Article 82 and Structural Remedies After Microsoft International Competition Forum St Gallen May, 2008 Dr Philip Marsden Director and Senior Research Fellow Competition Law Forum

What structural remedies? Unbundling? Disclosure? Fine? Neelie Kroes: April 2007 "It could be reasonable to draw the conclusion that behavioral remedies are ineffective and that a structural remedy is warranted”.

Remedy or Punishment? Fines punish Remedies restore competition Case finished Remedies complied with Interoperability principles added Still a concern with structure?

“That paragraph” (664) “Article 82 EC covers not only practices which may prejudice consumers directly but also those which indirectly prejudice them by impairing an effective competitive structure. In this case, Microsoft impaired the effective competitive structure on the work group server operating systems market by acquiring a significant market share on that market.”

Is acquiring market share now an abuse? Traditional ordoliberal concerns Historical concerns with structure 82 DP: new economic approach? But new legal approach too! CFI: –focus on market share –‘risk’ of impairing competitive structure –dominant firms must ensure rivals remain ‘viable’

Kroes’s interpretation on judgment day “one producer has 95% of the market, we are talking about a monopoly …and that is not acceptable, you cannot expect that a competitor can be interested in entering into such a market, and that is really what we have seen. And we have complaints from those competitors so how can you measure whether things are working better. Well, a market share of much less than 95% would be a way of measuring success. Now you cannot draw a line and say, well, exactly 50 is correct, but a significant drop in market share is what we would like to see.”

Increased threat of structural remedies Energy unbundling E.On divestiture offer Access remedies - linking networks Are they structural? Giving up IP - is this structural? How effective are structural remedies anyway?

Structural remedies in US ( ) Crandall research on 423 monopolisation cases Remedies: 172 behavioural (51.2%) ･ 69 compulsory licensing (20.5%) ･ 95 divestment (28.3%)…Alcoa, Standard Oil, AT&T Lessons - structural remedies rarely work: –Market moved on –Sacrifice efficiencies –Can be price raising –Can operate as a cartel

Policy issues Not problematic in principle Issue is in practice When structural remedies work best: –Defendant in distinct business units –Robust demand –Create new competitors not just smaller monopolies –Don’t require monitoring

Remaining concerns Chilling innovation Safeguards Remedy must be –Effective –Necessary –Proportionate

Final issue Access and Information Prime areas for 82 remedies Behavioural or Structural? Does it matter?

It does matter Affects burden of proof Behavioural remedies: conduct (prevent or provide); ongoing; monitoring Structural remedies: change to market structure; transfer assets; irrevocable; no ongoing monitoring

Result Mandated access: conduct, ongoing, monitoring - thus, behavioural remedy, thus lower burden of proof more common Information sharing: irrevocable, property, one- off: structural remedy- thus very high burden of proof, rare Disclosure IS divesture

A final word Do no harm Abuse must harm consumers/competition Remedy must solve that, without harming consumers/competition

Article 82 and Structural Remedies After Microsoft International Competition Forum St Gallen May, 2008 Dr Philip Marsden Director and Senior Research Fellow Competition Law Forum