in particular at the national level) and those favouring a European competition policy free of industrial policy considerations. Nevertheless, the policy statements allow for some conclusions. First, the early statements in the 1970s show that the Commission was already ‘marketing’ its competition policy positively as an integral part of a wider economic competitiveness agenda. Second and most importantly, in particular the more

11 Memorandum from the Commission on the technological and industrial policy programme, presented to the Council on 7 May 1973, SEC(73) 1090, Bulletin of the European Communities, Supplement 7/73, para. 29. 12 Commission, Thirteenth Report on Competition Policy (1984), point 11. 13 See, eg, Alexander Italianer, ‘Competition policy in support of the EU 2020 policy objectives’, speech, 9 June 2010, Vienna, last accessed 20 February 2013, and the ‘Monti report’ (‘A New Strategy for the Single Market—At the Service of Europe’s Economy and Society’, 9 May 2010, 86), or the speech of the former Competition Commissioner Neelie Kroes (2004–2010), ‘Industrial Policy and Competition Law and Policy’ (printed in Fordham International Law Journal 30(5) (2006), 1401, 1402).

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recent statements by competition policy-makers also display the position of strength that competition policy has achieved over industrial policy. The typical view today of policy-makers and economists is that the two policies can and should be complementary to a significant degree.14 However, this view rests on a horizontal understanding of industrial policy which accepts the limited knowledge of policy-makers about future market developments and abstains from sectoral or vertical and even single-case interventionism in the sense of ‘picking (supposed) winners’. Such horizontal industrial policy, which acknowledges that ‘domestic’ competition, at least in the long term, enhances competitiveness, may influence competition policy in particular with regard to R&D activities, for example by advocating a more lenient policy towards research and development cooperation among firms and accommodating targeted state aid. Such a policy mainly complements competition policy in areas where active measures are perceived to be necessary to address market ‘failures’.15 While this more recent view of industrial policy has reduced the potential zone of conflict with competition policy, advocates of competition as an expression of economic freedom such as Ordoliberals would still resist the utilitarian streak in viewing competition policy as instrumental in, or even as part of, industrial policy or a competitiveness agenda. In their view, competitiveness is a result or by-product of competition, not its goal. The ambiguities already described in political interpretations of and changes in the concept of industrial policy should be kept in mind when considering its relationship with European competition policy.

5.3 Retracing an Uneasy Relationship 5.3.1 The Founding European Treaties 5.3.1.1 The ECSC and Euratom Treaties: Industrial Policy Front and Centre The European Coal and Steel Community (ECSC) can fairly be characterized as an enterprise of industrial policy, even though the objectives driving these 14 See, eg, Jordi Gual, ‘The three common policies: an economic analysis’, in European Policies on Competition, Trade and Industry—Conflict and Complementarities, Pierre Buigues, Alexis Jacquemin, and André Sapir (eds) (Aldershot, UK/Brookfield, USA: Edward Elgar, 1995), 3–48. 15 These would include, eg, hysteresis effects on labour markets or imperfections in capital markets impeding access to finance. The normative literature on new trade theory (eg, Krugman and Obstfeld), new economic geography (in particular Krugman), and ‘new’ industrial policy and their recommendations for ‘domestic’ policies cannot be reviewed here.

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treaties went far beyond strictly economic performance goals.16 Aimed at two sectors deemed to be of crucial importance given the political and historical circumstances, the ECSC Treaty provided several instruments of industrial policy, such as ‘general programs with respect to modernization, the long-term orientation of manufacturing, and the expansion of productive capacity’ (which had to be worked out by the High Authority under Article 46(3) ECSC) and investment programmes (under Article 55 ECSC). At the same time, the ECSC Treaty contained what appeared to be relatively far-reaching competition provisions, notably including a merger control system (Articles 65 and 66). But the ECSC competition rules proved to be weak in practice. As Warlouzet has pointed out, the disparity between the ECSC’s competition law ‘in the books’ and competition law ‘in action’ can be explained in particular by the influence of member states on the High Authority.17 In sum, the ECSC Treaty (which expired in 2002) has rightly been characterized as a ‘mixture of a competition policy and an interventionist economic policy’.18 Negotiated in parallel with the EEC Treaty, the Euratom Treaty was also conceived as the foundation of a European industrial policy that would promote research (Articles 4–11) and provide guidance on investment (Articles 40–44) in connection with the nuclear power sector.19 The industrial policy character of the Treaty is especially evident in its preamble, which envisages that Euratom will ‘create the conditions necessary for the development of a powerful nuclear industry which will provide extensive energy resources [and] lead to the modernization of technical processes [ . . . ]’ and in Article 1, which calls for the ‘speedy establishment and growth of nuclear industries’. As regards the relationship of the Euratom Treaty and the rules for the Common Market, Article 232(2) of the Treaty of Rome provided that ‘[t]he provisions of this Treaty shall not derogate from those of the Treaty establishing the European Atomic Energy Community’; ie, where the Euratom Treaty provides a lex specialis, the more specific rule applies instead of the more general provision. 16 See the memoirs of Jean Monnet, Erinnerungen eines Europäers (Munich: dtv, 1978), 367–469, the Schuman declaration of 9 May 1950 and the preamble to the ECSC Treaty. This background is highlighted in Chapter 6, this volume. 17 Laurent Warlouzet, ‘The Rise of European Competition Policy, 1950–1991: A Cross-Disciplinary Survey of a Contested Policy Sphere’, EUI Working Paper RSCAS 2010/80, (last accessed 20 February 2013). For an overview on industrial policy in the ECSC and a comparison with the EEC Treaty, see Swan, Competition and Industrial Policy in the European Community, 9–18. 18 Arved Deringer, ‘Verordnung Nr.17/62 und Verordnung Nr.1/2003—die historische Perspektive’, speech, Brussels, 17 July 2003. For an analysis of the background to the ECSC, see Matthias Kipping, Zwischen Kartellen und Konkurrenz. Der Schuman-Plan und die Ursprünge der europäischen Einigung 1944–1952 (Berlin: Duncker & Humblot, 1996). 19 See Wolf Sauter, Competition Law and Industrial Policy in the EU (Oxford: Oxford University Press, 1997), 70 and (the references in) footnote 41.

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This has sparked some debate; in particular, with regard to the application of state aid rules to the nuclear sector.20 However, the Commission has applied the normal competition rules on restrictive agreements and on abuse of dominance to commercial activities.21 Nevertheless, the Treaty is the embodiment of sector-specific industrial policy, designed to nurture an industry that did not really exist when the Euratom Community was launched.

5.3.1.2 The EEC Treaty: Competition Policy in a Dominant Position A significant contrast to the ECSC and Euratom Treaties may be seen in our principal subject of interest, the European Economic Community and its founding text. Similar to the ECSC, the Common Market project had an industrial or competitiveness rationale, but with a different constitution and different instruments. The very first sentences of the Spaak Report of 1956, paving the way for the EEC Treaty, refer to the challenge posed by the higher productivity of big US firms and the smaller size of markets in Europe. Reference was made to the lack of a European manufacturer of large transport aircraft or a European car manufacturer which could apply production technologies used by US firms.22 Thus, the competitiveness of European firms, through the realization of economies of scale, was an objective at the core of the Common Market. In a nutshell, the Treaty of Rome (i) provided wide competition provisions (in terms of scope); (ii) in contrast to the ECSC Treaty, did not contain any provision on a general industrial policy at the Community level; and (iii) provided only a few explicit exemptions or safeguards for national or European economic policies which could be associated with industrial policy. The latter exemption or safeguard provisions fall into six areas. First, Article 85(3) EEC contained the well-known exemption for measures which contribute to ‘promoting technical or economic progress’. Second, Article 90(2) EEC provided that undertakings entrusted with the operation of services of general economic interest or having the character of a revenue-producing monopoly were subject to the competition rules only to the extent that their application would not obstruct the performance of the tasks assigned to them. Third, Article 92(3) EEC stated that: [t]he following may be considered to be compatible with the common market: 20

Faull and Nikpay, The EC Law of Competition, 1365. See, eg, Case COMP/26.940/a, United Processors, OJ 1976, L51/7; Case COMP/26.940/b, KEWA, OJ 1976, L51/15; Case IV/33.473, Nuclear Energy Agreement (Scottish Nuclear), OJ 1991, L178/31. The main ‘derogation’ from the competition rules are Articles 67–76 in the Euratom Treaty, which cover prices and supply of nuclear materials. 22 Comité intergouvernemental créé par la conférence de Messine (ed.) Rapport des chefs de délégation aux ministres des affaires étrangères (Brussels, 1956). 21

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(c) aid to facilitate the development of certain economic activities or of certain economic areas, where such aid does not adversely affect trading conditions to an extent contrary to the common interest. However, the aids granted to shipbuilding as of 1 January 1957 shall, in so far as they serve only to compensate for the absence of customs protection, be progressively reduced under the same conditions as apply to the elimination of customs duties, subject to the provisions of this Treaty concerning common commercial policy towards third countries; (d) such other categories of aid as may be specified by decision of the Council acting by a qualified majority on a proposal from the Commission.

Article 92 allowed the Commission to at least steer national subsidies or other forms of aid toward certain goals. Article 92(3)(c) also makes clear that the ship-building industry enjoyed special protection. Fourth, the Treaty of Rome contained a Title IV on a common transport policy. This Title23 was interpreted as allowing for the delay of liberalization in the transport sector for two decades,24 and it can be associated with the interest of certain member states in protecting national incumbent operators. Fifth, Article 42 EEC permitted certain qualified exemptions for the production of and trade in agricultural products from the general application of the competition rules.25 Sixth, Article 226 EEC allowed member states—during the transitional period for the establishment of the Common Market (ie, for twelve years)—to apply for authorization to take protective measures if ‘difficulties arise which are serious and liable to persist in any sector of the economy’. The competition provisions—in particular the possibility of exemption under Article 85(3) EEC and the relatively ambiguous language of Article 86 EEC—were open to different readings and uncertainty, and it was only later that other factors such as the adoption of Regulation 17/62 paved the path to a strong independent competition policy,26 buttressed by the crucial support 23 See also Article 61(1) EEC, which essentially exempted transport from the general freedom to provide services. 24 See Pelkmans, ‘European Industrial Policy’. Others have pointed out that the Title on a common transport policy was not used at all in the beginning. See Kiran Klaus Patel and Johan Schot, ‘Twisted Paths to European Integration: Comparing Agriculture and Transport in a Transnational Perspective’, Contemporary European History 20 (2011), 383. 25 The Common Agricultural Policy is certainly in tension with the principle of an open market economy that characterizes the EEC Treaty as a whole. However, we do not enter into a discussion of the CAP in this chapter. For details concerning the application of the competition rules in the agricultural sector, see, eg, Jean de Cockborne, ‘Les règles communautaires de concurrence applicables aux entreprises dans le domaine agricole’, Revue Trimestrielle de Droit Européen 24 (1988), 293. For broader discussion of the history of the CAP, see Kiran Klaus Patel (ed.), Fertile Ground for Europe? The History of European Integration and the Common Agricultural Policy since 1945 (Baden-Baden: Nomos, 2009); Ann-Christina Knudsen, Farmers on Welfare. The Making of Europe’s Common Agricultural Policy (Ithaca and London: Cornell University Press, 2009). 26 See Pace and Seidel, ‘Drafting History and the Role of Regulation 17/62’.

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of the European Court of Justice, which often vindicated the Commission’s interpretations of the Treaty.27 Yet despite these caveats, one may summarize the combined bargaining outcome—generally applicable competition provisions28 and the absence of any legal base or even any mention of industrial policy—as the adoption of a liberal economic order.29 This prompts the question of why the six founding member states opted for such an order despite different starting points and interests30 (eg, an already strong German export orientation versus a French industry suffering from an over-valued Franc) and different economic conceptions (Ordoliberalism31 versus planification).32 Mestmäcker has explained this outcome by reference to a ‘veil of ignorance or a failure of foresight’.33 Indeed, this is often a powerful explanation for many compromises that have been reached in the history of European integration. In addition, Schweitzer has pointed to the positive attitude towards competition that generally prevailed among the delegates in the Working Group for the Common Market.34

27 We will not focus on the jurisprudence of the ECJ in this chapter. To name only two early judgments in which the Treaty rules were given broad interpretations that tended to provide significant room for manoeuvre to the Commission (whereas the Court could have reached very different solutions that would have effectively narrowed the Commission’s powers), see Cases 56 and 58/64, Etablissements Consten SARL and Grundig-Verkaufs-GmbH v Commission [1966] ECR 299; and Case 6/72, Europemballage Corporation v Commission [1973] ECR 215. 28 The German Economics Minister Ludwig Erhard even remarked that ‘he could have written the competition provisions himself ’ (see Hans von der Groeben, ‘Europäische Integration aus historischer Erfahrung—ein Zeitzeugengespräch mit Michael Gehler’, Zentrum für Europäische Integrationsforschung, Discussion Paper C 108/2002). For discussion of Erhard’s stance on the EEC, see Tim Geiger, ‘Ludwig Erhard und die Anfänge der Europäischen Wirtschaftsgemeinschaft’, in 40 Jahre Römische Verträge: der deutsche Beitrag; Dokumentation der Konferenz anlässlich des 90. Geburtstages von Dr h.c. Hans von der Groeben, Rudolf Hrbek (ed.) (Baden-Baden: Nomos, 1998), 50–64. 29 With reference to a Hallstein speech, Mestmäcker emphasizes ‘the prominent place of the system of undistorted competition in the Treaty of Rome and the normative vacuum as far as industrial policy is concerned’. Mestmäcker, ‘Towards a Concept’. 30 See Frank Pitzer, Interessen im Wettbewerb. Grundlagen und frühe Entwicklung der europäischen Wettbewerbspolitik 1955–1966 (Stuttgart: Franz Steiner Verlag, 2009); Sibylle Hambloch, Europäische Integration und Wettbewerbspolitik—Die Frühphase der EWG (Baden-Baden: Nomos, 2009). 31 On the German positions in the negotiations, see Hanns Joachim Küsters, Die Gründung der Europäischen Wirtschaftsgemeinschaft (Baden-Baden: Nomos, 1982); and 40 Jahre Römische Verträge: der deutsche Beitrag; Dokumentation der Konferenz anlässlich des 90. Geburtstages von Dr h.c. Hans von der Groeben. 32 On the different national traditions of competition policy, see Chapter 3, this volume. 33 Mestmäcker, ‘Towards a Concept’. 34 Heike Schweitzer, ‘The History, Interpretation and Underlying Principles of Section 2 Sherman Act and Article 82 EC’, in European Competition Law Annual 2007: A Reformed Approach to Article 82 EC, Claus-Dieter Ehlermann and Mel Marquis (ed.) (Oxford/Portland: Hart Publishing, 2008), 119–64. For a description of the negotiations in the Working Group for the Common Market see Il rilancio dell’Europa e i trattati di Roma: actes du colloque de Rome, 25–28 mars 1987, Enrico Sierra (ed.) (Brussels: Bruylant, 1989).

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The French case, however, shows that there may have been a failure of foresight as to how much room for manoeuvre in the field of industrial policy member states would cede within the European integration process—but not a failure of foresight of this development as such. Without explicitly pushing for a European ‘industrial policy’—the issue of actively enhancing the competitiveness of European firms vis-à-vis foreign competition through discriminatory or interventionist measures did not play a major role in the negotiations leading up to the Treaty—the French government was very much aware of the potential consequences of the Common Market for French industry and attempted to negotiate for ‘safeguards’. It made several far-reaching demands, including the right to retain its national system of export subsidies and taxes on imports.35 Internal documents demonstrate that elements within the French government tried to retain the power to protect national industry and at the same time envisaged stronger European economic organization for the industry.36 Public and political circles perceived the prospect of a common market as presenting both opportunities (to be pressed to modernize industry and to gain greater shares of particular export markets) and risks (to be dominated in particular by the German ‘trusts’).37 In the end, the majority in the National Assembly saw more opportunities than risks. However, this majority vote was not based only on the economic dimension of the common market; it was also motivated by the political argument that peace with Germany could be secured through concrete economic integration projects. In addition, there was also the expectation that industrial policy would remain national. This may also explain to some extent the combined bargaining outcome in the Treaty of Rome of generally applicable competition provisions without any mention of industrial policy.

35 Note présentée par la délégation française sur les questions à soumettre aux ministres des Affaires étrangères (19 septembre 1956). The German reaction was negative. See Hans von der Groeben, Deutschland und Europa in einem unruhigen Jahrhundert (Baden-Baden: Nomos, 1995), 281–2. See also Hans von der Groeben, Aufbaujahre der Europäischen Gemeinschaft: Das Ringen um den Gemeinsamen Markt und die Politische Union (1958–1966) (Baden-Baden: Nomos, 1982); in English: The European Community: The Formative Years. The Struggle to Establish the Common Market and the Political Union (1958–1966) (Brussels, Luxembourg: Office for the Official Publications of the European Communities, 1985). 36 For an analysis of the different actors and their views, see Laurent Warlouzet, Le choix de la CEE par la France. L’Europe économique en débat de Mendès France à de Gaulle (1955–1969) (Paris: Cheff, 2011), 21–200. 37 See Pierre Guillen, ‘Frankreichs Europapolitik vom Scheitern der EVG zur Ratifizierung der Verträge von Rom’, Vierteljahreshefte für Zeitgeschichte 28 (1980), 1.

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5.3.2 The Emergence of an Industrial Policy Discourse in the EEC (mid-1960s to mid-1970s): Debates on Competition versus Planification and Taking up the ‘American Challenge’ While industrial policy was absent from the Treaty of Rome, the first major debate on an industrial policy at the Community level arose in 1962 when the Commission issued its Memorandum on the action programme of the Community for the second stage.38 This Memorandum contained not only a chapter on competition but also a chapter on economic policy, drawn up by the French Commissioner Marjolin and his staff. The latter chapter was highly controversial inside and outside the Commission, since it not only mentioned ‘industrial policies’39 but also announced a longer-term economic programme and suggested that studies on various sectors were necessary.40 In particular, Commissioner von der Groeben41 and the German Economics Minister Erhard42 were resistant to the notion of planification or industrial policy in the EEC’s mid-term economic policy, launched in 1963–1964.43 This conflict reflected a fundamental disagreement within the Commission on the principles that should guide European integration. Marjolin and some senior French officials at the Commission questioned the Treaty’s market-oriented vision of economic integration.44 The completion of the customs union approached, but the expected industrial adjustment had not 38 See Warlouzet, Le choix, 339–492. For a history of European industrial policy from 1958 until 1972, see Éric Bussière, ‘An improbable industrial policy’, in European Commission, The European Commission—1958–72, History and Memories (Office for Official Publications of the European Communities: Luxembourg, 2007), 457–70. 39 COM (62) 300 final, para. 110. 40 According to paragraph 119 of the Memorandum, these studies ‘should lead to certain conclusions which will help, on the one hand, in tailoring the industries in question to fit the estimated future pattern of demand, including foreign demand, and, on the other, in investment policy’. 41 See von der Groeben, Deutschland und Europa in einem unruhigen Jahrhundert, 353–6. See also Interview with Ivo Schwartz (a member of von der Groeben’s cabinet from 1963 to 1969) by Veronika Heyde and Myriam Rancon, 16 January 2004, available at the Historical Archives of the EU at the European University Institute (last accessed 18 March 2013). 42 On 20 November 1962, Ludwig Erhard delivered a famous speech, entitled ‘Planification— kein Modell für Europa’, before the European Parliament in Strasbourg. The Commission’s Memorandum was discussed extensively in the German Cabinet. 43 Medium-term economic policy planning began in 1963 (under Article 104 EEC). In 1964, the Medium-term Economic Policy Committee was set up, and was composed of members appointed by the governments of the member states (high-ranking officials such as State Secretaries) and the Commission. 44 The following description of events is based on: Archives of the European Commission in Brussels (ACOM), BAC118/83/807, Toulemon to Colonna di Paliano, 24 March 1965, and ACOM, BAC118/83/807, note by Prate, 11590/III/6612, September 1966.

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occurred. European companies merged mainly into ‘national champions’ or they turned to American partners in search of new technologies, capital or markets, while cross-border mergers between European companies in different countries remained rare. American firms with integrated operations throughout Europe, such as IBM, were notably among the main beneficiaries of the Common Market. Moreover, it was expected that the competitiveness of Europe’s industry would be put to the test following the tariff reductions of the Kennedy Round of GATT negotiations (1964–1967). Therefore, French Commission officials considered that the Community should intervene to stimulate the establishment of companies on a European scale. First of all, they considered it necessary to make effective progress in realizing the Common Market. Contrary to the spirit of the EEC Treaty, the member states continued to make their public purchases exclusively from national firms. Divergent technical norms still blocked trade. National capital markets were not yet integrated and remained too small to finance large companies. Furthermore, the legal and fiscal obstacles to mergers had to be resolved. In order to overcome one set of obstacles, there was a perceived need to establish a European company ‘statute’. Besides these ‘market-shaping’ measures, some top officials at the Commission deemed it necessary to develop positive discriminatory measures to support European industry, and particularly to increase public support for scientific and technical research. The resources available for research were largely related to the dimension and the ensuing financial capacity of European companies, but the technology gap was also attributed to the American government’s substantial support for civil and military research. European public investment in research was much more modest, and European countries duplicated research projects. Therefore, the Community’s industrial policy had to coordinate and to increase research and development efforts through common subsidies and collective or coordinated public procurement. Concrete and rather ambitious proposals in this sense were elaborated in the subgroup of the Medium-term Economic Policy Committee in charge of ‘Policy for Scientific and Technical Research’. However, these proposals led merely to the common funding of relatively minor collaborative research projects.45 In the meantime, on the occasion of the ‘merger’ of the EEC, ECSC, and Euratom Executives in 1967, the Commission created a Directorate-General for ‘Industrial and Technological Affairs’. Under the direction of Robert Toulemon (a former director of Marjolin’s cabinet), this new DG prepared a memorandum on the Community’s industrial policy. It was called the 45

On these proposals, see Van Laer, Vers une Politique Industrielle Commune, 34–53.

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‘Colonna memorandum’, a reference to the responsible commissioner. This vast programme recommended both the completion of the Common Market and interventions to support both sunset and sunrise industries. Following the Colonna memorandum, the Commission issued a series of proposals along these lines, but these got bogged down in fruitless discussions in the Council. Commissioner Spinelli, who had taken over the Industrial Affairs portfolio, presented in May 1973 a new Programme d’action en matière de politique industrielle et technologique, which advocated an approach quite similar to the Colonna memorandum. The Council adopted this programme in December but, once again, the Commission’s concrete proposals were blocked by disagreements between the member states.46 Within the Commission there was a consensus on the completion of the Common Market, but the need for discriminatory measures for specific sectors was contested by the Commissioners in charge of Competition—von der Groeben and his successor, Borschette. They resisted the creation of European champions insofar as it posed the risk of creating dominant market players.47 The proponents of scaling up European industry argued that the creation and the backing of European-sized firms should take priority over the preservation of competition in the Common Market because a single, competitive European company would contribute more to international competition than a large number of smaller players. The debates within the Commission did not fade away. Submerged tensions and compromises can be discerned in official publications including, for example, the 1973 communication on industrial and technological policy The industrial policy and the competition policy pursued by the Commission complement each other closely. The intensification of the measures to combat cartels and the efforts made to eliminate the abuse of dominant positions are essential to supplement the encouragement that the Community must give to the cross-frontier harmonization of undertakings. Both are aimed at increasing the efficiency of Community industry through structural improvements and the stimulation of competition.48

But the Competition Commissioners did not veto their colleagues’ industrial policy proposals, probably because they knew that the proposals had no chance of being adopted by the Council.49 Hardly any member state supported the idea of a sectoral, discriminatory European industrial policy: Germany and the Benelux countries were opposed to public interventions as a matter of 46

Van Laer, Vers une Politique Industrielle Commune, 41–2 and 44–5. Interview with Toulemon, 9 July 2004. 48 Memorandum from the Commission on the technological and industrial policy programme, presented to the Council on 7 May 1973, SEC(73) 1090, Bulletin of the European Communities, Supplement 7/73, para. 29, as quoted on pp. 165–166 (footnote 11) in this Chapter. 49 Interview with Jean Flory, 1 June 2004. 47

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principle; France, by contrast, considered such interventions desirable but in its view the proper locus for coordinated economic decision-making was the state, a natural home for policies supporting national champions.50 From the mid-1960s until the mid-1970s, the debates on competition versus interventionist industrial policy thus remained rather theoretical. On the one hand, the Commission’s proposals for an EEC industrial policy bore little fruit. On the other, the application of the Treaty rules on competition developed only progressively. The still-tentative control of state aid left the member states ample room for their national industrial policies.51

5.3.3 Industrial Policy at its Peak (late 1970s to mid-1980s): Coexistence, Mutual Limitation, and Adaptation 5.3.3.1 Interventionist Tendencies in Times of Crisis In the second half of the 1970s, the topic of industrial policy rose high on the public agenda. As a result of the persistent recession, Western governments stepped up their actions in support of key national industries. In spite of stated ideological divergences, most policy-makers perceived a need for public intervention. However, the proliferation of aid schemes at least potentially impeded international trade, and debates in fora such as the OECD concentrated on the idea of ‘positive adjustment’. Industrial policies were considered ‘positive’ if they were oriented in the sense of market-induced evolution. They had to be temporary, degressive, transparent, and, if possible, general (horizontal) rather than sectoral (vertical).52 The Commission also worried about the resurgence of national industrial policies in the EEC. The establishment of new non-tariff barriers would ‘re-nationalize’ the Common Market, and national policy measures were liable to neutralize each other or merely shift economic distress from one member state to another. In its 1977 report to Parliament, the Commission underlined the need for common policies to avoid these pitfalls: The Commission responded to the persistence of the structural crisis by intensifying its endeavours to consolidate and accelerate the unification of the internal market and 50 Robert Toulemon and Jean Flory, Une politique industrielle pour l’Europe, Paris, 1974 (SUP, L’économiste, 40), 110–13; Christopher Layton, ‘The high-tech triangle’, in Partners and Rivals in Western Europe: Britain, France and Germany, Roger Morgan and Caroline Bray (eds.) (Aldershot-Brookfield: Gower Publishing, 1986), 184–204; interview with Flory, 1 June 2004. 51 See Michelle Cini (2000), ‘From Soft Law to Hard Law?: Discretion and Rule-making in the Commission’s State Aid Regime’, Robert Schuman Center for Advanced Studies, Working Paper 2000/35, (last accessed 20 February 2013). 52 OCDE, Pourquoi des politiques d’ajustement positives? Recueil de documents de l’OCDE 1978/79 (Paris, 1979). In English: OECD, The Case for Positive Adjustment Policies: A Compendium of OECD Documents, 1978/79.

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customs union and by developing specific policies to help individual industries adapt to the new competitive position in world trade.53

The Commission thus tried to link the consolidation of the Common Market with the development of common actions in the field of industry. In fact, both missions were assigned to the new Commissioner for Industrial Affairs, the Belgian Étienne Davignon (1977–1985). Upon his arrival, Davignon’s priorities were partly a continuation of the industrial policy agenda pursued by come Commission officials, and partly dictated by the need to formulate a European answer to the problems of the sectors hit hardest by the crisis: textiles, ship-building, and above all, steel. In the College of Commissioners he enjoyed particular clout because of his talents for negotiation and problem-solving. He also maintained good personal relationships with his counterparts responsible for competition policy. With regard to the steel industry,54 Davignon negotiated a restructuring plan in 1977 (the ‘Davignon plan’), which combined voluntary production quotas, binding minimum prices, and restrictions on imports.55 In 1980, the Commission took the view that there was a ‘manifest crisis’ within the meaning of Article 58 of the ECSC Treaty,56 and imposed a system of binding production quotas.57 Already in 1976, the private cartels Denelux and then Eurofer had been formed and endorsed by the Commission under the ECSC Treaty.58 A conjunction of several factors contributed to this far-reaching EEC-level industrial policy in the steel sector. The sector was particularly hard hit by the crisis, and the consensus on the need for publicly financed restructuring was stronger in steel than in other sectors. Action at the Community level would avoid uncoordinated, self-defeating national subsidies; facilitate a 53 Commission, Eleventh general report on the activities of the European Communities in 1977 (1978), point 120. 54 For a detailed account and a political science analysis of the strong role of DG III at this time in developing and implementing steel policy, see Thomas Grunert, ‘Decision-Making Processes in the Steel Crisis Policy of the EEC: Neocorporatist or Integrationist Tendencies?’, in The Politics of Steel: Western Europe and the Steel Industry in the Crisis Years (1974–1984), Yves Mény and Vincent Wright (eds) (Berlin/New York: de Gruyter, 1986), 222–307. For an analysis of the ECSC’s role in both the coal and steel industries, see Karen J. Alter and David Steinberg, ‘The Theory and Reality of the European Coal and Steel Community’, in Making History: European Integration and Institutional Change at Fifty, Sophie Meunier and Kathleen R. McNamara (eds) (Oxford: Oxford University Press, 2007), 89–104. 55 Commission Decision No 962/77/ECSC of 4 May 1977 fixing minimum prices for certain concrete reinforcement bars. OJ 1977, L114/1. 56 Article 58 ECSC specified the conditions in which the Commission had to react in the presence of a manifest crisis confronting the Community by establishing, with the assent of the Council, a system of production quotas. 57 Decision 2794/80 of 31 October 1980, OJ 1980, L291/1. 58 Grunert, ‘Decision-Making Processes’, 231–2.

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strong European front in international negotiations; and, not least, relieve national politicians from responsibility for unpopular restructuring decisions. The Commission also had powerful instruments to intervene in the steel sector by virtue of the ECSC Treaty. Two aspects, however, may be seen as typical for later industrial policy activities at the European level. First, the Commission’s centralized attempt to temporarily steer production was also driven by the intention to replace national industrial policies with a more ‘orderly’ European approach. This became apparent in particular in the adoption of the Communication on the Commission’s Policy on Sectoral State Aid Schemes59 and of a subsidies code for the steel industry by the Commission,60 which aimed at avoiding a ‘war of subsidies’ and ‘beggar thy neighbour’ spirals by member states. Second, a European framework which deferred competition principles in the short term was to some extent motivated by the Commission to allow a return to normal, undistorted market conditions in the medium-term after a reduction of production capacities and an improvement in the competitiveness of European firms.61 These two rationales were also behind the European measures in the ship-building and textile industries. As for the textile industry, also severely hit by the crisis, the Commission negotiated the flow of imports, adopted a (‘soft law’) framework applying to state aid, and encouraged restructuring through common social and regional aids.62 However, when DG III sought to support the formation of a crisis cartel in the textile industry similar to that in the steel industry, DG IV rejected this as contrary to Article 85 EEC. The Commission also developed a common policy in the ship-building sector, combining the use of state aid control with Community structural funds. From today’s perspective, these sectoral policies, including in particular the broad approval of state aid, may be regarded as a ‘victory’ of industrial policy advocates over pure competition principles. With a view to DG IV’s early state aid policy, Claus-Dieter Ehlermann, a former Director-General of that DG (1990–1995), later stated the measures were ‘more an exercise in damage limitation than an expression of policy driving for a reduction of aid and the

59

Communication from the Commission to the Council of 25 May 1978, COM(78) 221 final. See Decision No. 2320/81/ECSC of the Commission of 7 August 1981 to introduce rules for aiding the iron and steel industry, OJ 1981, L228. This decision expanded already existing rules of 1 February 1980. 61 See, eg, Commission, 1981 Steel Restructuring Policies COM (81) final 67, Brussels March 13. 62 Commission communication to the member states on the Community framework for aid to the textile industry (SEC(71) 363 final, July 1971, refined in 1976. For an analysis of the development of state aid policy from a political science point of view, see Cini, ‘From Soft Law to Hard Law?’. 60

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attainment of the Treaty’s “system of undistorted competition”’.63 Compared to the enforcement of Articles 85 and 86 EEC, the enforcement of state aid rules was still at a very early stage of development during the 1970s. In this phase, the Commission attempted to use the competition rules, and in particular the state aid rules, to coordinate member states’ industrial policies or at least neutralize the cross-border spillover effects of national industrial policies. There was, however, no genuinely European industrial policy. At the beginning of the 1980s, the Commission’s attention moved from sectors in decline towards growing sectors, and towards technology policy, and R&D. The main driver behind a common industrial policy became the need to provide European industry with the technologies necessary to remain competitive at the international level. This led to a series of large common research programmes with unprecedented budgets (ie, unprecedented outside the nuclear field): ESPRIT (for research in informatics), RACE (telecommunications), and BRITE (basic industrial technologies). The objective of these research programmes went beyond mere support for research. Through their conditions for the allocation of subsidies, they aimed at orienting industrial activity, striving to encourage private investment in R&D, transnational cooperation, and the establishment of European standards. However, in designing these programmes, DG III generally took care to avoid direct conflicts with the competition rules. The ESPRIT programme, for instance, encouraged cooperation between companies but was limited to ‘pre-competitive’ research in order to minimize the possibility that the programme might facilitate coordinated behaviour between undertakings with anticompetitive consequences.64

5.3.3.2 Towards a Proactive Industrial Policy? Davignon did not have confidence in a purely competition-based industrial policy. In a 1979 conference on the market economy he underlined the gap between the model of perfect competition and the starkly different functioning of real-world markets. ‘When I listen to those advocating free competition as an exclusive criterion, I sometimes have the impression that they are so dazzled by the theoretic appeal of competitive markets they forget that the conditions of perfect competition have been unattainable [ . . . ]. We do not live in a market economy in the strict theoretical sense. We live in a mixed economy [ . . . ]’.65 63 Claus-Dieter Ehlermann, ‘State Aids under European Community Competition Law’, Fordham International Law Journal 18 (1994), 410–36, at 416. 64 On the conception of these programmes, see Van Laer, Vers une Politique Industrielle Commune. 65 ACOM, BAC75/84/29, texte du discours de Davignon au colloque de la Commission Droit et vie des affaires (Liège, 18.10.79), intitulé La CEE, garante de l’économie de marché, s.d. (our translation).

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Nevertheless, there is surprisingly little archival evidence of open conflicts between Davignon and the Competition Commissioners, first Vouel (1977–1980) and then Andriessen (1981–1984). Seemingly, the protracted economic crisis had forged some basic agreement on the ‘positive adjustment’ strategy. As the Commission wrote in its Thirteenth Report on Competition Policy (1983): The Commission’s work of administering competition policy cannot be encapsulated by the sole objective of removing distortions caused by anticompetitive practices or State aids which are liable to interfere with inter-State trade. Competition policy also contributes to improving the allocation of resources and raising the competitiveness of Community industry, and thanks to this greater competitiveness, secured largely by encouragement of research and development, to enabling the Community at length to overcome the economic problems now facing it and in particular to combat structural unemployment. In this way competition policy can play its part, with other Community policies, in securing a lasting economic recovery.66

This did not mean that there were not sometimes lengthy and difficult discussions between DG IV and DG III. But disagreements were resolved inside the Commission, through intensive consultations—largely informal but also institutionalized in ‘groups’ of Commissioners, ‘nuclei’ of Directors-General, and ‘groups’ of high officials from different services dedicated to themes such as steel, information technologies, and innovation. Davignon and his staff put forward various economic justifications in favour of their interventionist industrial policy proposals. These arguments were never made systematically in official documents (indeed, economic theories supporting such interventions would only flourish in the second half of the 1980s). However, the articles and speeches of Davignon and his collaborators referred to the limits of the invisible hand.67 Oligopolies, they argued, could be desirable in markets characterized by increasing returns to scale or learning effects. 66

Commission, Thirteenth Report on Competition Policy (1983), 11. The following articles and chapters by Davignon and his collaborators are of particular significance. Étienne Davignon, ‘Renforcement de la Communauté européenne: le rôle de la Commission’, Studia diplomatica 32 (1979), 465; Étienne Davignon, ‘Une stratégie industrielle pour l’Europe’, Revue d’économie industrielle 23(1) (1983), 109; ACOM, BAC10/85/37, Pierre Defraigne (an economist and for a time Davignon’s chef de cabinet), draft paper for the proceedings of a conference organized by the Centre for European Policy Studies of the University College London, 16 December 1982; Pierre Defraigne, ‘Towards concerted industrial policies in the EC’, in European industry: public policy and corporate strategy, ed. Alexis Jacquemin (Oxford: Clarendon Press, 1984), 368–77; Christopher Wilkinson (an economist and Head of Unit in DG III who was assigned, in 1984, to the Information Technologies and Telecommunications Task Force), ‘European industrial policies in an international context’, Annales de sciences économiques appliquées 39(3) (1983), 197; Christopher Wilkinson, ‘Trends in industrial policy in the EC: theory and practice’, in European industry: public policy and corporate strategy, 39–83. 67

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They also stressed the inability of pure market forces to properly harness positive externalities (such as non-appropriable benefits of research) or to remedy negative externalities (above all, social harms). The competitive advantages of an economy did not depend only on initial endowments in factors of production: public institutions could promote innovation capabilities by creating favourable social structures—for example by means of initiatives in the field of education. Davignon and DG III agreed on the temporary nature of such industrial policies. According to them, interventions were needed to allow a return to normal, undistorted market conditions in the medium-term. In general, Davignon and his associates were influenced by concepts such as Schumpeter’s ‘creative destruction’.68 Davignon’s scepticism vis-à-vis the market mechanism in times of economic crisis and his trust in the Commission’s ability to overcome the market’s shortcomings by way of centralized intervention were not shared by all Commissioners or Commission officials, nor by all member states. However, the idea that certain obstructions to the Common Market created by national industrial policies could be overcome only if some of these measures were transposed to the European level had a certain plausibility for many. A collaborator of DG III’s Director-General explained that this link was decisive in rallying key Germans to certain forms of a common industrial policy: ‘From that moment, even the Grand Pontiff of the social market economy, Müller-Armack [ . . . ] accepted my argument that, without positive action, we could not hope to open technology-intensive markets, notably in telecommunications, rail equipment, energy or water distribution’.69 Overall, however, the influence of industrial policy concerns was limited to relatively narrow areas of competition policy. Apart from the above-mentioned crisis sectors in which the application of Article 85 EEC was affected, such concerns were most influential in the area of state aid. With a broad prohibition of national state aid, but simultaneously broad public policy exceptions, the EEC state aid rules provided a certain opening for national industrial policies, and at the same time for the development of a European industrial policy to overarch and to some extent steer national state aid. The idea of a Community framework for state aid supporting R&D was put forward by DG IV in 1978. However, DG III officials were not very keen to develop an EEC approach to R&D subsidies on the basis of the

68 Explicit reference to Schumpeterian theories is made in ACOM, BAC10/85/37, Braun (written by Rutsaert) to Davignon, 7 September 1983. 69 Interview of Heinrich von Moltke by Arthe Van Laer and Julie Cailleau, 22 January 2004, available at the Historical Archives of the EU at the European University Institute (our translation) (last accessed 18 March 2013).

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competition rules. Rather than guiding national state aids, they preferred the notion of Community-level aid. Common R&D funding was nevertheless beyond the competences granted by the EEC Treaty (except for agriculture) and establishing such aids therefore would have required unanimity in the Council, whereas the Commission had substantial authority over national state aid under Article 92 EEC. Differences between the two DGs remained. When DG IV put the question of a framework for R&D state aids on the table again in early 1982, DG III reiterated that it should be linked to an industrial strategy, and proposed to discuss it with the national Directors-General of Industry. DG IV was very reluctant to tempt fate by involving national officials, and it insisted on the Commission’s independence in the field. There was also disagreement on the substance of the proposed framework. DG III, DG XII (Science and Research) and DG XIII (Telecommunications, Information Market, and Innovation) considered that the framework was too competition-oriented: While one can (perhaps) understand the argument that state aids can more easily be tolerated—from a competition point of view—if R&D is not a strong element in the finished product, adoption of this line of reasoning leads to bizarre results, e.g. aids are acceptable if they are insignificant; or aid to R&D in shoe manufacture is acceptable but aid to electronic R&D is not.70

And whereas DG IV proposed more lenient treatment of aids for basic research than for applied research, DG III, DG XII, and DG XIII pushed for an aid-friendly policy for both types of research because European industry needed to ‘catch up’.71 The discussions inside the Commission proved to be more difficult in the end than those with the member states. However, the framework for R&D aid was adopted in 1985. Under the framework, DG IV turned out to be quite permissive with regard to the R&D aids notified to it for approval. Similar discussions between DG IV and DG III arose when DG IV proposed block exemption regulations for patent licensing agreements72 and for R&D agreements73 under Article 85 EEC. In the context of these initiatives, DG III urged an expansion in the scope of the exemptions, especially to facilitate the use of territorial restrictions; this led to a compromise in the final texts. With regard to the block exemption regulation on R&D agreements, DG III tried 70

ACOM, BAC141/89/115, Davies to Van Rhijn, 17 July 1984. ACOM, BAC141/89/115, Davies to Van Rhijn, 17 July 1984. 72 Regulation (EEC) No 2349/84 of 23 July 1984 on the application of Article 85(3) of the Treaty to certain categories of patent licensing agreements. 73 Regulation No 418/85 of 19 December 1984 on the application of Article 85(3) of the Treaty to categories of research and development agreements. 71

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unsuccessfully to introduce preferential treatment for cooperation projects subsidized by the Community.74 The forementioned examples of disagreements between DG IV and DG III should not obscure the fact that DG IV fundamentally shared the idea to use state aid policy to foster R&D. An articulation of this vision can be seen, for example, in the following passage written by Aurelio Pappalardo, a former Director (1976–1986) at DG IV: [C]ompetition policy with regard to R&D cooperation not only can be fairly easily reconciled with the quest for technological innovation; it can encourage it. One should not lose sight of the fact that—because of the characteristics of competition rules—this positive effect is necessarily indirect: the application of the rules can result either in an expansion of practices removed from the prohibition, or it can result in the prohibition of practices that impede technological progress. Competition law therefore has a complementary role with regard to policies—such as those which are beginning to be elaborated at Community level—which employ more direct means to encourage the cooperation necessary to promote technical innovation.75

5.3.3.3 The Use of Competition Rules to Promote Industrial Policy Objectives Competition rules were not always regarded by DG III as antagonistic to the achievement of the goal of increasing competitiveness in cutting-edge industries. Often, DG III resorted to the threat of Commission action under the competition rules, including in particular the state aid rules, in order to secure concessions from the member states. This strategy was used, for example, in the second half of the 1970s in order to achieve coordination of the national plans in peri-informatics and microelectronics. This type of ‘coercion’ was employed with caution, however. On the one hand, it was considered that European industry genuinely needed financial support and that, in the absence of Community action, national aids and preferential treatment were indispensable. On the other, the Commission wanted the member states to collaborate on common action not foreseen by the Treaty, which required a unanimous vote in the Council. In a softer mode, DG III and the Task Force on Information Technologies (‘ITT Task Force’) asked DG IV for assistance in collecting information on national industrial programmes, which included state aids. DG IV could require detailed information under Articles 92 and 93 EEC. DG III and the Task Force on Information Technologies were also 74

For detailed analysis, see Van Laer, Vers une Politique Industrielle Commune. Aurelio Pappalardo, ‘Politique communautaire de concurrence et progrès technologique’, Revue internationale de droit économique 1 (1986), 89, 114 (our translation). 75

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consulted on state aid decisions, but they occasionally expressed the wish to be more closely associated to the decision-making.76 In this perspective, it is also interesting to note the role of DG III in the IBM case,77 which at the time was the largest EEC antitrust case in history. Investigations of IBM’s commercial activities were launched in 1973 on the initiative of Spinelli, the Commissioner for Industrial Affairs. A decade later, when negotiating a settlement with IBM in 1983–1984, DG IV took into account the recommendations of the ITT Task Force, especially with regard to the obligation on IBM to communicate network standards.78

5.3.4. Parallel Evolution of Industrial and Competition Policy Towards a More Liberal Order (1985–1988) During the first term of the Delors Commission (1985–1988), EEC industrial policy aimed at the completion of the internal market, horizontal measures, and support for high tech; it was less concerned with supporting the ‘old’ sectors. Completing the Common Market had been a central part of the Commission’s industrial policy agenda since the 1960s, but the great leap forward was the 1985 white paper on ‘Completing the Internal Market’ and the launch of the programme to create a ‘Single Market’ by 1992. The new Commissioner in charge of Industrial Affairs, Karl-Heinz Narjes (1985–1988), tried to reduce assistance gradually to declining industries, seeking for example to wean the steel sector from public support by 1988. But Narjes pursued and developed the existing EEC research programmes (ESPRIT, RACE, and BRITE) and initiated others, such as EURAM, COMETT, SPRINT, etc. He also set up a series of horizontal measures to stimulate ‘innovation’, particularly for SMEs—an approach better suited to Narjes’ economic convictions than his predecessor’s sectoral actions supporting big firms.79 The EEC’s role in ‘Research and technological development’ was formally recognized by the 1987 Single European Act, which introduced a new Title on the subject in the EEC Treaty.80 The first Article of this Title, Article 130(1)

76

See Van Laer, Vers une Politique Industrielle Commune, 282–95. Case IV/30.849, IBM Personal Computers, OJ 1984, L118/24; Commission, XIVth Report on Competition Policy (1984), points 94–95. 78 For a detailed analysis of the IBM case, see Van Laer, Vers une Politique Industrielle Commune, 69–70, 295–309. 79 Van Laer, ‘Quelle politique industrielle pour l’Europe? Les projets des Commissions Jenkins et Thorn (1977–1984)’, in Milieux économiques et intégration européenne au XXe siècle. La relance des années quatre-vingt (1979–1992). Colloque des 1er et 2 décembre 2005, Eric Bussière, Michel Dumoulin, and Sylvain Schirmann (eds) (Paris: CHEFF, 2007), 42–4. 80 See Sauter, Competition Law and Industrial Policy in the EU, 83. 77

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EEC, established that ‘[t]he Community’s aim shall be to strengthen the scientific and technological basis of European industry and to encourage it to become more competitive at international level’. At the same time, Article 130(3) emphasized that ‘special account shall be taken of the connection between the common research and technological development effort, the establishment of the internal market and the implementation of common policies, particularly as regards competition and trade’. With a view to the already existing Community research programmes, R&D as a relatively accepted ‘horizontal’ factor and the grounding in the 1992 single market programme,81 the introduction of the Title was relatively undisputed.82 Therefore, the mere reference to competition was deemed sufficient by competition policy-makers wary of industrial policy interference. As EEC competition policy assumed a higher profile under the leadership of Commissioner Sutherland (1985–1989), the EEC’s industrial policy projects evolved toward a more market-based, growth-oriented, and horizontal approach. The ideas of economic planning were replaced in economic policy circles by an emphasis on privatization, liberalization, and deregulation; ie a retreat of the state from markets. This ‘Hayekian turn’ in economic mainstream thinking also led to growing scepticism towards state aids and towards industrial policy in general and specific sectoral measures. DG IV was thus able to strengthen its state aid policy and enforcement. Major steps in this direction included the Community Framework for State Aids for Research and Development in 1986, the first comprehensive survey on state aid in all member states published in 1989, and the Community Framework on State Aid to the Motor Vehicle Industry in the same year. Adherents of industrial policy shifted their emphasis towards horizontal measures (in particular towards facilitating innovation), which were more in line, or even complementary with, competition principles.

5.3.5 The Evolution of EC Merger Control Merger control was another area where, after certain controversies, competition policy ultimately prevailed. The EEC Treaty had not originally provided 81 In its white paper on the Internal Market of 1985, the Commission (at 34) stated that it would also ‘continue to apply competition rules by authorizing cooperation between undertakings which can promote technical or economic progress within the framework of a unified market’. 82 The Solemn declaration of Stuttgart of 19 June 1983 (in 3.1.8) had already stated: ‘The development of an industrial strategy at Community level in order to strengthen industry, make it competitive and create productive jobs in Europe, in particular by encouraging investment and innovation. In order to provide the Community with the means for vigorous development in the long term, cooperation between enterprises in advanced technologies will be strengthened by the establishment of projects of common interest’ (emphasis added).

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for a merger control system. However, already in the 1960s the Commission started to advocate the introduction of a merger regime.83 In its 1970 Colonna Report, the Commission cited the high number of mergers which had taken place between firms in the same member state in the period from 1961 until 1969 as opposed to the low number of cross-border mergers. In their Conclusions of the 1972 summit, the Heads of State and Government expressed ‘the need to try and provide a uniform foundation for industry throughout the Community’.84 The Commission used this political environment favourable to the creation of a European industrial base to put forward its first proposal for a merger control regulation in July 1973.85 Article 1(3) of the proposal allowed otherwise anticompetitive mergers to be approved if they were ‘indispensable to the attainment of an objective which is given priority treatment in the interest of the Community’. After years of unsuccessful negotiations, however, the Commission concluded in 1981 that ‘France, the United Kingdom, Italy and Ireland have requested that exemption should also be possible on grounds of national industrial, regional or social policies. Germany and Denmark oppose this idea’ (emphasis in original).86 In the meantime, Germany (in 1973) and France (in 1977) had enacted national merger control systems. With regard to France, Jenny has stated that, although public policy-makers in charge of French industrial policy ‘generally still believed in the positive effect of concentration and mergers’, they preferred the adoption of a merger control system at the French level ‘as a way to defeat the European merger-control project’.87 Germany was not keen to cede control over important mergers either, and accordingly suggested a high turnover threshold for the application of European merger control. However, in contrast to the ‘public interest’-minded member states, Germany’s position was that

83 See, eg, Colin Overbury, ‘Politics or Policy? The Demystification of EC Merger Control’, in International Antitrust Law and Policy: Fordham Corporate Law 1992, Barry Hawk (ed.) (Huntington: Juris Publishing, 1993), 558. 84 Conclusions of the Meetings of the Heads of State or Government in Paris on 19–21 October 1972, Bulletin of the European Communities 1972, No. 10, 19 (point 7, ‘Industrial, Scientific and Technological Policy’). 85 Proposal for a Regulation (EEC) of the Council on the control of concentrations between undertakings, OJ 1973, C92/1. Many documents concerning the legislative development of the Merger Regulation can be found online in the web Archive of European Integration (AEI) of the University of Pittsburgh at (last accessed 20 February 2013). 86 Amended proposal for a Council regulation on the control of concentrations between undertakings (merger control regulation), COM(81) 773 final, of 9 December 1981, 3 and OJ 1982, C36/3. 87 Frédéric Jenny, ‘French Competition Policy in Perspective’, in Competition Policy in Europe and North America: Economic Issues and Institutions, William S. Comanor et al. (eds) (London: Harwood Academic Publishers, 1990), 146, 151.

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if European merger regulation was to be adopted, its substantive test should be based exclusively on competition criteria.88 The negotiations on the merger regulation gained new momentum in the mid-1980s due to the push of big European firms for a one-stop merger-control shop and due to the ECJ’s Philip Morris judgment in November 1987.89 This well-known judgment confirmed that the Commission could rely on Article 85 EEC to prohibit certain mergers and acquisitions assuming the existence of an agreement between undertakings. With its bargaining position enhanced, the Commission put forward a new legislative draft in April 1988. Article 2(4) of the draft contained an ‘authorization of mergers on the basis of principles analogous to those contained in Article 85(3)’. But the draft appeared to go somewhat beyond Article 85(3), as it also referred to ‘improving the competitive structure within the common market, taking due account of the competitiveness of the undertakings concerned with regard to international competition and of the interests of consumers [ . . . ]’.90 In a later interview, Sutherland conceded that this clause ‘was part of the politics of getting a merger control regulation through’.91 One of Sutherland’s cabinet members, Jonathan Faull, stated that ‘[t]here was a real fear in Germany that giving up competition policy, which was the way they thought of it, to Brussels would lead to a less independent, more industrial policy, more social policy, a more employment based system’.92 At the end of 1989, the Council finally agreed upon a Regulation which only allowed the Commission to take into account ‘the development of technical and economic progress provided that it is to consumers’ advantage and does not form an obstacle to competition’.93 Sutherland’s successor as Competition Commissioner, Leon Brittan (1989–1993, and Commissioner for Trade and External Relations until 1999), later commented that he: was determined that the Merger Regulation should not be used as a way of imposing an industrial policy on Europe, although there were quite a number of participants in

88 Hubert Buch-Hansen, Rethinking the history of European level merger control. A critical political economy perspective (PhD diss., Copenhagen Business School, 2008), 162, 179. Published version: (Frederiksberg: Copenhagen Business School Press, 2009). 89 Case 142/84, British American Tobacco Company Ltd v R.J. Reynolds Industries Inc. [1987] ECR 4487. 90 Amended Proposal for a Council Regulation (EEC) on the control of concentration between undertakings, COM (88) 97 final of 25 April 1988 (emphasis added). 91 Buch-Hansen, Rethinking the history of European level merger control, 167. 92 Buch-Hansen, Rethinking the history of European level merger control, 179. 93 In addition, recital 13 of Regulation 4064/89 stated: ‘Whereas it is necessary to establish whether concentrations with a Community dimension are compatible or not with the common market from the point of view of the need to preserve and develop effective competition in the common market; whereas, in so doing, the Commission must place its appraisal within the general framework of the achievement of the fundamental objectives referred to in Article 2 of the Treaty, including

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the debate who wanted to do just that. Whether it was because they wished to create European Champions, or wanted to allow social considerations to have an important impact, they wanted the wording of the Regulation to be sufficiently broad for the Commission to be able to consider matters going well beyond the effects of the mergers in the relevant market. In the end, the supporters of an industrial policy were effectively beaten back, and the Regulation gives clear primacy to the competition criterion, with only the smallest nod in the direction of anything else.94

With the ‘pure’ competition advocates having won the debate on the legislative side, the conflict then moved to the arena of interpretation and enforcement. There again, following dramatic struggles in the early 1990s,95 the contested content of European merger control was resolved in favour of a ‘pure’ competition approach.

5.4 Conclusions In its first thirty-five years from the Treaty of Rome until the Treaty of Maastricht, European competition policy has seen many patterns of interaction with national and European industrial policies: with regard to member states’ competing industrial policy ambitions, DG IV and DG III often had the common interest of replacing national ‘beggar thy neighbour’ policies with a European framework, with DG IV emphasizing common competition rules and DG III trying to establish a European industrial policy, sometimes invoking the use of European competition rules as a threat and bargaining lever to obtain concessions from the member states. In the heyday of vertical industrial policy in particular in the 1970s, the anti-cartel and state aid provisions in that of strengthening the Community’s economic and social cohesion, referred to in Article 130a’. For discussion, see Ulrich Immenga, ‘Die Europäische Fusionskontrolle im wettbewerbspolitischen Kräftefeld’, in Walter-Eucken-Institut—Beiträge zur Ordnungstheorie und Ordnungspolitik (Tübingen: Mohr Siebeck, 1993). 94 Leon Brittan, ‘The Early Days of EC Merger Control’, in EC Merger Control: Ten Years On (London: International Bar Association, 2000), 3. 95 A widely publicized case arose from a notified joint acquisition by Aerospatiale and Alenia of the assets of de Havilland in 1991, which, in light of the acquirer’s joint control of another firm, ATR, would have strengthened ATR as a major producer of turbo-propeller aircraft, allegedly putting it in a dominant position. The merger was ultimately blocked following a contentious vote in the College of Commissioners (nine votes to four, with four abstentions). For details, see, eg, Giorgio Monti, EC Competition Law (Cambridge: Cambridge University Press, 2007), 9–18; Mark Pollack, The Engines of European Integration: Delegation, Agency and Agenda Setting in the EU (Oxford: Oxford University Press, 2003), 293–4 and 298; Michelle Cini and Lee McGowan, Competition Policy in the European Union, 2nd edn (Basingstoke: Palgrave Macmillan, 2009), 154–5. For a contemporary account, see Michael Reynolds, ‘The de Havilland Case: A Watershed for EC Merger Control’, International Financial Law Review 10 (1991), 21.

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the EEC Treaty were interpreted in crisis sectors such as shipbuilding and textiles to be compatible with industrial restructuring objectives. In the area of technology, DG III and DG XII were able to influence the scope of block exemptions to obtain broader safe harbours for undertakings. Viewing the relationship from the perspective of European competition policy-makers and enforcers, it would be more than fair to conclude that, overall, first, they have to a large extent managed to fend off attempts to adapt competition policy to national or European industrial policy objectives, and, to the contrary, second, they have limited and shaped national and European industrial policies much more than the other way round. One of the strongest limitations of national industrial policies has arisen from the establishment of a stringent state aid policy from the 1980s onwards, which is unprecedented in economic history and which even constrains member states in their tax policies. Similarly, the negotiations on the Merger Regulation and its early enforcement are examples of conflicts between competition and industrial policy advocates being resolved in favour of an ‘undistorted’ competition approach. Finally, the shift of European industrial policy away from sectoral towards horizontal measures in particular from the 1990s onwards also reflects the fact that, on the level of economic ideas, the competition paradigm has had a profound influence on industrial policy. In sum, we conclude that the Commission’s official line of ‘complementary policies’ does not correspond closely to the dynamics we have discussed. Patterns of interaction between European competition policy and industrial policy included conflict as well as mutual adaptation, the latter having been asymmetrical in the sense that competition policy had a more significant influence on industrial policy than vice versa. In that sense, the officially touted harmony of the policies in reality has been imperfect. The main variables that have influenced the relationship of European competition and industrial policy during the three decades we examined have been: (i) the legal set-up foreseen in particular by the Treaty, with the competence of the Commission to design its competition policy with no decisive political influence from the member states, (ii) the relative institutional power of DG IV and DG III, (iii) the prevalent economic paradigm and thus the beliefs of decisive actors, which have changed significantly over time, and (iv) the personal leadership qualities and personal relations at the highest political levels in the Commission. The Treaty of Rome did not mention industrial policy. While its Articles on competition were open to interpretation and contained some potential inroads for industrial policy considerations, it would be fair to characterize them—not only in hindsight—as a competitionfriendly economic order for the Common Market. The early enhancement of DG IV’s powers by Regulation 17/62 and the support from the Court

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of Justice were important factors for the establishment of a strong, relatively independent competition policy inside the Commission. These factors planted the institutional and legal character of competition policy firmly in the ground, with roots so deep it has not been shaken loose. This solid foundational structure and competition policy’s ‘first mover advantage’ also explain to some extent the more robust institutional power of DG IV relative to DG III. In the 1970s, the intensification of efforts to cultivate a supranational industrial policy in the vertical sense, ie, one that entailed Community intervention to protect particular fields of economic activity stricken by crisis, did not lead to dramatic conflicts between DG IV and DG III due to personal leadership qualities and personal relations at the highest political levels in the Commission. There were tensions, to be sure, but these tensions were generally managed and contained. They do not compare to conflicts in the 1990s over the application of the Merger Regulation to transactions favoured by national industrial interests, where the acrimony spilled over and was broadcast by the media. When the prevalent economic paradigm took a liberal turn in capitalist countries in the 1980s, the general focus of European industrial policy proposals shifted from sectoral palliatives to horizontal strategies. At the same time, DG IV asserted itself, more than ever, as a major institution with significant legal and quasi-political authority. All the above-mentioned factors contributed to the establishment of a strong, relatively independent competition policy within the Commission, a policy which today is largely free of considerations typically associated with industrial policy.96 Although we have not covered the last two decades here, it would be fair to conclude that the adoption of a Community competence for industrial policy and the competitiveness objective in the Maastricht Treaty have not altered this path.

96 In the field of merger control, the Commission’s track record of maintaining the integrity of the Merger Regulation’s competition-only (and objective) criteria is reviewed and evaluated positively by Damien Geradin and Ianis Girgenson, ‘Industrial Policy and European Merger Control—A Reassessment’, in International Antitrust Law and Policy: Fordham Competition Law Institute 2011, Barry Hawk (ed.) (Huntington, NY: Juris Publishing, 2012), 353–82, 363–6, and 381–2.

6 Towards a Concept of a Workable European Competition Law Revisiting the Formative Period Ernst-Joachim Mestmäcker

6.1 Introduction The project of common legally binding competition rules of an international community raised novel legal and economic issues. Even the most progressive thinkers of the European enlightenment thought of competition between neighbouring states as a precarious cold war or a preparation for armed conflict. The ability of a sovereign to protect its citizens against foreign enemies was not only a matter of its power, it was an essential part of its legitimacy, understood as the ability to guarantee peace or at least survival. European balance of power politics always included, in its calculations, industrial and financial power. The preamble to the European Coal and Steel Community Treaty reflected the decision of member states to overcome centuries of bloody conflict through peaceful cooperation and competition rules. But even the chapter on cartels and mergers took into account balance of power considerations. In the control of mergers, the High Authority was required to observe the principle of non-discrimination (Article 66(2) ECSC). That principle was to prevent distortions caused by the unequal size of undertakings. In its first major competition law ruling the European Court endorsed the prohibition of the German coal cartel under Article 65 ECSC Treaty. The ‘Einheitsverkauf Ruhrkohle’, a joint sales agency, controlled 100 per cent of German coal production. The Court found that the cartel enabled the undertakings to control prices and sales for a substantial part of the relevant common market and to prevent real competition with other undertakings.1 There 1

Case 13/60, Geitling Ruhrkohlen-Verkaufsgesellschaft and others v High Authority [1962] ECR 83.

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was no discrimination because the German cartel’s control of coal production was twice that of Charbonnage de France (233). The Court was careful to interpret the non-discrimination clause as recognition of the reality of oligopolistic markets. In this way, the Treaty contributed to the aim of Article 2 to create conditions which facilitate ‘by themselves’ the most rational distribution of production and the highest level of efficiencies. In referring to conditions which contribute ‘by themselves’ to these effects, the Treaty favoured competition over regulation. In this case, I acted as the High Authority’s counsel. The ECSC Treaty was part of the difficult peace process after the Second World War. The strict control of cartels and mergers was insisted upon by the US military government as a condition of terminating their control of the German Coal and Steel Industry under the Allied de-concentration legislation. It is this background that explains balance of power considerations in ECSC merger control.2 When the Treaty of Rome was ratified by six member states, only Germany had competition rules similar to Articles 85 and 86 of the EEC Treaty. I am not going to rehearse the well-documented negotiations leading to the adoption of the competition rules. Their text was general and indeterminate enough to permit the belief that final solutions were a matter of future policies. Nevertheless, every single step towards these rules, from administration to substance, was controversial. My impression is that compromises were made possible behind a veil of ignorance or a failure of foresight. Both were due to the traditional international law interpretation of treaties as only binding on states and their governments. In my own country, the negotiation of the Act against Restraints of Competition until its final adoption in 1958 had been extremely controversial. The ratification of the EEC Treaty with competition rules potentially stricter than the German statute passed parliament without the merest discussion of competition rules. The impression of competition rules as a black box of minor political relevance prevailed even at the first Commission. Once the Commission had been established, the responsibilities of individual commissioners had to be assigned. Hans von der Groeben, the first Commissioner responsible for competition policy and harmonization of laws, loved to tell the story that nobody had wanted his job. It was left to him as the junior member of the Commission without prior ministerial rank. John Rawls thought of the veil of ignorance as a hypothetical position in which all persons have the same rights to choose principles of justice without knowing, however, how he or she will 2 In 1963, the High Authority published a report on the ECSC covering the period of 1952–1962. In this report (at 363), the High Authority emphasized that there was no legal obligation to prevent a re-concentration of German industry.

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be affected. Under these conditions, rational persons can be expected to consent to the resulting principles as equals.3 However, the potentially affected member states and trade organizations did not put themselves in an original or least-privileged position. They imagined, rather, and in direct contrast to Rawls’ theory, a most-privileged position permitting the maximization of their own utilities. The opinion that the Community’s defining character was its legal order to be interpreted by the Court of Justice, and that competition rules were to be part of that legal order and to be interpreted accordingly was not to be readily found. The obvious challenge in the formative years of the Union was to overcome national traditions and interests in favour of an ever closer union. That proved to be a fundamental and difficult task. I had the good fortune to participate in this process as an observer of and adviser to German and European institutions. In 1960 I became a member of the German Council of economic advisors. From 1961–1970, I was special adviser of the Commission for competition policy and harmonization of laws. The German Commissioners were Walter Hallstein as President, and Hans von der Groeben. I met von der Groeben when the German Council discussed an amendment of the German Act against Restraints of Competition. Von der Groeben participated in these meetings as a guest. At that time the Commission was preparing the implementation of the competition rules through a Regulation under Article 87 EEC (now Article 103 TFEU). What was to become Regulation 17 was submitted to the European Parliament and accepted by the Council on 2 February 1962. Regulation 17 became an efficient instrument in the hands of the Commission to apply and develop a coherent competition policy. I am not going to discuss Regulation 17, which is the topic of Chaper 2 in this volume. The attempt to remember one’s own activities and thoughts of half a century ago is inevitably influenced by hindsight. Unfortunately, I did not keep a diary and I do not have an archive. In this chapter, I rely on my publications which were the product of or influenced by my service with the Commission.4 In addition, 3 John Rawls, A Theory of Justice (Cambridge, MA: Harvard University Press, 1971), § 24, at 136 and 19. 4 See ‘Offene Märkte im System unverfälschten Wettbewerbs’ (Open markets in the system of undistorted competition), in Wirtschaftsordnung und Rechtsordnung—Festschrift zum 70. Geburtstag von Franz Böhm, Helmut Coing, Heinrich Kronstein, and Ernst-Joachim Mestmäcker (eds) (Karlsruhe: Müller, 1965), 345–91 (also published in Mestmäcker, Wirtschaft und Verfassung in der Europäischen Union, 2nd edn (Baden-Baden, NOMOS: 2006), 553–96); ‘Die Beurteilung von Unternehmenszusammenschlüssen nach Artikel 86 EWGV’ (mergers and acquisitions under Article 86 EEC Treaty), in Probleme des europäischen Rechts, Festschrift für Walter Hallstein zu seinem 65. Geburtstag, Ernst von Caemmerer, Hans-Jürgen Schlochauer, and Ernst Steindorff (eds) (Franfurt am Main: Klostermann, 1966), 322–54 (also published in Mestmäcker, Wirtschaft und Verfassung, 597–623); Mestmäcker, Die Vermittlung von europäischem und nationalem Recht im System unverfäls-

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I am reassured by accounts of my activities by Hans von der Groeben5 and my long-time friend, Ivo Schwartz.6 In these recollections I do not pretend to have been guided by present salutary or mischievous effects of decisions taken during that time. I hope, however, that it is legitimate to account for those years in my own perspective as it has developed and probably changed over time. That perspective has always been influenced by my profession as a lawyer and my hopes as a European citizen. I propose to look at the issues which came up during my time with the Commission and which were of continuing relevance. The issues I am going to discuss are inevitably interrelated and frequently underlie or explain specific questions or cases. A recurring issue is the development of the Community or the Union from an international law treaty to an autonomous legal order. In the context of competition rules it came up again and again in controversial interpretations of the ‘effect on trade between Member States’ in Articles 85 and 86. As recently as 2009, the German Constitutional Court, in its ruling on the Lisbon Treaty, went out of its way to stress the Union’s international law character.7 Another seemingly academic issue is the highly complex relation between law and economics. In the European context it concerns the relevance and elements of an economic order that confers rights to and imposes duties on member states and individuals. The most important product of this interdependency is, of course, the systematic unity of the internal market and the system of undistorted competition. Other important aspects were the relation of competition policy to industrial policy; economic concentration and merger control; and finally, the role of public sectors and state trading monopolies in the Community. chten Wettbewerbs (The relationship between European and national law in the system of undistorted competition) (Baden-Baden: NOMOS, 1969). Mestmäcker, ‘Auf dem Weg zu einer Ordnungspolitik für Europa’, in Eine Ordnungspolitik für Europa, Festschrift für Hans von der Groeben zum 80. Geburtstag, Ernst-Joachim Mestmäcker, Hans Möller, and H. P. Schwarz (eds) (Baden-Baden: NOMOS, 1987), 9–49. Mestmäcker, ‘Concentration and Competition in the EEC’, in two parts: Journal of World Trade Law 6 (1972–1973), 615–47; and Journal of World Trade Law 7 (1972–1973), 36–63. 5 Von der Groeben, ‘Ernst-Joachim Mestmäckers Beitrag zur Gestaltung einer europäischen Wettbewerbspolitik’, in Festschrift für Ernst-Joachim Mestmäcker zum 70. Geburtstag, Ulrich Immenga, Wernhard Möschel, and Dieter Reuter (eds) (Baden-Baden: NOMOS, 1996), 29–39. 6 Schwartz, ‘Ernst-Joachim Mestmäcker als “stiller Europäer”’, in Recht und spontane Ordnung, Festschrift für Ernst-Joachim Mestmäcker zum 80. Geburtstag, Christoph Engel and Wernhard Möschel (eds) (Baden-Baden, NOMOS: 2006), 461–86. 7 See Opinion of 30 June 2009, with an English translation available at (last accessed 21 February 2013). For this author’s comments, see ‘Im Schatten des Leviathan (In the shadow of Leviathan), Comments on the Constitutional Court’s Lisbon ruling’, in Grundgesetz und Europäische Integration, Die Europäische Union nach dem Lissabon-Urteil des Bundesverfassungsgerichts, Europarecht Beiheft 1, Armin Hatje and Jörg Philipp Terhechte (eds) (Baden-Baden, NOMOS: 2010), 35–56.

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6.2 Member States and Community Law of Competition In economics there are no theoretical difficulties in disregarding national boundaries and assuming a division of labour on global markets. But when considered in the light of the traditional international law of cartels, the European competition rules are revolutionary. Anecdotal history proves the point. High on the agenda of a European economic union after the First World War was the position of cartels in the context of a planned customs union. In a report on proceedings of the World Economic Conference under the auspices of the League of Nations (1927), the rapporteur concluded his account of diplomatic consultations of European governments with this summary: ‘No rational human being inside or outside the conference even considered the possibility of international controls on the basis of international jurisdiction, some common law, applied by delegations of governments who give up their own jurisdiction’.8 This involuntary prophecy is nevertheless indicative of the conceptual and practical difficulties of implementing the rules of competition. Even after the adoption of Regulation 17, fundamental issues had to be addressed. I mention but one: the effect on trade between member states as a demarcation of Community law and member state law. The Commission initially favoured a broad applicability of the EEC competition rules and relied on experiences with federal and state legislation in a federation. Under German constitutional law, concurrent legislative powers of the Länder and the Federation are resolved in favour of the Federation as soon as federal legislation is enacted (Article 72 Basic Law). The application of this principle to the Community competition rules would have eliminated member state competition law in its application to restraints that ‘may affect trade between member states’. For very obvious reasons such an effect was unacceptable as long as the Community competition rules were law only on the books. When the Court was called upon to rule on the relationship between Community competition law and German competition law, the Commission proposed a novel conflict rule: Community law takes precedence over member state law to the extent that the application of member state law in the case at hand would be incompatible with the effet utile of Community law.9 The Court accepted this principle in the so-called Teerfarben Fall. The inapplicability of member state law in individual cases does not interfere with the validity of member state law beyond the resolution of conflict. It is a solution the US Supreme Court had already applied to overlapping jurisdictions of federal 8 9

For details, see Mestmäcker, ‘Offene Märkte’, 555–8 of the Wirtschaft und Verfassung reprint. See Case 14–68, Walt Wilhelm v Bundeskartellamt Teerfarben [1969] ECR 1.

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and state law under the Commerce Clause of the US Constitution. It is only since the Lisbon Treaty that the Union has exclusive legislative power for competition rules necessary for the functioning of the internal market. The new legislative power does not interfere, however, with the principle of concurrent applicability of member state and Union competition law as provided for in Regulation 1/2003.

6.3 Competition Policy in the Context of Economic and Industrial Policy In 1962, the Commission’s action programme for the second stage (1962– 1965) triggered a political dispute that was representative of controversies to come. The Commission’s action programme for the Community’s medium-term economic policy proposed a modified planification à la française. The potential conflict with the implementation of the system of undistorted competition, outlined in the same document, was not recognized. However, the programme revealed divergent ideas and instruments for the further development of the common market. Commissioner Marjolin, responsible for economic policy, proposed soft ‘planification’ in harmony, or at least compatible with, the French economic policy of planning. Von der Groeben proposed a system of undistorted competition as a cornerstone of the common market’s economic constitution. The Community’s medium-term economic policy was to be implemented by the coordination of economic planning, programmes, and projections as practised in the member states. The Commission’s programme provided for the probable, favourable, and acceptable distribution of the social product among major economic activities and recommended, if possible and useful, broken-down data for major industries. Markets were to be extended not by liberalization but by organization. Integration theory was thought of as an alternative to a market-based approach.10 The sector-specific approach, characteristic of the ECSC, had been abolished,11 but it surfaced again in this context. An important instrument of this policy is the principle of organization—of 10 Compare the account in Bela Belassa, The Theory of Economic Integration (London: George Allen & Unwin, 1962), 8–10. 11 See German Council of economic advisors, Opinion of October 1953 on ‘Fragen des gemeinsamen Marktes’ (Issues concerning the common market): The Council repeats its opinion that the economic justification of the European Community on Coal and Steel depends upon and is justified through its internal dynamics, which tend to transcend the integration of a single economic sector and tend towards a complete integration of the European economy. Sammelband der Gutachten von 1948–1972, S. 199.

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member states, public and private undertakings, trade unions, consumers, and, if possible, non-governmental organizations. Markets must be taken into account, but they are to be managed in light of global or sector-specific or industry-specific aims and projections. In the very document that favoured ‘planification’ for Europe, Commissioner von der Groeben insisted on highlighting the role of competition for Europe. I quote: As a matter of economics competition and even imperfect competition satisfies the needs of buyers and consumers to a high degree. The more effective competition is, the stronger are the motivation and necessity for industry and trade to fuller exploit opportunities to improve and rationalise production and distribution facilities in the interest of consumers. In this way competition simultaneously contributes to technical and economic progress. Finally, competition prevents or stifles tendencies of higher costs and prices, more particularly prevents to recoup higher costs through prices. Competition contributes to a more equal distribution of profits over the different sectors of the economy and minimizes the danger of false investments. In addition, the competitive order is to confer on all members of society the highest possible degree of personal liberty.12

For the German Minister of Economics, Ludwig Erhard, the medium-term economic policy confirmed his worst misgivings about a dirigiste Europe. On 20 November 1962 he went to the European Parliament to voice his criticism. What we need, he said in a frequently quoted speech, is not a planning programme but a programme for an economic order.13 For Ludwig Erhard, such an order had to be a market economy, with strict rules against cartels and monopolistic practices. Commission President Walter Hallstein answered Erhard in the same meeting of the European Parliament. In his characteristic approach, he combined preferences for a market economy with the political constraints of integration.14 He ended his analysis quoting the ordoliberal Walter Eucken on the ubiquity and necessity of economic planning (S. 381). This was an elegant attempt to highlight the Commission’s sovereignty in coping with ‘planification’ and markets. It failed, however, to distinguish, as Walter Eucken did, different kinds of planning. One kind is decentralized planning of independent actors on markets which is coordinated through competition. The other kind is central or sector-specific planning by authorities empowered to guide economic activities. It was this kind of planning that the 12

Aktionsprogram Ziffer 23, quoted by Ivo Schwartz. Quoted and discussed by Wilfried Guth, ‘Europäische Integration und soziale Marktwirtschaft’, in Ludwig Erhard et al., 1897–1997, Soziale Marktwirtschaft als historische Weichenstellung (Düsseldorf: ST Vlg., 1997), S. 441, 447 N. 9: Planifikation—Kein Modell für Europa. 14 Walter Hallstein, ‘Zum Aktionsprogram der Gemeinschaft für die Zweite Stufe’, in Hallstein, Europäische Reden (Stuttgart: Deutsche Verlags-Anstalt, 1979), 369–81. 13

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Commission proposed in its action programme. But Hallstein (a lawyer) was careful to point out that the Commission had no legal powers to implement ‘planification’ and did not want them. The presence of governments and the Commission in the economy was, nevertheless, a fact of life that could not be ignored. An obvious sequel to this debate was an opinion by the German Council of economic advisors in November 1963 on ‘economic projections in the medium term’. The Council endorsed global medium-term projections, but warned against a disaggregation of global data. Even a non-binding, detailed projection of economic developments was incompatible with the market economy. Experience showed that private undertakings would take these projections into account and governments would be tempted to contribute to their implementation. More particularly, industry-specific projections were incompatible with the EEC system of undistorted competition.15 Global projections of economic developments became a matter of course in German as well as in European economic policies. Part of the collaborative project reported in this volume is a discussion of the role of German Ordoliberalism in the development of competition policy and industrial policy. The proposal in one of the contributions to identify key actors within the Commission by their political affiliation and by their assumed opposition to Ordoliberalism does not recognize the bipartisan support of competition policy in Germany. Michel Foucault,16 a critical and in this respect neutral observer, summarizes the bipartisan Ordoliberal approach thus: the economy is analysed as an economic/legal order; the legal institutions are rules of the game; in this system, the courts of law are more important than the executive (Foucault, 244–5). It was Karl Schiller, later the Federal Minister of Economics and Finance, referred to by Foucault, who led the Social Democratic Party to a policy of ‘as much competition as possible, and as much planning as necessary’ (Foucault, 130, note 40); to be followed by the break with all Keynesian policies denouncing economic planning as dangerous for a liberal policy (Foucault, 133).

6.4 Industrial Policy Ivo Schwartz, member of von der Groeben’s cabinet and later the director responsible for the internal market, points out that the term ‘industrial 15

Opinion of November 1963. Michel Foucault, Die Geburt der Biopolitik. Geschichte der Gouvernementalität 2, (Frankfurt am Main: Suhrkamp Verlag, 2004). 16

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policy’ occurred for the first time in the Commission’s programme for the second stage. New controversies within and outside the Commission may be summarized as the rivalry of industrial policy and competition policy. A defining difference within the Community was pointed out by President Hallstein in his Strasburg speech: the prominent place of the system of undistorted competition in the Treaty of Rome and the normative vacuum as far as industrial policy was concerned. The differences between competition policy and industrial policy point to fundamental underlying conceptual differences. These are related to different kinds of planning, the relationship between the political constitution and the economic constitution, and last but not least the relationship between law and economics. I will not go into the divergent traditions of the European enlightenment that surface in this context, but I will try to capture them by referring to representative authors. I would refer to Elie Halévy’s classical French account of political economy as represented by Adam Smith and Jeremy Bentham. According to Halévy, classical political economy was governed by two contradictory principles: the principle of the artificial identification of interest through the legislator; and the principle of the spontaneous identification of interest on markets as taught by Adam Smith. The first principle is, Halévy says, the modern conception of science.17 F. A. von Hayek would refer to the first conception as the constructivist assumption of knowledge, while the second conception denotes a spontaneous order which is, however, based on the rule of law and which provides for the decentralized resolution of conflicts.18 Basic differences of optimism and pessimism in the possibilities or effectiveness of public interventions notwithstanding, there developed a peaceful coexistence of industrial policy and competition policy in the Community. On 3 May 1973 the Commission submitted a comprehensive programme for an industrial and technological policy to the Council.19 The programme remains representative of the aims and methods of industrial policy in later years.20 The Commission notes the difficulty of defining the essence of industrial policy. A common feature of the Commission’s proposals for action is to look for determinants of economic policy on the level of industrial sectors,

17 Elie Halévy, The growth of philosophical radicalism, Mary Morris (trans.) (London: Faber and Faber, 1928), 498. 18 F. A. von Hayek, Law, Legislation and Liberty, vol. I (London: Routledge and Kegan Paul, 1973), 146. 19 SEK (73) 1070 endgültig. 20 An important recent example is the Commission’s current agenda, called ‘Europe 2020’. As a flagship initiative, it recommends an ‘industrial policy for the global era’. See (last accessed 21 February 2013).

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specific industries, and even individual undertakings. The organization and structure of undertakings, their finances, their workforce, and the technical or legal conditions influencing their activities are all taken into account. Of primary interest are the growth and technologies of key industries, and the restructuring and adaptation of industries in light of economic and political changes. Rivalry with competition policy is inevitable, particularly if one considers conditions of effective competition as an overriding mandate of the economic and legal order. The more important differences concern international competitiveness, meaning the encouragement of centres of economic power as instruments of global power politics. Similar differences emerge when looking at public undertakings as instruments of industrial policy. An important explanation of peaceful coexistence in spite of conceptual differences is the coincidence of policies that may be interpreted as implementation of both industrial and competition policy. Important examples are measures of harmonization and even regulation for the completion of the internal market.

6.5 Economic Concentration and Economic Power The policy of a balance of powers, dominant in Europe until the end of the Second World War, always took into account the economic power represented by national industries. Max Weber refers to these policies as capitalistic imperialism.21 Industrial policy may be interpreted in this tradition. A dominant theme is the encouragement of economic concentration in the belief of superior efficiency of big enterprises and an inclination to identify corporate size and power with political power to be used by the relevant authorities. I quote the document on industrial policy of 1973: ‘Where national concentration and absorption by corporations from third states come together the potentialities of a European high tech policy for lead technological industries may be restricted or even destroyed’. The Commission therefore proposed to eliminate, for all industries, hindrances impeding the organization of transnational European corporations and to provide public credits to build up leading European industries. Transnational European corporations were not only those active in various countries but also corporations whose capital and management were distributed in various countries and whose centre was in Europe. The aim was to make possible or to facilitate the establishment of corporations not necessarily financed or organized out of the six member states. More important was a controlling position of powerful coporations 21

Weber, Wirtschaft und Gesellschaft, 5th edn (Tubingen: Mohr Siebeck, 1976), Teilband 2, 524 ff.

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in Europe to enable them to cope with competition from giants overseas on world markets.22 The priorities of competition policy are different from, if not directly opposed to, this type of industrial policy. Corporate concentration may restrict competition and create dominant positions. The Treaty of Rome did prohibit cartels but it did not establish a system of merger control. The same was true of the German Act against Restraints of Competition. As far as German industry and German government were concerned, the memory of allied de-concentration legislation may explain their resistance against merger control. The issue returned, however, as soon as the prohibition of restrictive agreements became effective in the common market. The standard argument was that a cartel prohibition would encourage higher degrees of cooperation through merger. Merger control was necessary to prevent a trend towards further concentration.23 However, the political expectations of industry were to slow down or mitigate the cartel prohibition’s application or effect. The Commission sought to acquire merger control powers but it was not assisted or encouraged by the member states. It was therefore necessary to use the instruments at the Commission’s disposal. The question was whether Articles 85 and 86 as such or a regulation under Article 87 could be used to introduce a merger control regime for the Community. Two working groups of national experts were asked to assess whether and how Article 85 or Article 86 might be used to prohibit anticompetitive mergers.24 The reports of the working groups were inconclusive, and the Commission opted for an approach not even mentioned by the experts: the application of Article 86 to concentrations that eliminated competition or strengthened a dominant position in a substantial part of the common market. The underlying controversy concerned the ultimate purpose of abuse control under Article 86. Systematic interpretations in light of the US experience resulted in conflicting positions. René Joliet, later a judge of the European Court of Justice, posed the issue as an alternative of regulation of market power or preservation of the competitive process. I quote: ‘Contrary to the suggestions of the EC Commission and some legal writers such as Mestmäcker, we feel that Art. 86 does not cover the unilateral practices of independently acting single firm monopolies which are designed to entrench such firms’ hold over the market’.25 Mestmäcker’s theory would transform Article 86 into an exact 22

‘Die Industriepolitik der Gemeinschaft’, Memorandum of the Commission to the Council, 21. The then-president of the Bundeskartellamt, Eberhard Günther, endorsed this position. See ‘Europäische und nationale Wettbewerbspolitik’, in Festschrift für Franz Böhm zum 70. Geburtstag, 279–318. 24 The Commission published a report on the resulting opinions in Das Problem der Unternehmenskonzentration im Gemeinsamen Markt (Brussels, 1966). 25 Joliet, Monopolisation and Abuse of Dominant Positions, A Comparative Study of the American and European Approaches to the Control of Economic Power (Liège: Faculté de Droit, 1970), 251–2. 23

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equivalent of Section 2 of the Sherman Act, which prohibits the monopolization of markets. Under Joliet’s own theory, the test of legality was ‘not the interference with other firm’s freedom to compete and the use of “exclusionary practices” to achieve and hold power, but rather the monopolistic exploitation of the market—however market domination had been achieved and maintained’.26 Under this approach, a dominant firm had no interest in consolidating its position by resorting to exclusionary practices because direct price and output regulation would neutralize its power. A different reading of the American antitrust experience and of Article 86 led to contrary conclusions. Article 86 was to be interpreted in light of the prohibition of monopolization under Section 2 of the Sherman Act and the treatment of mergers as possible instruments of restraints of competition.27 Article 86 was to be integrated into a system of undistorted competition (Art. 3g). Dominant undertakings infringed Article 86 when they strengthened or extended their dominance to the detriment of competitors, customers or consumers. Most controversial was, of course, the applicability of Article 86 to mergers, even though there were no specific rules of merger control at the time. The ultimate test was to be derived from the last condition under Article 85(3). This condition was representative of a general principle of Community law that competition in a substantial part of the common market must not be excluded. Under this interpretation, a merger that strengthened a dominant position was an abuse under Article 86. In Continental Can, the Commission prohibited a merger under Article 86 because it strengthened the dominant position of the acquiring company. The Court of Justice agreed with the legal analysis and the applicability of Article 86 to mergers, but declared the Commission’s decision void because of an overly narrow definition of the relevant market.28 The judgment in Continental Can, which articulated the position and role of Article 86 in the Community’s system of undistorted competition, is still good law.29 The different kinds of abuse mentioned explicitly in Article 86 were but examples of abusive behaviour and they were not exhaustive for purposes of ascertaining an infringement. 26

Joliet, Monopolisation and Abuse of Dominant Positions, 250. Joliet referred to the following publication: Mestmäcker, ‘Die Beurteilung von Unternehmenszusammenschlüssen nach Art. 86 des Vertrages über die Europäische Wirtschaftsgemeinschaft’ (The assessment of mergers under Article 86 of the Treaty establishing the European Economic Community), in Festschrift für Walter Hallstein, 322 ff. Also published in Mestmäcker, Recht und ökonomisches Gesetz, 2nd edn (Baden-Baden: NOMOS, 1984), 565–81. 28 Case 6-72, Europemballage Corporation and Continental Can Company v Commission [1973] ECR 215, para. 25. 29 Case 95/04 P, British Airways v Commission [2007] ECR I-2331. 27

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Contrary to a dominant view in academic writings, the case was not an unheard of case of judicial fiat. In finding the elimination of competition in a substantial part of the common market to be an offence, the Court took up its own position on the ECSC Treaty. Under that Treaty, High Authority and member states initiated a procedure for a so-called minor amendment in order to eliminate the absolute prohibition of dominant cartels in Article 65 § 2c. Such an amendment required the Court’s approval (Article 95 § 3). The Court held that the prohibition of cartels controlling a substantial part of the common market was an objective test and part of the Treaty’s economic order as a whole.30 This prohibition contributed to the effet utile of the Treaty’s basic objectives. In line with this finding, the Court in Continental Can held that the elimination of competition in a substantial part of the common market would emasculate numerous provisions of the Treaty. Most important among the many provisions the Court referred to were, of course, the four freedoms establishing the internal market. In recent years, the Court has repeatedly confirmed these principles: Article 3(3) TEU and Protocol No. 27 together maintain the well-established unity of the internal market and the system of undistorted competition.31 The purpose of Articles 101 and 102 TFEU is to protect not only the interests of individual competitors or customers against direct damages but also the structure of the market and competition as such.32 This jurisprudence calls for major modifications in the Commission’s present competition policy. This applies in particular to the more economic approach as presented in the Commission’s guidelines on the interpretation of Articles 101 and 102.33

6.6 Public Sectors Public undertakings with or without special or exclusive rights are popular instruments of industrial policies. In all Commission documents on industrial policy the public sector is called upon or relied upon to contribute to the development of the common market. However, there are serious potential conflicts between the internal market and competition policy, on the one 30

Opinion 1/61 of 13 December 1961, [1961] ECR (English special edition) 243. Case C-52/09, Konkurrensverket v Telia Sonera Sverige AB [2011] ECR I-527, paras 20–21. 32 Case C-280/08 P, Deutsche Telekom v Commission [2010] ECR I-9555, para. 170; Case C-202/ 07 P, France Télécom v Commission [2009] ECR I-2369, para. 105; Case C-501/06 P, GlaxoSmithKline Services v Commission [2009] ECR I-9291, para. 73; Case C-8/08 T-Mobile Netherlands BV and others v Raad van bestuur van de Nederlandse Mededingingsautoriteit [2009] ECR I-4529, para. 38. 33 See (last accessed 21 February 2013). For a comprehensive review of the Guidance Paper, see European Competition Law: The Impact of the Commission’s Guidance on Article 102, ed. Lorenzo Federico Pace (Cheltenham: Edward Elgar, 2011). 31

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hand, and public undertakings on the other. A manifest conflict with the internal market concerns state trading monopolies.

6.6.1 State Trading Monopolies Article 37 of the EEC Treaty required the ‘adjustment’ of state trading monopolies ‘so as to ensure that when the transitional period comes to an end, no discrimination regarding the conditions under which goods are produced and marketed exist between nationals of Member States’. Article 37 is one of the provisions that draws on Article XVII § 3 of the GATT. In spite of partly identical texts, there are significant differences. The GATT guarantees the existence of these monopolies, while the EEC Treaty required the elimination of all discrimination by reason of nationality. The restructuring of state trading monopolies proved difficult because of their economic and political position, particularly in Italy and France. In France, the importation and distribution of crude oil and oil products were subject to a regime that qualified as a trading monopoly. I am not going to report the technical details and the long struggle over the gradual adjustment and abolition of this and other state trading monopolies as recommended by the Commission. The ultimate legal issue was how to restructure the monopolies so that all discrimination was eliminated. This mandate of the Treaty goes beyond rules of conduct because discrimination is the necessary consequence of an exclusive right of state trading monopolies for the importation of the relevant products. As long as the monopoly rights exist, the controlling state determines through its buying policy what products from other member states reach its own national market. The monopoly is simultaneously a competitor of its consumers who have no direct access to the relevant market. However, it is not subject to similar restrictions in its access to the markets of other member states. On these markets the monopoly is free to offer its products. When the Court of Justice had to consider whether the exclusive right was compatible with the Treaty, the Commission, contrary to my advice, submitted an opinion that the abolition of the exclusive right would be the best, but not the only permissible solution. However, the Court ruled that when the transitional period ended, Article 37(1) became directly applicable,34 and that the exclusive right of importation was thus contrary to the Treaty and had to be abolished. Many years later, the Court ruled that state-granted exclusive import and export rights in the gas and electricity sectors were in principle within the scope of Article 37 as well, subject to justification arguments.35 34

See Case 59-75, Pubblico Ministero v Flavia Manghera and others [1979] ECR 91, para. 6. Among the other parallel cases, see Case C-159/94, Commission v France [1997] ECR I-5815, para. 34. 35

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The lessons to be learned from this development are applicable to systems of competition in general and the international system of free trade. A level playing-field of competition where governments respect the discipline of markets depends upon the functional independence of public undertakings. This was the reason why socialist states with planned economies were not accepted as members of GATT. The explicit or implied governmental monopolization of imports and exports made it impossible to distinguish, in their foreign trade, economic from political considerations.

6.6.2 Public Undertakings The Treaty of Rome could not ignore the important public sectors of some of the founding member states. The rules applicable to public undertakings are obviously the product of a political compromise. Article 222 EEC (now Article 345 TFEU) stated that: ‘This Treaty shall in no way prejudice the rules in Member States governing the system of property ownership’. Some observers argued—obviously in the tradition of Karl Marx—that this guarantee of public ownership prevented the Community from establishing a market economy. They did not recognize that the defining characteristic of a market economy is not the guarantee of private property as such, but a system of competition. As far as the Community was concerned, Article 90(1) EEC imposed on member states the duty to observe the rules of competition. That provision stipulated as follows: ‘In the case of public undertakings and undertakings to which states grants special or exclusive rights, Member States shall neither enact nor maintain in force any measure contrary to the rules contained in this Treaty, in particular to those rules provided for in Article 6 and Articles 85–94’. Member states with important public sectors had no competition rules (Italy) or did not apply them to their public sector (France). The Commission in 1964 and 1965 asked a committee of national experts to report on the policy of member states regarding their public sectors and to comment upon the applicability of the EEC competition rules to public undertakings. Article 90(1) EEC was obviously predicated upon the application of the competition rules to public undertakings. This functional interpretation restricts the traditional governmental prerogative of organizing state activities and deciding, in particular, whether to do so according to private or public law rules. The application of competition rules to public undertakings and their market transactions is representative of the new significance of competition rules and private law rules. They serve as a public policy standard to make governmental participation in commerce compatible with the internal market. Procurement rules are an important example.

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The guarantee of national systems of ownership had only a limited effect because the Court ruled that this guarantee does not prevent the applicability of the Treaty rules to the exercise of ownership rights. The same principle applies to the exercise of intellectual property rights.36 As already stated, the direct mandate of Article 90(1) is the obligation of member states not to enact or to maintain in force any national measure incompatible with competition rules. A case study of changing and contradictory attitudes of the member states in their position as concerns public undertakings is the interpretation of Article 90(3). This provision empowers the Commission to ensure the application of Article 90 and, where necessary, to address appropriate directives or decisions to member states. Some commentators and member states argued that this special provision excluded the applicability of the general Treaty rules to public undertakings and to member states in their relations to these undertakings. When the Commission started to exercise its powers under paragraph 3, member states argued that the provision was undemocratic because directives were legislative instruments and part of the reserved powers of the Council. However, the rationale behind paragraph 3 is that the special powers of the Commission are to be used to prevent conflicts of interest where member states adopted rules or regulations in markets in which their own undertakings operated. Giving significant recognition to those special powers, the Court endorsed the Commission’s authority under paragraph 3 to issue directives. An important application of this power is a directive that governs the financial relations between member states and their public undertakings.37 But these developments, like those concerning Article 90(2) on services of general economic interest, occurred after my departure from Brussels.

36 See Cases 56 and 58–64, Établissements Consten S.à.R.L. and Grundig-Verkaufs-GmbH v Commission [1966] ECR 299. 37 For details, see Ernst-Joachim Mestmäcker and Heike Schweitzer, Europäisches Wettbewerbsrecht, 2nd edn (Munich: C.H. Beck, 2004), § 33 III.

7 EU Competition Law in Historical Context Continuity and Change Heike Schweitzer and Kiran Klaus Patel

7.1 Introduction Recent legal writing on EU competition law tends to distinguish between ‘old’ and ‘new’ competition law.1 Accordingly, ‘old’ competition law— roughly speaking, all competition law doctrine which evolved before the 1990s—is characterized as ‘formalistic’, interventionist, and economically uninformed.2 Certain authors have called it ‘Ordoliberal’, a notion which over time and particularly in the English-speaking world has taken on an iridescent meaning. ‘New’ competition law, on the other hand, has benefited from the enlightenment of a ‘more economic approach’—a term not yet as multifaceted as Ordoliberalism, but also quite variegated and changeable in itself. While ‘old’ competition law, allegedly focused on goals like fairness and equity, was ‘contaminated’ by an internal market goal and based on a pro-regulatory philosophy, ‘new’ competition law is based on a goal of consumer welfare maximization and has left the ‘irrationalities’ and distortions of ‘old’ competition law behind. According to this widespread interpretation, the ‘more economic

1 See, for example, James S. Venit, ‘Article 82: The Last Frontier—Fighting Fire with Fire?’, Fordham International Law Journal 28 (2004), 1157, 1161–6. 2 Barry E. Hawk, ‘System Failure: Vertical Restraints and EC Competition Law’, Common Market Law Review 32 (1995), 973, 975–82, 983–6; James S. Venit, ‘Slouching Towards Bethlehem: The Role of Reason and Notification in EEC Antitrust Law’, Boston College International and Comparative Law Review 10 (1987), 17, 33–5, 42–4; James S. Venit, ‘Future Competition Law’, in European Competition Law Annual 1997: The Objectives of Competition Policy, Claus-Dieter Ehlermann and Laraine L. Laudati (eds) (Oxford: Hart Publishing, 1998), 567, 567–9.

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approach’ is to EU competition law what the ‘Chicago School revolution’ was to antitrust law in the United States: EU competition law is finally leaving former dubious policy orientations behind and is brought into line with economic rationality—based, however, not on Chicago School doctrines, but on superior post-Chicago insights. There is, as this interpretation would have it, a clear rupture between ‘old’ and ‘new’ competition law. The various contributions to this book do not address the question of how and why this alleged break in European competition law thinking has come about. Instead, they focus on the foundational and consolidation period of European competition law in its own right, and thereby on the challenges that EEC competition law had to meet during its early years. The stakes were high indeed: the Community had to build up a regime of substantive competition law from scratch, since no similar regime had existed before in the member states. While the United States and the quickly evolving German approach to competition law provided some orientation, the EEC legal order required new and specific solutions in many respects. There had to be effective and uniform competition law enforcement across all member states, each with their widely different traditions regarding the state–market interface. In such a situation, the focus was necessarily on public enforcement, and on enforcement centralized in the hands of the Commission. From the start, the evolution of European competition law was tied up with the Community’s mission to create a common market and the need to define and to confine the member states’ role in the economy. Should and could competition rules prevail over the public interest as defined by national governments? Should the Commission apply competition rules according to shifting economic needs? Should competition rules cede to industrial policy goals? Looking at the evolution of European competition law from this angle, a much more nuanced interpretation emerges compared to the standard story summarized above. Instead of a clear rupture, signalling the end of an old and the beginning of a new system of competition law, this contribution strives to disentangle elements of continuity as well as of change. Many of the early controversies have been overcome, among them debates on the role of wider public policy goals for the implementation of competition law and on the applicability of competition rules to state-regulated sectors (II.). Other debates have been revived, as exemplified during the run-up to Regulation 1/03, which substantially remodelled the enforcement regime originally established by Regulation 17/62. In the course of this endeavour, the direct applicability of Article 101(3) TFEU and the relationship between European competition law and national competition laws once again became controversial. The reasons for the choices made in the 1960s figured importantly in the debates that preceded and accompanied the change of regime some forty

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years later, and they continue to be relevant in their current re-evaluation (III.). Finally, the discussion surrounding the ‘more economic approach’ and its implementation in a number of block exemption regulations,3 guidelines,4 and in the field of merger control by Regulation 139/2004 and its accompanying guidelines,5 have added a new dimension to the competition law debates—a dimension not present during the foundational period of European competition law (IV.). In some respects, it appears to be linked to the never-ending debate on the interaction between competition law and industrial policy (V.). In both fields, we have seen and continue to see serious conceptual discussions regarding the route EU competition law is expected to take, yet even on this issue there seems thus far to be more continuity than change. The interpretation of the EU competition rules, in particular of Articles 101 and 102 TFEU and of the Merger Regulation, has generally not been bent to fit European industrial policy agendas, but industrial policy has certainly played a role in the field of state aid. In the debate on a ‘more economic approach’, the European Court of Justice (ECJ) has not been willing to redefine the fundamental goals of EU competition law, but it has paid more attention to effects on the competitive process in specific fields. Such continuities cannot and must not mean the absence of evolution of the law. For example, the methods by which markets are defined and the ways in which potential effects on competition are analysed have been continually refined over time; the law on the abuse of dominance is still being developed. However, EU competition law has not been revolutionized: in its normative basis and goals, it has not—and arguably should not—be severed from the overall project of European integration that loomed large at its birth (VI.).

3 See, in particular, Commission Regulation (EU) No. 330/2010 of 20 April 2010 on the application of Article 101(3) TFEU to categories of vertical agreements and concerted practices, OJ 2010, L102/1. See also Commission Regulation (EU) No. 1217/2010 of 14 December 2010 on the application of Article 101(3) TFEU to certain categories of research and development agreements, OJ 2010, L335/36; Commission Regulation (EU) No. 1218/2010 of 14 December 2010 on the application of Article 101(3) TFEU to certain categories of specialization agreements, OJ 2010, L335/43. 4 See, in particular, European Commission, Guidelines on the applicability of Article 101 TFEU to horizontal co-operation agreements, OJ 2011, C11/1; European Commission, Guidelines on the application of Article 81(3) of the Treaty, OJ 2004, C101/97; European Commission, Guidance on the Commission’s Enforcement Priorities in applying Article 82 of the EC Treaty to abusive exclusionary conduct by dominant undertakings, OJ 2009, C45/7. 5 Council Regulation 139/2004 on the control of concentrations between undertakings, OJ 2004, L24/1; European Commission, Guidelines on the assessment of non-horizontal mergers under the Council Regulation on the control of concentrations between undertakings, OJ 2008, C265/6; European Commission, Guidelines on the assessment of horizontal mergers under the Council Regulation on the control of concentrations between undertakings, OJ 2004, C31/5.

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7.2 Debates Overcome From a historically informed point of view, it is hard to look back at the ‘old’ debates without some sense of achievement. The then-revolutionary aspects of competition law that made it controversial during the early years of the EEC (ie, the understanding that the competition rules were not only programmatic policy statements but law; their interpretation as directly applicable law;6 the Commission’s competence to enforce these rules with strong powers;7 and others) have become uncontroversial. Despite the remarkable evolution of the competition rules from a perceived ‘black box of minor political relevance’8 to what is arguably the most powerful set of tools in the hands of the Commission, they have survived all Treaty revisions without major alterations. The issue of sovereignty, which was at the heart of many of the controversies on competition law during the foundational period, is no longer contentious.9 The shift from Regulation 17/62 to Regulation 1/03 which went along with a significant strengthening of the Commission’s role vis-à-vis national competition authorities (NCAs) did not lead to a public outcry. National traditions and interests in pursuing economic policies unhindered by the requirements of competition law have generally been overcome in favour of a common legal order, the necessity and neutrality of which is broadly accepted. If national interests remain an issue, it is mainly with regard to the relationship between the EU and the United States.10 A clear position has also evolved on the issue of cartels. Propositions to subject cartels to an abuse control—ie, to distinguish between ‘good’ and ‘bad’ cartels—that marked the debates surrounding the drafting of the Treaty of Rome and of Regulation 17/6211 are controversies of the past. The ‘fight against cartels’12 enjoys high priority today at both EU and national level. Interestingly, a concern already central for the Ordoliberals of the 1960s, 6 See, eg, Antoine Vauchez, ‘The transnational politics of pudicialization: Van Gend en Loos and the making of EU polity’, European Law Journal 16 (2010), 1–28. 7 For the early opposition of the member states to the centralization of powers at the level of the Community, see Chapter 2 this volume, pp. 70–1. 8 See Chapter 6, this volume, p. 192. 9 The one area where state sovereignty remains an issue is the application of competition rules in order to liberalize regulated industries—an area where core concepts of sovereignty are affected. 10 See, for example, the de Havilland controversy, briefly described in Chapter 5, this volume, p. 188 fn. 95 with further references. 11 See Chapter 2, this volume, p. 70; Chapter 3, this volume, p. 94. 12 See, for example, Mario Monti, SPEECH/02/384 of 11 September 2002; Neelie Kroes, SPEECH/07/128 of 8 March 2007; Alexander Italianer, speech at the ICN Cartel Workshop 2011 of 11 November 2011.

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but not fully implemented at the Community level at that time, has thereby become topical once again.13 Also, merger control—not part of the TFEU provisions on competition and only introduced after long resistance by way of Regulation 4064 in 1989—has become an essential and well-functioning leg of EU competition law. The early debates surrounding the adoption of the first Merger Regulation14 are long forgotten. Another major achievement of 50 years of EU competition law practice is the relative consensus reached on the interaction between competition law and other public policies. In the national tradition of many member states, particularly of France and the United Kingdom,15 competition policy had been designed and applied in light of varying public policy goals. The accepted approach today, albeit with some limited exceptions—is that competition law, properly understood, protects competition, and must not be bent to adapt to conflicting policy goals. Protectionist policies at the national level to promote national champions have not been uploaded to the EU level on a broad scale. Despite the vagueness of the EU competition rules, the nature of the Commission as a political body, and the debate about a ‘more economic approach’, it is the rule of law—and not political discretion—that characterizes EU competition law. The regime of judicial control of the Commission’s decisions has contributed significantly to this state of affairs. The concurrent applicability of European and national competition rules— another aspect much debated in early years—has also become uncontroversial.16 It is supplemented by the rule that EU law takes precedence over national law to the extent that the application of national law in the case at hand would be incompatible with the effet utile of EU rules17—a proposition today incorporated in Article 3 of Regulation 1/03.18 The Commission’s initial proposition 13 On Commissioner Hans von der Groeben, who identified cartels as the first priority but was unable to implement this priority see Chapter 1, this volume, p. 25. 14 Initiated by the Commission’s Memorandum on the Problem of Concentrations in the Common Market, SEC (65) 3500; Resolution of the European Parliament relating to rules on competition and the position of the European undertakings in the Common Market and the world economy, OJ 1971, C66/12; Proposal for a Regulation (EEC) of the Council on the control of concentrations between undertakings, OJ 1973, C92/1. 15 See Chapter 3, this volume, p. 105, for the prominence of the public interest test in early UK competition law and the bilan économique in French competition law. 16 Case C-17/10, Toshiba Corporation and Others v Ú ad pro ochranu hospodá ské sout že, not yet reported, para. 81. See also Joined Cases C-295/04 to C-298/04, Vincenzo Manfredi and Others v Lloyd Adriatico Assicurazioni SpA and Others [2006] ECR I-6619, para. 38. 17 Case 14/68, Walt Wilhelm and others v Bundeskartellamt [1969] ECR 1; confirmed in Joined Cases 253/78 and 1 to 3/79, Procureur de la République and others v Bruno Giry and Guerlain SA and others [1980] ECR 2327 paras. 14–16. 18 Articles 3(1) and (2) of Council Regulation (EC) No. 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty, OJ 2003, L1/1.

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to restrict the application of national competition rules to cases with no possible effect on interstate trade was not adopted by the ECJ and, when the Commission tried to re-activate this model in the context of the drafting of Regulation 1/03,19 it was not accepted by the member states. Another great achievement of EU competition law—remarkable also in comparison with American antitrust law—is its successful application to open up state-regulated sectors.20 This issue was highly controversial during the 1980s, when the Commission made its first forceful moves into this direction. The Commission’s broad interpretation of the Community competition rules—including in application to state-run or state-sponsored activity—was, however, fully backed by the ECJ.21 Repeated demands in particular by the French government to change the relevant Treaty provision in order to protect the French concept of service public, closely intertwined with French conceptions of state sovereignty, were ultimately unsuccessful.22 The incorporation of Article 14 TFEU (formerly Article 7(d) EC) by the Treaty of Amsterdam in 1997 has not curtailed the substantial force that is implicit in the application of competition rules to state-regulated sectors, nor are substantial changes of interpretation to be expected based on the adoption of Protocol No. 26 on services of general interest or other provisions introduced by the Treaty of Lisbon.23 This selective enumeration of some of the early milestones that have survived decades of competition law practice unscathed must necessarily remain incomplete. Beyond specific issues, it is important to stress that the case law of the European Courts displays a strong sense of continuity. Contrary to the situation in the United States, where early case law was openly overruled, a re-reading of the ECJ’s early and more recent competition case law shows evolution but no fundamental rupture in legal doctrine. Important judgments of the foundational period, among them Consten and Grundig24 on the interpretation of Article 85 EEC (now Article 101 TFEU), Continental Can25 19 See Article 3 of the Proposal for a Council Regulation on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty and amending Regulations (EEC) No. 1017/68, (EEC) No. 2988/74, (EEC) No. 4056/86 and (EEC) No. 3975/87 (‘Regulation implementing Articles 81 and 82 of the Treaty’), COM (2000) 582 final, OJ 2000, C365E/284. 20 For a comprehensive analysis, see Heike Schweitzer, Daseinsvorsorge, ‘service public’, Universaldienst (Baden-Baden: Nomos, 2001/2002), 229–365, with references to the ECJ’s case law. 21 For the functional concept of an ‘undertaking’, see Case C-41/90, Klaus Höfner and Fritz Elser v Macrotron GmbH [1991] ECR I-1979, paras. 21–3. 22 Schweitzer, Daseinsvorsorge, ‘service public’, Universaldienst, 380–4. 23 OJ 2008, C115/308. 24 Joined Cases 56/64 and 58/64, Établissements Consten S.à.R.L. and Grundig-Verkaufs-GmbH v Commission [1966] ECR 299, 340. 25 Case 6/72, Europemballage Corporation and Continental Can v Commission [1973] ECR 215, paras. 23–6.

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on the goals of European competition law and the interpretation of Article 86 EEC (now Article 102 TFEU) and Hoffmann-La Roche,26 continue to be widely cited in recent judgments of the ECJ.27 While observers of US antitrust law tend to distinguish different periods in which courts have followed different ideological trends and schools of economic thinking,28 the prevailing perception is that no comparable doctrinal divergence exists in the development of EU competition law. Chicago School thinking never became established in Europe,29 and with regard to the ECJ’s case law, this remains true today, notwithstanding the debate on a ‘more economic approach’ (see p. 220 et seq.).

7.3 Debates revived: The enforcement of EU competition rules from Regulation 17/62 to Regulation 1/03 Regulation 17/62 was of the utmost importance for the development of a forceful regime of competition law in the EEC and later the EU.30 The Regulation established that the somewhat ambiguous wording of Article 85 EEC had to be read as a full prohibition of anticompetitive agreements with some limited scope for exceptions, and not merely as a regime of abuse control. It interpreted Article 85(3) EEC as empowering the Commission to grant exceptions—and not as a directly applicable legal exception, an understanding which France had initially favoured. The Commission’s monopoly for granting exceptions (Article 9, Regulation 17/62) was combined with a notification requirement. While certainly bureaucratic, it was meant to provide the Commission with sufficient information to ensure effective supervision, and it aimed at a high level of legal certainty. Simultaneously and importantly, 26

Case 85/76, Hoffman-La Roche & Co. AG v Commission [1979] ECR 461. With regard to Consten and Grundig, see, for example, Case C-217/05, Confederación Española de Empresarios de Estaciones de Servicio v Compañía Española de Petróleos SA [2006] ECR I-11987 para. 37. With regard to Continental Can, see Case C-202/07 P, France Télécom SA v Commission [2009] ECR I-2369, para. 105; Case C-280/08 P, Deutsche Telekom AG v Commission [2010] ECR I-9555, para. 176; Case C-52/09, Konkurrensverket v TeliaSonera Sverige AB, [2011] ECR I-527, para. 24. With regard to Hoffman-La Roche, see, for example, Case C-549/10 P, Tomra, judgment of the ECJ of 19 April 2012, not yet reported, para. 70; Case C-52/09, TeliaSonera Sverige, para. 23. 28 See, for example, William E. Kovacic and Carl Shapiro (1999), ‘Antitrust Policy: A Century of Economic and Legal Thinking’, Competition Policy Center, University of California, Berkeley, Working Paper No. CPC 99–09, where the authors distinguish five different periods (accessed 5 December 2012). Also published in Journal of Economic Perspectives 14 (2000), 43–60. 29 See, for example, Mark Furse, ‘The role of competition policy: a survey’, European Competition Law Review 17 (1996), 250, 255–6. 30 See Chapter 2, this volume, pp. 87–8. 27

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this centralized enforcement regime was intended to guarantee the uniform application of the competition rules in all member states. Regulation 1/03 has fundamentally changed the regime of public competition law enforcement in the EU.31 In order to deal with the long-standing backlog created by the notification regime, which left Directorate General (DG) IV with minimal resources for prioritizing enforcement in other areas of competition law (especially in areas other than vertical agreements), and which seemed apt to lead to complete gridlock of the DG’s affairs after the enlargement, the notification regime was abolished. Against intense opposition in particular from the German Federal Cartel Office (Bundeskartellamt) and from German scholars,32 Article 101(3) TFEU was declared in Regulation 1/03 to be directly applicable. The alternative of decentralizing the notification regime and vesting NCAs with the power to grant exceptions was never publicly considered. The decentralized enforcement of competition rules by national competition authorities (NCAs) and national courts raised the major challenge of ensuring an effective decentralized public enforcement of European competition rules by the NCAs and national courts, as well as the uniform interpretation and application of those rules in all member states. Regulation 1/03 therefore had to redefine the interaction between national and European competition law. In its first draft of a new enforcement regulation,33 the Commission proposed to completely abolish the principle of concurrent applicability, which the ECJ had established in its Walt Wilhelm judgment of 1969.34 Instead, all agreements 31 For an account of these changes, see Ernst-Joachim Mestmäcker, ‘The EC Commission’s Modernization of Competition Policy: A Challenge to the Community’s Constitution’, European Business Organisation Law Review 1 (2000), 401–44. 32 See, for example, Tätigkeitsbericht des Bundeskartellamts 1997/1998 (Annual Activity Report of the German Federal Cartel Office), BT-Drucks. 14/1139 of 25 June 1999, V, VII; German Monopoly Commission (Monopolkommission), Sondergutachten Nr. 28: Kartellpolitische Wende in der Europäischen Union? Zum Weißbuch der Kommission vom 28. April 1999 (Baden-Baden: Nomos, 1999); ‘Die Aufgabe des Freistellungsmonopols lässt inkohärente Entscheidungen durch die Gerichte befürchten’—Interview with Ulf Böge, in Frankfurter Allgemeine Zeitung, 27 December 1999 (at the time, Böge was the forthcoming President of the German Federal Cartel Office); Mestmäcker, ‘The EC Commission’s Modernization of Competition Policy’; Wernhard Möschel, ‘Systemwechsel im Europäischen Wettbewerbsrecht’, Juristenzeitung (2000), 61; Wernhard Möschel, ‘Defätismus gegenüber Brüssel’, Wirtschaft und Wettbewerb (2000), 951; Fritz Rittner, ‘Kartellpolitik und Gewaltenteilung in der EG’, Europäische Zeitschrift für Wirtschaftsrecht (2000), 129; Wolfgang Fikentscher, ‘Das Unrecht der Wettbewerbsbeschränkung: Kritik an Weißbuch und VO-Entwurf zu Art. 81, 82 EG-Vertrag’, Wirtschaft und Wettbewerb (2001), 446, 450–8. 33 Proposal for a Council Regulation on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty and amending Regulations (EEC) No. 1017/68, (EEC) No. 2988/74, (EEC) No. 4056/86 and (EEC) No. 3975/87 (‘Regulation implementing Articles 81 and 82 of the Treaty’), COM (2000) 582 final, OJ 2000, C365E/284. 34 See Case 14/68, Walt Wilhelm [1969] ECR 1.

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or practices capable of affecting trade between member states should be subject to EC/EU competition law only.35 This proposition was ultimately abandoned and replaced by the rule now set out in Article 3(1) of Regulation 1/03: NCAs and national courts are required to apply Articles 101 and 102 TFEU alongside their national competition laws whenever the agreement or practice may affect trade between member states. To the extent that trade may be affected, they must not prohibit agreements between undertakings or concerted practices which do not restrict competition within the meaning of Article 101(1) TFEU, or which are exempt under Article 101(3). Based on a request by several member states, and against the initial opposition of the Commission, national rules on unilateral conduct must not be more lenient, but may be stricter, than Article 102 TFEU. Hence, national rules on the abuse of so-called ‘relative’ market power below the threshold of dominance could and did remain in force in various member states, including Germany, France, and Portugal. Leaving aside this one area of continued divergence, Articles 3(1) and 3(2) of Regulation 1/03 have reinforced the process of convergence of national laws with EU competition law. National competition laws now typically provide for norms that look like, and are interpreted like, Articles 101 and 102 TFEU.36 The option to provide for a different set of national competition rules for agreements and conduct that do not affect trade and those that do affect trade—an option that would be in line with Article 3 of the Regulation—is not pursued in any member state. Despite the confirmation of the Walt Wilhelm rule in recent ECJ judgments,37 according to which competition rules at the EU and at national levels continue to view restrictions on competition from different angles even after the entry into force of Regulation 1/03, full convergence has been achieved for most practical purposes. At the same time, experimentation at national level—a relevant input for the development of EU competition law for some time38—has all but vanished. Some limited areas of ambiguity remain. In particular, it is not yet settled whether member states may apply national competition law in those areas which fall outside 35 Article 3(1) of the draft Regulation stated: ‘[ . . . ] when an agreement or practice is capable of affecting trade between Member States only Community competition law applies. National competition authorities, being empowered to apply Articles 81 and 82 in their entirety, will thus apply Community law in all cases affecting trade between Member States’. For critical comments, see Mestmäcker, ‘The EC Commission’s Modernization of Competition Policy’, 426–9. 36 See, for example, §§ 1 and 2 of the German Act against Restraints of Competition, (accessed 5 December 2012); sections 2–11 of the UK Competition Act 1998, (accessed 5 December 2012). 37 See Case C-17/10, Toshiba Corporation, not yet reported, para. 81, with further references. 38 See contribution of Chapter 3, this volume, pp. 109–11.

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the scope of EU competition law due to the exception for national systems of social security that are based on the principle of solidarity.39 The process of convergence is supported by a number of other measures meant to ensure the uniform interpretation and application of the EU competition rules. Among other obligations, NCAs must inform the Commission before adopting an infringement decision (Article 11(4), Regulation 1/03). The Commission retains the power to initiate its own proceedings at any moment, at which point NCAs are relieved of their competence to apply Article 101 or Article 102 TFEU in the same case (Article 11(6), Regulation 1/03). National courts may be required to stay proceedings when dealing with a case in which the Commission is contemplating a decision. They must not take decisions running counter to a decision adopted by the Commission (Article 16(1), Regulation 1/03). The Commission has published a number of guidelines on the interpretation of Articles 101 and 102 TFEU that not only help undertakings to self-assess the legality of their action but also guide the NCAs and national courts (without directly binding them).40 Moreover, the entry into force of Regulation 1/03 was accompanied by the creation of the European Competition Network, which is designed to coordinate the enforcement actions of the NCAs with that of the Commission, and to influence or steer national enforcement policies. In light of these measures, commentators have observed that the Commission’s characterization of the reform as a ‘decentralization’ of EU competition law enforcement has been a misnomer. Rather, the Commission’s powers under Regulation 1/03 have substantially strengthened the Commission’s ability to centrally define and implement competition policy throughout the EU.41 The European Competition Network is not a venue of cooperation between competition authorities of equal rank: NCAs must consult with the Commission before adopting a decision under Article 101 or Article 102 TFEU; the Commission can approve or persuade an NCA to modify a decision—or it can open its own proceedings and relieve the NCA of its competences. Against

39 Joined Cases C-159/91 and C-160/91, Christian Poucet v Assurances Générales de France and Caisse Mutuelle Régionale du Languedoc-Roussillon [1993] ECR I-637. For further references, see Ernst-Joachim Mestmäcker and Heike Schweitzer, in Wettbewerbsrecht Bd. 1 EU, Ulrich Immenga and Ernst-Joachim Mestmäcker (eds) (Munich: C. H. Beck, 2012): Commentary on Art. 106 Abs. 1 EUV paras. 23–31. 40 See, in particular, European Commission, Guidelines on the applicability of Article 101 TFEU to horizontal cooperation agreements, OJ 2011, C11/1; European Commission, Guidelines on the application of Article 81(3) of the Treaty, OJ 2004, C101/97; European Commission, Guidance on the Commission’s Enforcement Priorities in applying Article 82 of the EC Treaty to abusive exclusionary conduct by dominant undertakings, OJ 2009, C45/7. 41 See, for example, Mestmäcker, ‘The EC Commission’s Modernization of Competition Policy’.

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this background, the regular meetings of the European Competition Network have more than a deliberative function. Like the Commission’s guidelines, they are a means to inform NCAs of the policy stance that the Commission wishes them to take. In light of the member states’ opposition against Regulation 17/62,42 and even more starkly in light of their opposition to the introduction of a Merger Regulation at Community level,43 it is striking how little opposition there was from the national governments to this increase of the Commission’s power when Regulation 1/03 was adopted. The second aspect of the reform that competition lawyers continue to grapple with is the direct applicability of Article 101(3) TFEU. From the perspective of undertakings, the abolition of the notification regime and the requirement to engage in self-assessment of restrictive agreements has meant a weakening of legal certainty. The request for safe harbours has partly been dealt with by way of a reform of the regime of block exemptions44 which undertakings now, as before, try to comply with. However, the modern generation of block exemption regulations makes use of a more flexible approach. The prescription of ‘white clauses’, with its strong standardization or straitjacket effect has, meanwhile, fallen out of use.45 The claim that the direct applicability of Article 101(3) TFEU as provided for in Article 1(1) and Article 1(2) of Regulation 1/03 TFEU is incompatible with the wording of the Treaty has never been tested before the ECJ. Under the new regime, the Commission is currently trying to redefine the boundaries between Article 101(1) and Article 101(3): while the notification regime established by Regulation 17/62 was originally thought to argue in favour of a broad definition of the scope of Article 101(1) TFEU (then Article 85 EEC), proponents of a ‘more economic approach’ currently strive to catch under Article 101(1) TFEU only those agreements which would likely cause 42

See Chapter 2, this volume, pp. 69–71. See Chapter 1, this volume, pp. 36–7. 44 See, in particular, Commission Regulation (EU) No. 330/2010 of 20 April 2010 on the application of Article 101(3) TFEU to categories of vertical agreements and concerted practices, OJ 2010, L102/1. See also Commission Regulation (EU) No. 1217/2010 of 14 December 2010 on the application of Article 101(3) TFEU to certain categories of research and development agreements, OJ 2010, L335/36; Commission Regulation (EU) No. 1218/2010 of 14 December 2010 on the application of Article 101(3) TFEU to certain categories of specialization agreements, OJ 2010, L335/43. 45 Old-generation block exemption regulations were frequently applicable only if specific ‘white clauses’ were used by the parties to a restrictive agreement. Block exemption regulations thereby had a regulatory effect. New-generation block exemption regulations do not require the use of such ‘white clauses’. Instead, it is only if an agreement that in other respects satisfies the conditions of a block exemption incorporates (explicitly or implicitly) so-called ‘hard core’ restrictions of competition that the safe harbour provided by the block exemption regulation will be precluded. New-generation block exemptions have also introduced market share thresholds above which the safe harbour will not apply. 43

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direct consumer harm.46 The rule-of-reason type of analysis proposed would do away with the need to apply the precise criteria set out in Article 101(3) TFEU and would shift the burden of proof to the Commission or, as the case may be, to NCAs and private plaintiffs. The scope of Article 101(1) TFEU would be much more narrowly construed. So far, the ECJ has not followed this proposition.47 Nor has it clarified the legal implications of the direct applicability of Article 101(3) TFEU for the interpretation of the exemption. According to a long-standing line of jurisprudence, the ECJ has accepted a margin of appreciation for the Commission in the interpretation and application of Article 101(3) TFEU.48 After the entry into force of Regulation 1/03, the General Court and the ECJ have continued to use this formula—failing to address the question of whether a policy-driven margin of appreciation can still be legally acceptable once Article 101(3) TFEU has acquired direct effect.49 At the same time, full judicial review remains a conceptual challenge in the area of Article 101(3) TFEU, as this provision requires the balancing of efficiency effects with competition and consumer concerns, and hence the balancing of potentially incommensurate policies.50 Whether Regulation 1/03 has been a success, according to the criteria originally put forward in favour of the change of regime, has not yet been comprehensively analyzed. Certainly, the backlog created by the notification regime has been resolved. It is less clear if the reform has freed up resources in DG Competition to deal with an increased number of relevant cases. Due to high fines51 and a successful leniency policy, the ‘fight against cartels’ has 46 See, in particular, European Commission, Guidelines on the applicability of Article 101 TFEU to horizontal cooperation agreements, OJ 2011, C11/1. 47 For the relatively broad scope of Article 101(1) TFEU, see, for example, Case C-439/09, Pierre Fabre Dermo-Cosmétique SAS v Président de l’Autorité de la Concurrence, Ministre de l’Économie, de l’Industrie et de l’Emploi, not yet reported, para. 47. See also the methodology applied in Case C-8/08, T-Mobile Netherlands [2009] ECR I-4529, para. 31. For a very clear comparison between the Commission’s approach to Article 101(1) TFEU and the ECJ’s approach, see Ernst-Joachim Mestmäcker, ‘Kooperative horizontale Wettbewerbsbeschränkungen im US-Antitrustrecht und im europäischen Wettbewerbsrecht’, in Recht, Ordnung und Wettbewerb. Festschrift zum 70. Geburtstag von Wernhard Möschel, Stefan Bechtold, Joachim Jickeli, and Mathias Rohe (eds) (Baden-Baden: Nomos, 2011), 409, 415–19, and 419–24. 48 Ever since Cases 56/64 and 58/64, Consten and Grundig [1966] ECR 299, 347. 49 For the asserted continuing practical relevance of the Commission’s margin of appreciation with regard to Article 101(3) TFEU, see Marc Jaeger, ‘The Standard of Review in Competition Cases involving Complex Economic Assessments: Towards the Marginalisation of the Marginal Review?’, Journal of European Competition Law & Practice 2 (2011), 295, 310. For a critical stance, see Heike Schweitzer, ‘Judicial Review in EU Competition Law’, in Research Handbook on EU Antitrust Law, Damien Geradin and Ioannis Lianos (eds) (Cheltenham: Edward Elgar, forthcoming). 50 David Bailey, ‘Scope of judicial review under Article 81 EC’, Common Market Law Review 41 (2004), 1327, 1338–9. 51 Statistics are available at (accessed 5 December 2012).

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received significant publicity over the last decade. Yet the average number of Article 101 and Article 102 TFEU decisions per year has not gone up. Arguably, a substantial portion of the Commission’s resources is now needed to meet the significantly higher standards of evidence required under its self-imposed ‘more economic approach’—in particular in Article 102 TFEU cases. In the field of cartels, the settlement procedure established in 200852 is starting to gain practical relevance.53 Beyond the area of cartels, a very significant number of Article 101 and Article 102 TFEU cases are now dealt with by way of commitment decisions54—and are thus broadly outside the regime of effective judicial review. The flight from effective judicial oversight may be considered one of the most problematic effects of the new enforcement regime. In sum, the shift of regime has had far-reaching effects at various levels. It has redefined the role of DG Competition with regard to the formulation and implementation of competition policy throughout the EU—a role that DG Competition has arguably used at times, although not always successfully so, to promote a redefinition of the law. The direct applicability of Article 101(3) TFEU has meant a major change of substantive competition law—a change that legal doctrine still has to cope with. And it has created room for reshaping public competition law enforcement based on a greater prioritization of some cases over others, thus opening the door for a ‘more economic approach’ to EU competition law, at least at the Commission level. However, two important features of the European regime have remained unchanged. First, despite serious attempts on the part of the Commission to strengthen private enforcement before national courts, in particular where private damages claims are concerned, public enforcement in the EU has remained strong. A shift towards the US model centring on the deterrent effect of private enforcement has not taken place and is not to be expected. Secondly, the powerful role of the Commission in EU competition enforcement has not been challenged but reinforced.

52 Commission Regulation (EC) No. 622/2008 of 30 June 2008 amending Regulation (EC) No. 773/2004, as regards the conduct of settlement procedures in cartel cases, OJ 2008, L171/3. Supplemented by the Commission Notice on the conduct of settlement procedures in view of the adoption of Decisions pursuant to Article 7 and Article 23 of Council Regulation (EC) No. 1/2003 in cartel cases, OJ 2008, C167/1. 53 See European Commission, Report on Competition Policy 2011, COM (2012) 253 final, 12. 54 Between 2004 and 2012, the Commission adopted a total of twenty-three commitment decisions, sixteen of which were adopted after 2008.

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7.4 New Debates: ‘The More Economic Approach’ as a New Epoch of EU Competition Law? The reform of the enforcement regime has been accompanied by an attempt to revise the substance of EU competition law. The ‘more economic approach’ is arguably the most fundamental challenge to EU competition law as it evolved between 1958 and the late 1980s. This said, and in contrast to the Chicago School, which has been so influential in American antitrust law, the ‘more economic approach’ is not a monolithic theory or concept but rather a conglomerate of suggestions on how to make intensified use of economic insights in interpreting and applying competition law. Three aspects can be distinguished. In its most far-reaching version, the ‘more economic approach’ is a proposition to redefine the goals of EU competition law. A different aspect of the ‘more economic approach’ is the suggestion to make greater use of economic theories and methods to establish the relevant facts of the case and provide evidence for the appropriateness of a given market definition or anticompetitive effects of a given type of unilateral conduct.55 Finally, the ‘more economic approach’ in a ‘light’ form can be understood to suggest a review of the established tests for anticompetitive conduct in light of recent insights of economic theory with a view to determining whether the EU competition can be interpreted in a more concise and unerring manner. In different contexts, DG Competition and—sometimes reluctantly—the Commission in general have endorsed these different aspects of a ‘more economic approach’. An intense use of economic theory and methods in order to establish the relevant facts, define the market, and determine anticompetitive effects has become the rule rather than the exception in DG Competition today. This development was prompted—or at least strongly accelerated—by the General Court’s annulment in 2002 of three Commission decisions in the field of merger control for their insufficient and economically incomplete or even incoherent line of reasoning. Following these well-publicized defeats in Airtours,56 Schneider Electric,57 and Tetra Laval,58 DG Competition implemented 55 In favour of this approach is Christian Ewald, ‘Ökonomie im Kartellrecht: Vom more economic approach zu sachgerechten Standards forensischer Ökonomie’, Zeitschrift für Wettbewerbsrecht (2011), 15. 56 See Case T-342/99, Airtours plc v Commission [2002] ECR II-2585, paras. 109–20, 172–81 and 270–7. 57 Case T-310/01, Schneider Electric SA v Commission [2002] ECR II-4071; Case T-77/02, Schneider Electric SA v Commission [2002] ECR II-4201. 58 Case T-5/02, Tetra Laval BV v Commission [2002] ECR II-4381; Case T-80/02, Tetra Laval BV v Commission [2002] ECR II-4519; confirmed by the ECJ, C-13/03 P, Commission v Tetra Laval BV [2005] ECR I-1113.

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significant internal changes, particularly with regard to its merger practice. Then-Commissioner Mario Monti placed the ‘more economic approach’ at the top of his agenda.59 On 1 September 2003, the first Chief Economist was appointed. Together with his team, the Chief Economist has the task of providing independent guidance on methodological issues of economics and econometrics in the application of EU competition rules, both in individual cases and in the shaping of the Commission’s overall competition policy. In potentially controversial cases, the Commission will use complex econometric evidence to back up a difficult market definition and test various theories of harm, although econometric evidence complements and does not normally replace qualitative analysis. Politically and legally, this aspect of the ‘more economic approach’ is relatively uncontroversial. In principle, it is up to the competition authority handling a case to decide on the methods to be used to clarify the relevant facts and to provide evidence for an infringement. Some concerns have been raised about whether the Commission has gone too far in its use of economic evidence; ie whether the gains in accuracy still justify the additional cost.60 It is also unclear whether smaller NCAs within the European Competition Network are able to meet a similar standard. Courts should arguably be cautious, therefore, when they substantially raise the standard of proof. An attempt by the Commission to redefine certain legal tests in order to reduce error costs is another legitimate version of a ‘more economic approach’. In recent judgments on Article 102 TFEU, for example, the Union Courts have emphasized the need to show anticompetitive effects in cases that do not by their nature create a strong presumption of such effects. So far, the Courts have left open whether likely or highly likely effects must be shown, or whether a showing of possible effects will suffice. They have emphasized that negative effects on the competitive process are to be distinguished from showing consumer harm (see pp. 222–3). An intense legal controversy has arisen around the most far-reaching version of a ‘more economic approach’: since the mid-1980s, the proposition has gained traction that efficiency or the maximization of (consumer) welfare is the exclusive goal of EU competition law, and that in implementing this goal, the effects of any potentially anticompetitive action on (consumer) welfare must be analysed in order to determine its legality.61 Agreements or unilateral 59 See, for example, Mario Monti, ‘EU competition policy after May 2004’, SPEECH/03/489 of 24 October 2003 given at the Annual Conference on International Antitrust Law and Policy of the Fordham Corporate Law Institute (now the Fordham Competition Law Institute), New York. 60 With regard to this concern, see Ewald, ‘Ökonomie im Kartellrecht’, 18–19. 61 Lars-Hendrik Röller (2005), ‘Economic Analysis and Competition Policy Enforcement in Europe’, (accessed 5 December 2012);

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conduct are to be prohibited only if direct negative welfare effects can be shown, and whenever presumptions are used, an efficiency defence should be allowed. Competition Commissioners have, in various public statements, advocated this approach. In 2004, Mario Monti, summarizing the key achievements of his term as a Commissioner, contended that he had ‘put consumer welfare at the top of the agenda of competition policy in Europe’.62 Neelie Kroes continued along the same lines, arguing that [c]onsumer welfare is now well established as the standard the Commission applies when assessing mergers and infringements of the Treaty rules on cartels and monopolies. Our aim is simple: to protect competition in the market as a means of enhancing consumer welfare and ensuring an efficient allocation of resources.63

In its enforcement practice, DG Competition today strives to identify direct and concrete consumer harm before issuing an infringement decision or prohibiting a merger. The ‘more economic approach’ in this interpretation proposes a break with the goals of EU competition law as defined by the ECJ, and with fundamental principles of interpretation in EU law. Traditionally, the rules of competition law have been derived from a teleological interpretation which places the competition rules in the context of the overall objectives of the Treaty64 and emphasizes the close interaction between the competition rules and free movement rules. Efficiency and consumer protection goals have always been implicated. The increase of efficiency and competitiveness of European firms were among the major aspirations of the common market from the start.65 Yet the finding of a competition law infringement has never presupposed a direct showing of consumer harm. In Continental Can, the ECJ established that the Lars-Hendrik Röller and Hans W. Friederiszick, ‘Ökonomische Analyse in der EU Wettbewerbspolitik. Ein erstes Résumé’, 2006, (accessed 5 December 2012); Damien J. Neven, ‘Competition Economics and Antitrust in Europe’, Economic Policy 21 (2006), 741. 62 Mario Monti, ‘Competition for consumer’s benefit’, speech of 22 October 2004 given at the European Competition Day, Amsterdam, (accessed 5 December 2012). 63 Neelie Kroes, ‘European Competition Policy—Delivering Better Markets and Better Choices’, SPEECH/05/512 of 15 September 2005 given at the European Consumer and Competition Day, London. 64 Case 283/81, Srl CILFIT and Lanificio di Gavardo SpA v Ministry of Health (CILFIT) [1982] ECR 3415, para. 20: ‘[ . . . ] every provision of Community law must be placed in its context and interpreted in the light of the provisions of Community law as a whole, regard being had to the objectives thereof and to its state of evolution at the date on which the provision in question is to be applied’. See also Case 6/72, Continental Can [1973] ECR 215, paras. 25–6. 65 See Chapter 5, this volume, p. 169, with references to the Spaak Report of 1956, which emphasized the need to realize economics of scale as one of the rationales for a common market.

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EU competition rules in general, and Article 102 TFEU in particular, were ‘not only aimed at practices which may cause damage to consumers directly, but also at those which are detrimental to them through their impact on an effective competition structure’.66 It has maintained this jurisprudence ever since, including in direct reaction to calls for a ‘more economic approach’,67 thereby confirming its established rights-based approach. The pros and cons of this version of a ‘more economic approach’ have been discussed elsewhere, and this is not the place to comprehensively revisit them. However, when approaching this debate against the background of the history of EU competition law, two phenomena deserve attention. Firstly, the ‘more economic approach’ was from the beginning presented as an effort to overcome an alleged European Ordoliberalism. To be sure, the attempt to replace the protection of the competitive process by a welfare maximization goal stands in stark contrast to an Ordoliberal conception.68 Yet it was not the fundamental divergence between Ordoliberalism and utilitarianism, between a rights-based and a welfare effects-based approach, that dominated the debate. Rather, Ordoliberalism, the major goal of which had been to translate economic theory into law, was (mis-)represented as a political movement, predominantly attached to fairness concerns, misaligned with economic theory, formalistic by nature, with no regard for the effects of a given type of conduct, and committed to a pro-regulatory stance. The ‘more economic approach’, on the other hand, was equated with a competition policy based on a determination of welfare effects—allegedly the only rational version of competition law. In such a scenario, the real debate remained hidden: should competition law be concerned with welfare effects only, or rather also with effects on the competitive process, as EU competition law has always been? Secondly, the ‘more economic approach’ has unleashed an institutional dynamic within the EU which is arguably new. A precise analysis of the forces that drove the shift of DG Competition towards a ‘more economic approach’ is still to be done. Arguably, important pressure came both from the US antitrust authorities69 and from US lawyers representing globally active firms

66

Case 6/72, Continental Can [1973] ECR 215 para. 26. See, for example, Case C-52/09, TeliaSonera Sverige, para. 24, with further references. 68 For an authoritative account of German Ordoliberal concerns, see Ernst-Joachim Mestmäcker, ‘The development of German and European competition law with special reference to the EU Commission’s Article 82 Guidance of 2008’, in The impact of the Commission’s guidance on Article 102, Lorenzo Federico Pace (ed.) (Cheltenham: Edward Elgar, 2011), 39. 69 See, in the merger context, then-FTC Commissioner Thomas B. Leary, ‘A Comment on Merger Enforcement in the United States and in the European Union’, address given 11 October 2001 to the Transatlantic Business Dialogue Principals Meeting, Washington DC, (accessed 5 December 2012); and former DOJ Deputy Assistant 67

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which had been increasingly exposed to the more stringent standards of EU competition law.70 In any case, the Commission as a whole and the Union Courts have not yet come to terms with this new approach. The recent Intel case is an example of the difficulties the ‘more economic approach’ currently raises. On the basis of established case law, the facts presented by the Commission in its decision71 suggest a relatively clear-cut case of exclusionary loyalty rebates and hence an infringement of Article 102 TFEU. Nonetheless, the Commission’s decision delves deeply into an analysis of the rebates’ negative consumer welfare effects. While this is done on the basis of the Commission’s Guidance Paper on the Enforcement Priorities in applying Article 102 TFEU,72 there is an apparent mismatch: enforcement priorities are typically defined to focus scarce resources on particularly important cases. Yet in the Intel decision, the impression is that it takes more resources to show the priority characteristics than to identify an infringement Attorney General Deborah Platt Majoras, ‘GE-Honeywell: The U.S. Decision’, address given 29 November 2001 to the Antitrust Law Section State Bar of Atlanta, (accessed 5 December 2012), all in reaction to Commission Decision No. 2004/134/EC of 3 July 2001 declaring a concentration to be incompatible with the common market and the EEA Agreement, Case COMP/M.2220—General Electric/Honeywell, OJ 2004, L48/1; confirmed by CFI in Case T-209/01, Honeywell International, Inc. v Commission [2005] ECR II-5527 and Case T-210/01, Honeywell International, Inc. v Commission [2005] ECR II-5575. 70 The softening of the EU approach to vertical restraints was pushed by, among others, Barry Hawk—a former partner at Skadden Arps, New York, and Brussels, and Director of the Fordham Competition Law Institute. In 1995, Hawk published an influential article proposing such a revision of policy in that area. See Barry E. Hawk, ‘System Failure: Vertical Restraints and the EC Competition Law’, Common Market Law Review 32 (1995), 973. See also Alexander Schaub, ‘Continued focus on reform: Recent developments in EC competition policy’, speech of 25/26 October 2001 given at the annual Fordham conference in New York: ‘Let me first reveal to you a well-kept secret: it was here in Fordham that it all began in 1995. Our participant of that year returned rather depressed, repeating that the Commission had been under attack from everybody, in particular from European competition lawyers, and that [ . . . ] the Commission was in danger of losing its intellectual leadership’. The cited speeches of European Officials are available at (accessed 5 December 2012). In the context of Article 102 TFEU, see James S. Venit, ‘Article 82: The Last Frontier’, 1158–9: ‘[ . . . ] Article 82 appears in many respects to have remained subject to the strictures of ordoliberalism and thus has too often been based on an approach that has ignored the need for sound economic analysis. [ . . . ] Unfortunately, such an approach strengthens the impression that Article 82 remains a Community problem child [ . . . ]’; then-DOJ Deputy Assistant Attorney General J. Bruce McDonald, ‘Section 2 and Article 82: Cowboys and Gentlemen’, presented 16–17 June 2005 at the College of Europe Global Competition Law Centre, Brussels: ‘Europe expects its companies to “compete like gentlemen”’, (accessed 5 December 2012); Barry E. Hawk, ‘Article 82 and Section 2: Abuse and Monopolizing Conduct’, in Issues in Competition Law and Policy, Vol. 2, Wayne D. Collins (ed.) (Chicago: American Bar Accociation, 2008), 871. 71 Commission Decision D(2009)3726 of 13 May 2009, Case COMP/C-3/37.990—Intel. 72 European Commission, Guidance on the Commission’s Enforcement Priorities in applying Article 82 of the EC Treaty to abusive exclusionary conduct by dominant undertakings, OJ 2009, C45/7.

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of Article 102 TFEU. In fact, the Intel decision seems to propose a new type of test for identifying anticompetitive rebates, but its wording suggests that consumer harm is shown merely to argue that the Intel case is indeed an enforcement priority—a fact that would normally be irrelevant for the legality of the infringement decision as such. The principle that the Commission must regularly stick to its self-imposed rules so as to ensure equal treatment cannot save an undertaking from the finding of an infringement where it in fact exists. On the other hand, the double reasoning of the Commission meant to satisfy both proponents and opponents of a ‘more economic approach’ imposes an extra burden on the defendant, who will inevitably try to disprove negative welfare effects. It is not yet clear how the Union Courts will handle this conflict, which is raised by the acute dissension about the need to show negative welfare effects. Potentially even more alarming is what one may call a ‘flight from judicial review’: with the entry into force of Regulation 1/03, the Commission has gained new instruments to implement its own political agenda largely outside judicial control, in particular by way of commitment decisions (Article 9, Regulation 1/03), but also through guidelines which have no binding effect on undertakings, NCAs, or national courts but which enjoy great impact nonetheless. Today’s debate on the need for a ‘more economic approach’ has no close counterpart in the early debates on the design and interpretation of the EEC competition rules. Rather, early debates focused on conflicting conceptions of a largely discretionary competition policy at the service of varying political goals on the one hand, and a justiciable, rule-oriented and thereby non-political competition law on the other. Only a rule-oriented regime seemed capable of protecting a system of undistorted competition against temptations at the national and EU level to engage in centralized planning or ad hoc intervention and protect against political influence. In this regard, the transformation of competition policy into law has been one of the major achievements of the EU. Arguably, these old debates merit more attention in the recent debates than they currently get. According to established doctrine, EU competition law has its place and function within a legal regime, centering on the creation and maintenance of a common market, which is constituted on the basis of individual economic freedoms, constrained by rules meant to ensure that the decentralized interaction of undertakings will contribute to the overall good. However, the future design of the EU is at a crossroads and current battles in the field of competition law reflect conflicting visions of a future EU: according to some, rule-based economic integration is to be replaced by a broader political integration geared toward, among other things, welfare maximization

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and growth. Such a major reinvention of the EU would arguably likewise affect the interpretation of the goals of EU competition law. In such a setting, the conflict between competition policy as a discretionary public policy, which it long was at the national level, and a justiciable, rule-based regime that it became in the context of the Community may now arise again at the level of the EU. If one of the major achievements of EU competition law over the last fifty years has been to constrain the scope for state intervention in the market, typically defended on welfare grounds, what could protect the Commission against the implementation of allegedly welfare-maximizing, but potentially anticompetitive measures if competition law were to be based on an open, overall bilan économique?

7.5 Never-ending Debates: Competition Law and Industrial Policy The idea that public intervention in the market is legitimate whenever a macro-economic cost-benefit analysis so indicates has been at the core of all traditional conceptions of industrial policy. A brief glimpse of the controversies that have recently dominated the legal literature would suggest that fervent discussions on industrial policy and its compatibility with competition law73 are a phenomenon of the past. The recent economic crisis has not induced the Commission to step back in its fight against cartels or generally to soften its enforcement74 as it did to some extent during the economic crisis of the 1970s.75

73 See, for example, Ernst-Joachim Mestmäcker, ‘Auf dem Wege zu einer Ordnungspolitik in Europa’, in Eine Ordnungspolitik für Europa: Festschrift für Hans von der Groeben zu seinem 80. Geburtstag, Ernst-Joachim Mestmäcker (ed.) (Baden-Baden: Nomos, 1987), 9, 27; German Monopoly Commission (Monopolkommission), Neuntes Hauptgutachten: Wettbewerbspolitik oder Industriepolitik (Baden-Baden: Nomos, 1992); Peter Hommelhoff, ‘Industriepolitik versus Wettbewerbspolitik im Maastricht-Vertrag’, in Der Staatenverbund der Europäischen Union: Beiträge und Diskussionen des Symposions am 21./22. Januar 1994 in Heidelberg, Peter Hommelhoff and Paul Kirchhof (eds) (Heidelberg: C. F. Müller, 1994), 131; Wernhard Möschel, ‘EG-Industriepolitik nach Maastricht’, in Festschrift für Rudolf Nirk zum 70. Geburtstag: am 11. Oktober 1992, Karl Bruchhausen et al. (eds) (Munich: C. H. Beck, 1992), 707; Ulrich Immenga, ‘Wettbewerbspolitik contra Industriepolitik nach Maastricht’, Europäische Zeitschrift für Wirtschaftsrecht (1994), 14. 74 See, among others, Neelie Kroes, ‘Many achievements, more to do’, SPEECH/09/106 of 12 March 2009 given at the International Bar Association conference, Brussels; Andrea Amelio and Georges Siotis, ‘Applying EU competition rules during testing times: Some issues’, Concurrences 2 (2009), 3, 6. 75 See Chapter 5, this volume, pp. 176–9.

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Before the recent crisis, industrial policy became an issue once more with the Maastricht Treaty, which extended the goals of the Treaty of Rome to include ‘the strengthening of the competitiveness of Community industry’ (Article 3(m) EC) and introduced a Title on industrial policy which granted the Community formal competences in this area.76 On the other hand, a passage was included according to which ‘[t]his Title shall not provide a basis for the introduction by the Union of any measure which could lead to a distortion of competition [ . . . ]’ (Article 173(1) TFEU; formerly Article 130(1) EC). A rhetorical truce between industrial policy and competition policy was found with the concept of a ‘horizontal’ industrial policy.77 Only implicitly was the tension between industrial policy and competition policy touched upon during the negotiations on the Lisbon Treaty, when Nicolas Sarkozy— then President of the French Republic—maintained that competition could not be a ‘goal as such’ and insisted that the system of undistorted competition be deleted from the list of Union goals laid down in Article 3(3) TEU. The underlying claim was plain: competition was to be seen as only one among various alternative goals to realize an internal market and economic growth. Industrial policy was another possible alternative—a recourse to the early phases of the evolution of EU law when integration through planning was repeatedly proposed as an alternative to integration through the market, if only in specific sectors which allegedly needed state guidance. The general perception today is that the Lisbon Treaty has not changed the competition rules’ role and position within the framework of the Union Treaties. This continuity has been facilitated in particular by Protocol 27, according to which the member states consider that the internal market includes a system of undistorted competition.78 The role of competition law within the internal market and its interpretation by reference to the system of undistorted competition which it is meant to guarantee has been confirmed by the ECJ in recent judgments.79 However, Sarkozy’s initiative indicates that the debate is not dead. This is not only true in the political arena. In the midst of the debate on the ‘more economic approach’, Lars-Hendrik Röller, the Commission’s first Chief Economist, explained that, after Lisbon, the instruments of EU competition policy must be used to the clear benefit of the European economy if the 76 Article 173(1) TFEU (formerly Article 130(1) EC) reads: ‘The Union and the Member States shall ensure that the conditions necessary for the competitiveness of the Union’s industry exist’. 77 See, for more details, Chapter 5, this volume, p. 167. 78 Consolidated version of the Treaty on European Union—PROTOCOLS—Protocol (No. 27) on the internal market and competition, OJ 2008, C115/309. 79 To this effect, see Case C-52/09, TeliaSonera Sverige, not yet reported, paras. 20–21; Case C-496/09, Commission v Italian Republic, not yet reported, para. 60.

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enforcement powers of the Competition Commissioner are to be left intact.80 If efficiency becomes the sole objective of EU competition law, the competitive process could arguably give way to measures of public intervention and planning where these promise to maximize efficiency. In this light, a dictum of the 1973 Memorandum on the technological and industrial policy programme to the effect that ‘[t]he industrial policy and the competition policy pursued by the Commission complement each other closely. [ . . . ] Both are aimed at increasing the efficiency of Community industry through structural improvements and the stimulation of competition’—arguably just a way for DG IV to ‘market’ its competition policy positively as an integral part of what was then a wider economic competitiveness agenda81—could well regain practical relevance.82 In the past, those competition law regimes have been prone to politicization and to the implementation of industrial policy agendas where the decision-making power was not in the hands of an independent authority following a quasi-juridical process, but in political hands.83 The European Commission is ultimately a political body. Institutional protection against industrial policy temptations remains strong, however, where competition policy is closely guided by law and reviewed scrupulously by courts. The greater the administrative discretion and the broader the political agenda, and the greater the scope for avoiding judicial control, the greater the risk of a politicization of competition policy. History serves as a reminder of what is ultimately at stake.

7.6 Conclusion Stepping back from the various lines of debate which EU competition law has lived through over its fifty years of existence, the first observation is that— despite important reforms and changes over time—it has proven strong, robust, and stable. Measured by its practical impact, it has been a huge success,

80 Lars-Hendrik Röller, ‘Economic Analysis and Competition Policy Enforcement in Europe’, in Modelling European Mergers: Theory, Competition Policy and Case Studies, Peter A.G. van Bergeijk, Simon Bremer, and Erik Kloosterhuis (eds) (Cheltenham: Edward Elgar, 2005), 11, 12–13. 81 Chapter 5, this volume, pp. 175–6. 82 For the ambivalence of recent industrial policy initiatives, see, for example, Commission Communication: An Integrated Industrial Policy for the Globalisation Era. Putting Competitiveness and Sustainability at Centre Stage, COM(2010)614; Commission Communication of 3 March 2010, Europe 2020. A strategy for smart, sustainable and inclusive growth, COM(2010)2020; and Commission, European Competitiveness Report 2011, SEC(2011)1188 final, 201–23. 83 See Chapter 3, this volume, pp. 106–8.

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perhaps surprisingly so: supranational competition law came into being as a novel legal regime with scant tradition in the national legal orders, and it met with considerable resistance from the member states once its full force was recognized. With its direct applicability and its unique enforcement regime at EU level, which today is also deeply interconnected with national enforcement, it has established itself at the heart of EU law. All attempts to mitigate the impact of competition law on nationally owned or favoured undertakings, and ultimately on national sovereignty, have remained unsuccessful. Over the last fifty years a forceful competition law culture has evolved in the EU—a culture that is all the more impressive as no such culture existed before. The success of this policy domain was based on various factors. Among them was the fact that, due to its close links with the free movement rules and the goal of a common market, EU competition law has always been at the core of the European integration project. The function of competition law to realize and protect undistorted competition has translated into legal rules that provided safeguards against its discretionary instrumentalization for variable political purposes, and into a powerful system of public enforcement by the Commission, most of the time in close cooperation with the Union Courts. The growing body of precedents to which both Commission and the Courts have generally adhered has led to a strong sense of continuity over time, generally unaffected by changing schools of economic thought and policy. The reforms that EU competition law has gone through since the 1990s have meant a partial rupture with this prevailing sense of continuity. However, it appears that the reforms have not disrupted the general continuity of the Union Courts’ case law. Despite numerous calls by proponents for a redefinition of the goals of EU competition law to embrace a ‘more economic approach’, the ECJ has held firm to its traditional understanding of those objectives. As regards the less controversial aspects of a ‘more economic approach’— the focus on strong economic evidence, both qualitative and quantitative— there may be a risk that the added cost of better evidence may sometimes outweigh its added value. In particular, in a European setting of decentralized competition law enforcement, not all NCAs may be in a position to live up to the increased expectations with regard to economic evidence. The Commission, on the other hand, may be forced to focus on a small set of large cases, losing sight of other areas of competition law enforcement, or to shift towards an ever-increasing use of consensual enforcement instruments outside the purview of judicial review. The complex interplay between the Commission and the Union Courts—a productive force in the evolution of EU competition law, which has ensured its coherence and continuity over time—may thus be seriously harmed.

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Another aspect to be closely observed is the interaction between competition law enforcement at the European level and at the national level. As regards competition law and policy, Regulation 1/03 has been a leap towards centralization. At the same time, the national institutional and procedural enforcement regimes remain specific to each member state and may provide an important pool of possible solutions for the EU to cope with criticism targeted at the EU’s own procedural regime. The EU would be well advised to learn from the national legal regimes in this regard. In these important debates on the future of EU competition law, history does not provide conclusive answers, but it provides context and orientation, and reminds us of various factors to keep in mind. What is the place of competition law within the broader legal and political system established by the Union treaties? What does this mean for its legitimacy and strength within the EU and vis-à-vis the member states? What are the institutional preconditions for making competition law a success? How can competition law safeguard against political intervention? What does history teach us about the preconditions for effective enforcement; for example, in relation to the role of public and private enforcement? What lessons can be learned from the success and failure of self-regulation, which is, at times, being rediscovered in the EU? If nothing else, history is a useful reminder of these and other difficult questions that will have to be answered in order to find the right balance between continuity and change.

Index abuse of dominant position (Article 86 EEC) see also competition law of the EU administrative implementation 77–84 centralization of application 77 drafting 58, 64 enforcement 78–84 judicial protection 84–5 purpose of abuse control, under 201–2 concept 34–5 enforcement 35–6 generally 22 structuralist approach, to 47–9 teleological interpretation, of 47 Albrecht, Ernst 31, 33, 145 Andriessen, Frans 37, 180 anti-competitive agreements (Article 85 EEC) administrative implementation 77–84 centralization of application 77 drafting 62–4 effects on competition 38–9, 41–2 effects on trade 38–40 enforcement 78–84 exemptions 70–1 merger control, and 201 notification system 26, 31, 70 teleological interpretation, of 38–9 case law (1960s) 38–43 competition authorities European Commission, cooperation with 80–2 role and power 79–80 generally 22 anti-trust law see competition law of the EU; national competition law; United States anti-trust policy see competition law of the EU; United States Arnold, Thurman 135–6 Bain, Joe 142 Bernini, Giorgio 140–1 block exemptions categories of agreements expansion of scope 182–3, 189 notification, of 86–7 generally 30 proposal for general power to issue 29

Regulation 19/65, adoption, of 30 safe harbours 217 ‘white clauses’ 217 Böhm, Franz 134, 136 Borschette, Albert 33, 35, 143, 175 Bowie, Robert 133, 135 Brittain, Leon 187–8 cartels cartelization period 54–6, 92 competition rules 64, 67–8 crisis cartels flexible approach, to 11, 34, 37 decartelization in Germany 96–8 ‘fight against cartels’ 210–11, 218, 226 France 61–2, 70, 78, 96 freedom of trade, and 93 Germany, and 59–61, 68, 78, 96 Italy, and 91, 96, 102 Keynesian discourse, and 21, 28, 34, 37 market integration 22, 43 national laws absolute cartel ban 103 control of abuse principle 104 guiding principles 103–4 obligatory registration 103 neo-corporatist approach, to 28 Netherlands 95, 102–3 Ordoliberal approach, to 25–6 penal approach, to 93 positive and stabilizing economic feature, as 11, 54, 92–3 price fixing 43–5 prohibition 203 settlement procedure 219 transition period (end-1969) 25, 26 United Kingdom 100–1 Caspari, Manfred 27, 37 Chicago School 208, 220 Clark, John M. 139 Clappier, Bernard 29 Commercial Solvents case 156–9 common market ‘American challenge’ 35, 143, 174 competitive market structure 45–9

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common market (cont.) market integration impediments, to 43–52 undistorted competition, and 38–43 market partitioning anticompetitive nature, of 44–5, 49–52 competition authorities decentralized enforcement of rules 214–15 development of mandate 118 European Commission cooperation, with 80–1 vertical relationship, with 85 Regulation 17/62 role and power of Member States 79–80 competition law of the EU see also national competition law achievements 210–13 case law 1960s 38–43 1970s to 1980s 43–52 evolution, of 37–8 market integration and undistorted competition 38–43 market partitioning as obstacle to competitive market structure 43–52 common-market project competition law as core, of 1 relationship, with 208 competition policy chronology 1963 to 1981 21, 52–3 1970s to 1980s 32–7 competition rules applicability, of 195 Article 101(3), direct applicability 217–18 convergence with national competition law 215–16 centralization, of 216–17 conceptual and practical difficulties, facing 195 enforcement 213–19 generally 54–7, 87–8 monitoring system and Ordoliberal principles 26–7 national competition law, convergence, with 215–16 private enforcement 219 Regulation 17/62 see Regulation 17/62 Regulation 1/03 see Regulation 1/03 conflict of laws concurrent applicability 195–6 overlapping national and EU law 195–6 constitutionalization, of 5, 19 direct effect 1

EEC Treaty role of competition law 169–72 enforcement of competition rules centralization, of 216–17 conceptual and practical difficulties, facing 195 discourse 213–19 private enforcement 219 Regulation 17/62 see Regulation 17/62 Regulation 1/03 see Regulation 1/03 European institutions’ powers 24 Europeanization process 89–90 European integration, and 1 Frankfurt Conference on Restraints of Competition free market economy, and 1 goals competitiveness 25–6, 32–3 economic efficiency 20 European Commission’s perspective 22–37 industrial policy 32–3 market integration 19, 22, 38–52 protection of competition 19, 22 public policy goals 20 single market 42, 51 legal research established field, of 2 ‘more economic approach’, to block exemptions 209, 217 consumer harm identification 222–3 consumer welfare 48, 221–2, 225 European Commission’s policy (1970s to 1980s) 32 evidence required in Article 102 cases 219 generally 2, 6, 11, 17, 18, 203, 220–6 historical context 207, 209 institutional response 223–5 Ordoliberalism, compared 223 reaction by the ECJ 48 national competition law convergence 215–16 influence, of 109–11 normative foundations 2 notification procedure abolition 218 backlog 6, 31, 86–7, 218 European Commission rulings 84–5 national courts 84–5 opponents and supporters, of 70, 71, 75 simplified procedure 27 ‘old’ and ‘new’, distinguished 207–8 practical impact 229

Index reforms 229 specialized area of law, as 2 strengthening of during 1980s 90 transatlantic interaction institutionalized interaction (1970 to 1981) 143–5 introduction 125–9 motivations, for 145–6 workable competition 139–41 United States’ influence (1960s to 1970s), on conclusions 160–1 influence, meaning of 127 introduction 125–9 methodology 127 utilitarian approach, to 6 workable competition definition 139 influence on competition law in the EU 139–41 theoretical debate in US 139–40 competition law theory development, of 1–2 legal writing, on 207–9 competition policy of the EU see competition law of the EU; European Commission; industrial policy competition rules in the EU see competition law of the EU conflict of laws concurrent applicability 195–6 effet utile 149, 195, 203 overlapping national and EU law 195–6 overlapping state and federal laws 195–6 Commercial Solvents (1974) case 48–9 Consten and Grundig case 27, 29–30, 40–1, 147–50, 159, 212 Continental Can case 35–6, 46–7, 153–6, 159–61, 202–3, 212, 222–3 consumer welfare see competition law of the EU Davignon, Étienne 177, 179–81 180, 181 Davignon plan 177–8 Delors Commission 184 Deringer, Arved 74–5 Directorate-General for Enterprise and Industry (DG III) 17, 165, 177–85, 188–90 Directorate-General for Competition (DG IV) competition policy 21, 24–6, 29 composition 25 political divisions 29 transatlantic antitrust expertise 133–5 transatlantic interaction 130–5, 139–141, 143–5 workable competition 139–41

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Directorate-General for Science, Research and Development (DG XII) 182, 189 Directorate-General for Telecommunications, Information Market and Exploitation of Research (DG XIII) 182 distribution agreements ECJ approach, to 51–2 drafting Article 85 EEC 58–64 Article 86 EEC 64 merger regulation 46–7, 187 Regulation 17/62 alternatives to Commission’s proposal 69–71 centralization, principle of 69–71 exemptions procedure 70 generally 65–9 non-state actors’ role 71–3 Regulation 1/03 214 Duesberg, Peter 145 economic concentration economic power national industries representing 200 encouragement, of 200 European-sized firms 174–5 transnational European corporations 200 economic crisis competition policy 31–7 hyperinflation in Germany 94 economic policy competition policy, and 196–8 Economic and Social Committee competition policy supranational powers 24 Edwards, Corwin D. 135–6, 138–40 enforcement competition law of the EU public enforcement 77–8, 87–8, 195, 213–19 private enforcement 219 Erhard, Ludwig 23, 72, 173, 197 Euratom Treaty characterization as industrial policy 167–8 European Coal and Steel Community balance of power considerations 191 characterization as industrial policy 167–8 competition rules 58 non-discrimination principle 191–2 peace process post-1945 cartel control as condition, of 192 European Commission administrative antitrust system complaints 85

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European Commission (cont.) control mechanisms 82–4 cooperation with competition authorities 80–2 anticompetitive agreements exemptions 78–9 competition authorities cooperation, with 80–1 competition law and policy conclusions 52–3 enforcement 77–8 institutional and personal setting 22–3 supranational powers 24 independence enforcement of competition rules 77–8 notifications handling, of 85–7 Regulation 17/62 administrative implementation 78–84 control mechanism 82–4 enforcement of competition rules 77–8 reactions to Commission’s proposals 69–71 supranational powers 24, 83 European Council competition policy supranational powers 24 European Court of Justice archive 3 case law 1960s 38–43 1970s to 1980s 43–52 conclusions 52–3 evolution, of 37–8 market integration and undistorted competition 38–43 market partitioning as obstacle to competitive market structure 43–52 competition law doctrine objectives 22 supranationality 24, 160 US antitrust law distribution, (case studies) 147–53 encounters, with 146–60 precedential influence 159–60 reinforcement of a dominant position by acquisition (case studies) 153–6 unilateral refusal to deal (case studies) 156–9 European Parliament competition policy consultative status 24 European Union (EU) competition law 1

integration 10–1 supremacy of EU law 1, 10 Fédération internationale pour le droit européen (FIDE) competition policy in the EU influence, on 131 France abuse principle 64 agreements between undertakings regulation, of 61–2 anti-cartel legislation 94, 104 cartels generally 61–2 ‘good’ and ‘bad’ cartels 61, 70, 94 penal approach, to 93 state encouragement during 1930s 95 competition authorities development of mandate 118 expert advisers 107, 109–10, 117–18 political decision-makers 107, 118 reporting requirements 119 right to instigate investigations 118 development (1960s to 1980s) 114–17 economic policy post-1945 96 national competition law absolute cartel ban 104 bilan économique 105, 117 bonnes ententes 94, 105 case-by-case assessment 105 development (1960s to 1980s) 114–7 enforcement 107, 117–18 exceptional measures 100 mauvaises ententes 94, 105 principles 103, 114–15 statutory assessment criteria 114–7 national competition policy development until 1945 93 penal approach, to 93 planification generally 96 inflation control, and 100 nationalization 99–100 price control 99–100 public undertakings 205 state trading monopolies 204 Frankfurt Conference on Restraints of Competition contributions with transatlantic dimension 138 organization 135 participants 135–9

Index plenary reports 136 working groups 136 free trade promotion, of 6 Freiburg School 98 Gaitskell-Allen report 100 GATT state trading monopolies guaranteed existence 204 Gaudet, Michel 30, 131 GB-Inno-BM case 34 Gerber, David J. 7, 9, 19, 56, 64–5, 125 Germany anti-cartel legislation 94, 103–4 anti-competitive practices prohibition post-1945 97 cartels absolute cartel ban 103–4 generally 59–61, 92–3 historical background to cartelization 94 freedom of trade 92 decartelization post-1945 generally 96 instrument of destruction and reconstruction, as 96–8 decision-making authorities independence of institution 108–9 economic policy post-1945 96 economic reconstruction post-1945 96 hyperinflation 94 Missbrauchsprinzip (principle of abuse) 60 national competition law absolute cartel ban 103–4 development (1960s to 1980s) 115–17 enforcement 108 exemptions 106 principles 103, 115–16 statutory assessment criteria 104–6, 117 national competition policy development until 1945 92–3 prohibition principle 64 sovereignty restoration conditional on competition law adoption 97–8 Verbotsprinszip (principle of prohibition) 60, 98 Groeben, Hans von der 23–7, 30–1, 33, 35, 63, 65–7, 72–3, 83, 131, 134–6, 140, 173, 175, 192–4, 197 Gűnther, Eberhard 23, 26, 72 Haferkamp, Wilhelm 33 Halèvy, Ellie 199

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Hallstein Commission aims 71 role 12 Hallstein, Walter 22–3, 65, 72, 192, 197–9 Hoffmann-La Roche case 213 Houssiaux, Jacques 72, 137, 142 industrial policy aims 199 American challenge 174 capitalistic imperialism 200 Colonna memorandum 175 common market 175, 177, 184 competition policy in the EU conceptual differences, between 199 influential determinants 163–4 interaction, with 162–4, 165–6, 175, 199–200, 226–8 parallel evolution with industrial policy (1985 to 1988) 184–5 competition rules promotion of industrial policy objectives 183–4 discourse (mid-1960s to mid-1970s) 173–6 economic crisis (mid-1970s) 176–9, 226 economic policy implementation of medium-term policy 196–7 planification, and 196–7 planning, distinction of different types 197–8 economic projections global projections incompatible with EEC system 198 EEC Treaty competition policy dominant 169–72 Euratom Treaty characterization as industrial policy 167–8 European Coal and Steel Community characterization as industrial policy 167–8 European-sized companies 174, 175 evolution parallel evolution with competition policy (1985 to 1988) 184–5 horizontal understanding, of 167, 227 interventionist policies economic crisis, and 176–9 justifications, for 180–1 introduction 162–4 Memorandum on action programme for the second stage 173, 196 methods 199

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industrial policy (cont.) national industrial policies effect on EEC 176–7 replacement at European level 178 notions, of 164–7 definitions 165 institutional driver 164 original focus (1960s) 165 relationship with competition policy 165–7 objectives promotion by competition rules 183–4 occurrence in Commission’s programme for second stage 199 planification medium-term economic action plan, and 196 resistance, to 173 positive industrial policies 176 priorities 201 proactive policy 179–83 public sector instruments of policy, as 203–4 public policy standards, compliance 2–5 public undertakings 205–6 state trading monopolies 204–5 research and technological development 179, 181–4 sectoral policies declining sectors 177–8 growth sectors (1980s) 179 planification 197 ship-building economic crisis, and 178 steel industry Davignon plan 177–8 textile industries soft law framework of state aid 178 Intel case 224–5 Italy cartelization of economy 102 economic policy post-1945 96, 101–2 public undertakings 205 state holdings in major corporations 101–2 state trading monopolies 102, 204

competition policy influence, on 27–31, 34–7, 52–3 Ordoliberalism, and 21 Kronstein, Heinrich 72–3, 133–4, 136, 138

Jaume, René 68 Joliet, René 201–2

Mansholt, Sicco 23 Marjolin, Robert 23, 25, 28, 30, 173, 196 market economy characteristics 205 market integration see common market market partitioning see common market Markham, Jesse 131, 136, 139, 142 Marshall Plan 95 Mason, Edward 133, 142 member states administrative antitrust system control mechanisms 82–4 competition authorities role and power 79–80 European Commission cooperation, with 80–2 Memorandum on action programme for the second stage 173, 196 Memorandum on the Problem of Concentration background, to 141–2 questionnaire 141 transatlantic interaction 141 Mercillon, Henri 142 merger control Colonna Report 186 competition policy in the EU interaction, with 185–8 economic concentration restriction, of 201 generally 22, 36–7 ‘pure’ competition approach, to 188 Mestmäcker, Ernst-Joachim 72, 137, 138, 145, 154–5, 193, 201–2, 204 Metro I case 152–3 Möller, Hans 137, 140 monopolies generally 22 state trading monopolies instruments of industrial policy, as 204–5 Műller-Armack, Alfred 23, 68 Mussard, Roland 68

Kaysen, Carl 133, 142 Keynesian discourse capitalist development neo-corporatism 21 planification 21

Narjes, Karl-Heinz 25, 184 national competition law see also individual countries eg France case-by-case assessment 104–5 chronology (1960s to 1980s)

Index institutions assessing restraints on competition 117–19 principles, reorientation of 113–16 progressive development 111–13 statutory assessment criteria 116–17 competition law in the EU influence, on 109–11 competition policy in the EU interaction, with 89–90 conclusions 122–4 Europeanization process 1960s to 1980s 119–22 limited extent of influence 119–22 influences affecting development post-1945 95–6 institutions assessing restraints on competition development (1960s to 1980s) 117–19 development (post-1945) 106–8 international institutions influence on national laws 121–2 introduction 89–92 post-1945 emergence, of 95–103 principles absolute cartel ban 103–4 control of abuse 104 obligatory registration 103–4 reorientation during 1960s to 1980s 113–16 procedures assessing restraints on competition development (1960s to 1980s) 117–19 development (post-1945) 106–8 reorientation during 1960s to 1980s 117–19 statutory assessment criteria generally post-1945 104–6 reorientation during 1960s to 1980s 116–17 structural differences, between 103–8 supranational competition policy interaction, with 89 national competition policy competition policy in the EU interaction, with 89–90 Europeanization process bottom-up effects 90 limited extent of influence 119–22 parallel effects 90 top-down effects 89–90 pre-1945 economic context 92–4

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emergence from 1920s 94–5 legal framework 92–4 Netherlands cartels cartel haven, as 91, 115 obligatory registration 102–4 state encouragement of cartelization 95 decision-making authorities expert advisers 107, 110 economic policy post-1945 96, 101 national competition law common interest test 106 control of abuse principle 104, 106 development (1960s to 1980s) 115 development (generally) 91, 95 development (post-1945) 101–3 enforcement 107 principles 103–4, 115 Ordoliberalism aims 97–8 bipartisan support of competition policy 198 cartels 25 challenges, to 20, 22 chronology (1963 to 1981) 21, 52–3 competition policy influence on competition policy 25–31, 52–3 Keynesian discourse, and 21, 27–31, 52–3 order based policy, as 97–8 constitutionalization, of 19 definition 24 generally 6, 7, 9–10 holistic concept 25 introduction 19–22 Keynesian discourse, and conclusions 52–3 introduction 21 limits, of 20 historical role 7 Organization for European Economic Cooperation (OEEC) competition policy in the EU influence, on 131–2 Otter Tail Power Co case 157–8 Philip Morris case 187 planification capitalist development Keynesian approach 21 France post-1945 99–100

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planification (cont.) industrial policy medium-term economic action plan, and 196 resistance, to 173 political science competition policy 9 embedded liberalism 6 privatization promotion, of 6 Regulation 1/03 contrast to Regulation 17/62 18, 77, 80, 210 decentralization of prohibitions 81 enforcement of competition rules 213–19 EU law precedence 211 ‘flight from judicial review’ 225 Regulation 17/62 administrative implementation 78–84 adoption 77 alternatives to Commission’s proposal 69–71 centralization, principle of 69–71, 77, 78 changes to competition system 85–7 conclusions 87–8 drafting 65, 66–9 enforcement 77–8, 213–19 entry into force 78 exemptions procedure 70 implementation 78–84 judicial protection 84–5 national competition law influence, on 109–10 negotiation 73–7 notification system 70, 77 non-state actors’ role 71–3 origins 64–6 repeal 78 ‘transmission belt’ of prohibition, as 55 restraint of trade United Kingdom doctrine underpinning competition policy 93–4 public interest test 95 Roemer, Karl 137 Rye, Jean 25, 30 Saclé, Armand 28 Sassen, Emanuel J.A. 31–3 Schiller, Karl 198 Schlieder, Willy 33, 35–6, 143, 145 Schumacher, Hermann 23, 27 Schuman declaration 58 Schuman Plan (1950 to 1951) informal transatlantic collaboration 130

Schwartz, Ivo 34, 132, 137, 194, 198–9 Schwinn case 150–1 sovereignty balance of power considerations 191 Germany restoration conditional on competition law adoption 89–90, 92, 124 Spaak Report 19, 35, 63–4, 169 state aids generally 22 steel industry Davignon plan 177–8 Steindorff, Erich 72–3 supranational law competition law of the EU example, of 1 Sutherland, Peter 37,185, 187 Sylvania case 151–3 Tait, Edward 138 Thiesing, Jochen 68, 137 Thorn, Gaston 37 Toulemon, Robert 143, 174 Turner, Donald 133, 142 UNICE 71 United Brands (1978) case 49 United Kingdom anticompetitive agreements ‘gateways’ 105, 116 cartels two-tiered approach to control 105, 116 competition authorities courts 108 development of mandate 118 law officials 118 reporting requirements 119 right to instigate investigations 118–19 competition policy consumer interests 116 economic policy post-1945 96 Gaitskell-Allen report 100 national competition law development (1960s to 1980s) 113–14, 116 development (post-1945) 100–1 enforcement 108 negotiation between state and businesses 100 principles, 103–4, 113–14 public interest 101, 105 statutory assessment criteria 116 national competition policy development pre-1945 93–4

Index restraint of trade doctrine development, of 93–4 public interest test 95 United States ‘American challenge’ 35, 143, 174 antitrust law Western European competition law, distinguished 2, 32 competition law in the EU conclusions 160–1 DG IV 130–42 influence (1960s to 1970s), on 125–9 influence, meaning of 127 introduction 125–9 methodology 127 role in drafting 58 conflict of laws effet utile 149, 195, 203 overlapping state and federal laws 195–6 DG IV influence (1960s to 1970s), on 130–42 economic relations Europe, with 35, 143 European Court of Justice influence (1960s to 1970s), on 146–60 Sherman Act

influence on European competition law 47, 125, 138, 202 transatlantic interaction different fora, in 130–2 institutionalized interaction (1970 to 1981) 143–5 workable competition definition 139 influence on competition law in the EU 139–41 theoretical debate in US 139–40 Uri, Pierre 35 VerLoren van Themaat, Pieter 23, 27–9, 31–2, 66–8, 72, 131, 136, 138, 140 vertical agreements competition policy development, of 27 Vouel, Raymond 33, 180 Waelbroeck, Michael 137–8 Walt Wilhelm rule 42–3, 215 White Motor case 147–8 Wirsing, Erich 68 World Economic Conference (1927) international controls on competition diplomatic consultations 195

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