Class notes
Lectures Competition Law
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Grade: 8 All the lectures and extra videos of Competition Law in . Teacher: prof. mr. dr. H.H.B. Vedder
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ContentWeek 1A – Introduction & scope ........................................................................................................... 2
Week 1B – Scope .................................................................................................................................... 5
Extra video: Flowchart approach to EU competition law ..................................................................... 11
Extra video: The need for market definition and how to go about that ................................................ 11
Extra video: Distinguishing between horizontals and verticals and the need to identify a clear theory of
harm ...................................................................................................................................................... 12
Week 2A – horizontals.......................................................................................................................... 12
Week 2B – verticals .............................................................................................................................. 16
Extra video: MIFs ................................................................................................................................. 20
Week 3A – 101 part 1 ........................................................................................................................... 21
Week 3B – 101 part 2 ........................................................................................................................... 26
Week 4A – 102 part 1 ........................................................................................................................... 31
Week 4 B – 102 part 2 .......................................................................................................................... 35
Extra video: predatory pricing .............................................................................................................. 44
Week 5A & B – Merger control............................................................................................................ 46
Week 6A – Public Enforcement............................................................................................................ 56
Week 6B – Private enforcement ........................................................................................................... 64
Week 7A – 101 and digital markets ...................................................................................................... 70
Week 7B – 102 and merger control and digital markets ....................................................................... 74
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,Text in italics is copied from the slides. The ‘’normal’’ text are the things prof. Vedder explained
furthermore.
Week 1A – Introduction & scope
Competition law is a really fast-moving section of the law. People do continuously question why we
have competition law. About the other sections of law it is very logical why we have them. Everyone
understands why we need criminal, environmental law, etc.. Why do we want to protect competition?
Competition is like a sports competition according to some. What is the competition in that? What
exactly is competition? The fact that someone wins or loses? Or the continue changing positions? What
are we actually interested in?
Most lectures are not explicit about what we want to learn and need to learn and what is expected on
the test.
Economics underline competition law. We must explain the economic principles that underlie
competition law.
For the test the most difficult part is the design task. This means that you to apply the law to a set of
facts and are able to critically analyse and review results and adept where necessary the law. For
example, a question could be a description of a situation company X does and that you’ll then need to
apply the law to that case. You would come to the conclusion that the situation is most likely prohibited
under competition law or not. Then the design starts: does that mean that you will just cease and exist
to stop with the actions that probably violate competition law, or would you say ok that means that
we’re going to amend the work of the business so that it is more likely to be compatible with competition
law. You can also keep in mind what that means for the way the company makes money. You could
also change the law, that would be a design solution as well.
Example design question: Apple has an app store that is integrated in the operating system. All
payments that you accept when you use one of thess apps is distributed using the Apple App Store or
are routed through the Apple Payment infrastructure. That makes this a completely closed off
ecosystem. Apple charges a commission of 30% in the first and 15% from the second year onwards for
all the sales made through their App Store. For the analysis if this is in line with competition law, it is
important to define the market. Obviously there is no competition when it comes to just the Apple App
Store as everything has to go through Apple. Spotify and Epic Games started complaining about this.
Epic Games made it possible to pay for in-app purchases for the game Fortnite outside the Apple App
Store. Therefore, Fortnite was banned from the App Store by Apple. Are consumers going to switch
from iOS to Android because of Fortnite being banned from the App Store? Probably not, the switching
costs are because of the ecosystem high; people are locked in in iOS or Android. Even if you don’t
have all the Apple products you’ll need to ditch the €500+ iPhone you already have, sell it for the
current retail price, therefore it is very unattractive to switch between OSs. So, Apple has a dominant
position, in fact, is a monopolist, as it is the only one who can determine what the conditions are for
distributing apps through the App Store.
The Spotify complaint has an extra complication as Spotify states they (and their customers) are not
just ripped off through the commission, but also pushed out of the market because Apple has its own
media distribution system; iTunes and that does not have to pay the commission. So, the prices will be
lower on that on iTunes compared to Spotify.
No Apple could just say that it will no longer charge a commission for sales made through the App
Store, but what does that mean to the way they’ve organised their business? Apple is so valuable
precisely because they offer this closed ecosystem and as a result are able to offer the consumer a lot of
added value and a lot of added value means that you can ask significant prices. If apple would no longer
be able to charge the commission over all the sales that they do through their app store, what does that
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,mean for the value of the company? It is probably going to decline so apple is probably also going to
want to resist this claim. How could you resist such a claim, what could you do as a company to say
competition law shouldn’t be applied to what we have done? One way is to say that all cases that would
prohibit this action are all old cases and that the law should be rethought, redesigned to take into account
the current situation that we he have moved from the traditional brick-and-mortar to a digital economy
and that one of the hallmarks of the digital economy the network effect is; the fact that everyone wants
to join this big network that we have created for ourselves. That could mean that the Commission’s
traditional way of measuring markets and measuring market powers is wrong; it should no longer be
applied that way in a digital market.
All the European cases dealt with brick-and-mortar cases from the old economy. None of them deals
with the digital markets that we have right now (not even Intel), so is it even ok to apply law that was
developed in a brick-and-mortar period to this digital era? So, the design question is about the question
if you will apply traditional art. 101 and 102 case law to the case.
If nothing would be changed possibly the incentive to any other developer of an App Store or OS would
cease to exist, because why would they invest if any competitor can later come along and say well I
don't like your app so I want to use it but I don't want to pay for it.
Designing new law is essential to be a good lawyer. Anyone can know what the law is. The era of
making serious money with just throwing how the law is away, you have to redesign the law.
Competition law is very dynamic and constantly changing trough influence of politics and
economic
Competition law changes fundamentally, because the market itself changes. It is also changing because
of the changing influences of politics and economics. Competition law starts from the assumption that
the market knows best; is the best way to organise the economic distribution of resources. That is a
fundamentally political finding. Politics can change and maybe think the free market theory isn’t the
best option. This is not so prominent in the EU, but in the US it really is (with the Neo Brandeis school).
This is one of the reasons that the big tech companies have more problems in the EU, than in the US.
In the US: As long as they don’t price an excessive price, it is fine. And what is the price for google and
Facebook? → Data. US: there is no specific price on data, so no problem. In for example Germany they
go hard on Facebook, because of World War II fundamental rights are very important in Germany. So,
also, the right on privacy is very important. Economics used to be really simple. All we had to do was
to draw a little graph of a demand and supply curve and then you could see where the exact point where
price equals to costs and plus a bit of marginal cost would be, and that’s where there is the optimal
situation. However, that issues everything in economic down to price and that the consumers are able
to calculate almost perfectly. Behavioural economics is becoming more prominent since the last ten
years. In behavioural economics they think it is not only about prices, but also for example about
maximising choice. The possibility for consumers to choose. And if economics changes, competition
law also changes.
Macro → is competition possible and desirable in the first place; what is competition?
What is competition and do we want it? This sets the framework in which we can answer the micro
level question; the concrete question.
Micro-level → was there competition (and a restriction of it) in an actual case?
International practice and scholarship leading to cross-fertilisation and exchange of ideas
Cases: there is a tiny bit of legislation, it is essentially arts. 101 and 102 TFEU. Also there is a bit of
procedural stuff in arts. 3 and 4 TFEU and it is topped up by the Merger Regulation, and then there is a
bit of secondary legislation. There are a few regulations that have been adopted by the Council or by
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, the European Commission. So this tiny bit of regulations is supplemented by a lot of case law. So, we
will study a lot of cases. For the exam: there is always the possibility to access Eurlex. The same applies
to regulations. All of the regulations are needed to be studied and all of these regulations are discussed
in the books, but read at least one of this regulations, so you know how to read it on the exam.
What is competition law and how can it be restricted?
Working definition: a process (or the result of) rivalry between entities that operate in relation to
another → everyone wants to be the best in the eyes of the consumer.
Analogy with a sports match
Do we care about the way a sport player trains? No, we don’t care about that, we just care about winning.
The preparation is important, but nothing we care about as consumers. As competition lawyers we do
care about the process before the product enters the consumer market.
This will, absent market failures, result in economic efficiency
• Allocative: the market produces the right amount of goods at the right price. There is no waist
and no shortages.
• Productive: goods are produced to the lowest possible costs.
• Dynamic: there is innovation. When you measure the outcome of markets it is harder to measure
this dimension, than the allocative and productive dimension. So, there is a problem with
dynamic efficiency.
If prices are equal to marginal cost. The profit marge is almost zero. Who will be kicked out then? The
production staff would not be kicked out, because they made the product and can make new products.
Will you kick out the marketing people? No, because you will not sell the products. Who will you kick
out first; R&D, because innovation will just costs money until the invention is successful. So, what will
this do to the dynamic efficiency? So lowering the price trough competition law could also lower the
dynamic efficiency (think of pharmaceutical companies). So, there is a trade-off between allocative and
productive efficiency and dynamic efficiency. In the textbooks it states that everyone should be
interested in consumer welfare then the second question is what form; what aspect of consumer welfare
are you interested in? Are you interested in the prices are the lowest possible or are you interested in
efficiencies in the form of a innovation?
The legal test for a restriction of competition
In the EU we built on what is considered as a S-C-P paradigm (structure, conduct, performance). US
antirtust law was dominated by the Harvard School. They said you need to look at three different
elements:
• Structure: according to the Harvard School you need a lot of companies active and low
barriers to entry to have a good market structure. If someone starts charging a high price, then
more competitors will come if the barriers to entry are low. So nobody is able to charge a high
price. Even if they are fixing the price, someone would just enter the market to cut the price.
They said: don’t care about performance, because it is very difficult to measure and don’t care
about conduct as it is very difficult to actually prove. All you need to care about is the market
structure. The problem is they did not have the empirical evidence. There are certain markets
that by the look of it have a bad structure, but do work very well and vice versa.
• Conduct: art. 101 and 102 TFEU give examples of bad conduct. The bad conduct we want to
prohibit. For example: we don’t want competitors to fix prices. We don’t want companies to
agree to share the market. Harvard School said you don’t have to look at conduct or
performance, but to the structure.
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