TILEC – T ILBURG L AW AND E CONOMICS C ENTER Convergence and Divergence in Competition Law Filomena Chirico Norwich, 12 June 2008

TILEC – T ILBURG L AW AND E CONOMICS C ENTER Outline General Theoretical Background Positive analysis >Convergence in competition policies >Divergence in competition policies Mechanisms of convergence Impact of divergence on welfare Advantages of divergence Obstacles to spontaneous convergence Optimal amount of convergence

TILEC – T ILBURG L AW AND E CONOMICS C ENTER General Theoretical background Case for convergence >Externalities >Transaction costs >Asymmetric Information >Economies of scale Case for divergence >Costs of harmonisation and uncertainty of success >Local preferences >Benefits of Experimentation

TILEC – T ILBURG L AW AND E CONOMICS C ENTER Convergence in competition policies Introduction of competition laws Use of economics as foundation of antitrust Enforcement Priorities Actual solutions Strategies >Leniency >Private enforcement

TILEC – T ILBURG L AW AND E CONOMICS C ENTER Mechanisms of convergence Extraterritorial application of competition law Free trade agreements >Source of market contestability >Antitrust clause attached International agreements on a global competition order not successful >Maybe overinclusive >High costs of reaching the agreement

TILEC – T ILBURG L AW AND E CONOMICS C ENTER Divergence in competition policies Goals of competition law >Innovation & Welfare >Fair competition >Protection of SMEs >Promoting the healthy development of the socialist market economy Strength of competition policy vis-à-vis other national regulations Standards for evaluation >Consumer welfare Your consumers or mine? Divergent solutions to certain issues

TILEC – T ILBURG L AW AND E CONOMICS C ENTER Areas of EU/US divergence Excessive pricing Predatory pricing Refusal to deal Loyalty and volume-based discounts Vertical territorial restraints and RPM Vertical and conglomerate mergers Choice of remedies Pursuit of dynamic efficiency

TILEC – T ILBURG L AW AND E CONOMICS C ENTER Impact of divergence Consumer welfare >Export cartels >Protectionist market foreclosure Firms >Increase in costs of compliance >Refrain from trade (how serious?) Regulatory costs >Multiple interventions >Spillovers onto other jurisdictions >Risk of overenforcement

TILEC – T ILBURG L AW AND E CONOMICS C ENTER Advantages of divergence Local policy preferences >Maybe not achieved because of external effects Experimentation with enforcement >Economics is no panacea Remedies targeted to the local situation

TILEC – T ILBURG L AW AND E CONOMICS C ENTER Obstacles to spontaneous convergence Externalities Lack of coordination Standards battle: Twiddeldum and Twiddeldee Non competition goals trumping antitrust policy Capture of national/local authorities

TILEC – T ILBURG L AW AND E CONOMICS C ENTER Optimal level of convergence Use the view from the top to inform the solutions from the bottom Total harmonisation / centralisation may be undesirable >Certainly for the enforcement Optimal convergence seems higher in competition policy than other legal areas if welfare is the goal >Some room for regulatory competition or emulation Issues where convergence (coordination) is desirable: >Domestic and International Competition policy to focus on efficiency and welfare >Common case allocation mechanism >Dispute resolution body

TILEC – T ILBURG L AW AND E CONOMICS C ENTER Optimal level of convergence Room for divergence >Other goals to be tackled by other regulatory tools than competition policy >Actual enforcement procedures Development of best practices and regulatory emulation >Experimentation with solutions >Remedies Can be locally tailored but beware of spillovers