Article 82 and Structural Remedies After Microsoft International Competition Forum St Gallen 2223 Ma

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Article 82 and Structural Remedies After
Microsoft International Competition Forum
St Gallen 22-23 May, 2008

• Dr Philip Marsden
• Director and Senior Research Fellow
• Competition Law Forum

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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.

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Remedy or Punishment?

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

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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.

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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
  

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Kroess 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.

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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?

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Structural remedies in US (1890-1996)

• Crandall research on 423 monopolisation cases
• Remedies 172 behavioural (51.2)?69 compulsory
  licensing (20.5)?95 divestment (28.3)Alcoa,
  Standard Oil, ATT
• Lessons - structural remedies rarely work
• Market moved on
• Sacrifice efficiencies
• Can be price raising
• Can operate as a cartel

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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
• Dont require monitoring

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Remaining concerns

• Chilling innovation
• Safeguards
• Remedy must be
• Effective
• Necessary
• Proportionate

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Final issue

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

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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

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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

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A final word

• Do no harm
• Abuse must harm consumers/competition
• Remedy must solve that, without harming
  consumers/competition

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Article 82 and Structural Remedies After
Microsoft International Competition Forum
St Gallen 22-23 May, 2008

• Dr Philip Marsden
• Director and Senior Research Fellow
• Competition Law Forum