Tomorrow, European Union Competition Commissioner Margrethe Vestager will be in Washington to address the Antitrust Section of the American Bar Association. Within the EU, Commissioner Vestager’s role is to ensure that businesses compete fairly, markets operate freely, and antitrust rules are followed. However, the EU approach to competition policy – or the rules that govern how businesses behave in open markets – is different from that taken in the United States.
While there have been periods of cooperation, the U.S. and EU views of competition enforcement have never been fully aligned. In addition to questions over the enforcement role of the EU Commission and lack of judicial review in Europe, the two legal frameworks’ most notable point of divergence is over the question of market dominance. In the U.S. monopoly can be legal, and legal challenges primarily address how monopoly status is obtained and maintained. In Europe, the view is that a dominant firm has a “special responsibility” in the market and to its competitors. Frustratingly, the EU does not clearly define what constitutes dominance or “special responsibility”. For businesses with leading market share positions, the U.S. approach maintains a watchful eye, but too often the EU appears to punish success.
But ultimately, the greatest difference between the U.S. and EU approaches lies with the philosophy that underpins the function of competition enforcement. Europe’s motives for competition enforcement serve a regulatory function, designed to shape and exercise control over a given industry. In contrast, the U.S. has largely shunned that view. Instead, antitrust enforcement has been used to address specific conduct by a market actor, and the remedy is designed to restore market forces to a position of self-regulation.
It’s easy to see the EU’s state of mind play out in practice. Commissioner Vestager made waves last year by her highly questionable use of state aid law to levy retroactive tax bills on companies for tax arrangements approved by the Member States. Many rightfully argue that the questions at the heart of these matters have roots in tax policy, not competition enforcement. Similarly, Commissioner Vestager has recently called for new EU competition rules in the age of “big data,” an approach driven by a regulatory philosophy rather than the actions of a specific market actor.
Regulatory instincts in Europe’s competition philosophy extend beyond Brussels. It can be seen in Germany and France, where competition enforcers have also expressed “big data” regulatory like concerns. And it can be seen in the UK, where the competition authority recently raised eyebrows in its decision against Pfizer that essentially claimed the price of a drug as too high –more a question for a price control board than an antitrust matter.
To be clear, policy debates are welcome and differences between the U.S. and Europe are expected. Debates over tax, the age of “big data,” pharmaceutical prices, or dozens of other issues often result in industry regulation based on societal judgments. However, competition law and enforcement should not be the back door for making these decisions. Competition should be guided by economic analysis and consumer welfare. It is important to remember this philosophical difference as Commissioner Vestager delivers her remarks this week. To the degree her remarks speak to the regulatory approach to European enforcement, incoming U.S. antitrust leadership should be forewarned that periods of transatlantic divergence lie ahead.