The role of economics in the development of competition law and policy has been a central topic of debate for at least as long as the life of the European Communities. Although that debate was initially conducted primarily in the USA, only gradually taking root in the UK and Europe, it has been generally accepted for many years (at least in theory) that competition law and policy should be based on sound economic principles rather than a set of formal rules. The key question since the UK and EU modernisation programmes were implemented between 1998 and 2004 has been how best to reflect sound principles of industrial and behavioural economics in a system of legal rules and administrative practices that remains sufficiently clear to form a fair basis for the exercise of regulatory control. The underlying requirement of legal certainty reflects the need for the public enforcement agencies, who exercise substantial regulatory powers and sanctions under the various statutory regimes, to be subject to effective judicial control in courts of appeal or review. In that modified debate, although competition law ‘emphatically remains law not economics’,1 an ability to engage intelligently with the relevant economic principles is an essential prerequisite of the subject for advisers, advocates and judges
This book emanates from the well-known economic consultancy Oxera – the three authors have extensive experience both as academic economists and as economic advisers and expert witnesses in competition proceedings. It represents something of a novelty in that it is a book written by eminent practising economists but specifically directed at competition lawyers as a target audience. This is made clear in its title and is confirmed early in the book when the authors identify three categories of lawyers, with varying degrees of expertise in competition law and economics, all of whom it is said would find assistance within its pages. This is not just a puff or idle boast – it is clear from any page or section of the book that it has been deliberately drafted in a clear and non-technical style, intending so far as possible to engage the reader in the intuitive foundations of the difficult topics that are covered, not to assume any prior knowledge of the techniques or jargon of economics. As an earlier review states with only modest hyperbole ‘This book reads like a novel. Its captivating, conversational style is perfectly tailored to competition lawyers seeking to get the basics of competition economics under their belts’.2
Turning to the content of the book, the longest sections relate to the introductory topics of market definition and ‘market power’, rightly described as the ‘core concern in competition law’, and a long chapter on ‘abuse of dominance’, where the main categories of abuse are systematically discussed from the perspective of economic harm. These main chapters are then followed by shorter discussions of cartels, vertical restraints, mergers and state aid, before turning to remedies, damages, and the use of economic evidence.
Of the substantive sections, the introductory chapters on market definition and market power would be an excellent starting point for anyone new to competition law, as a way of understanding the basic scope and purpose of the subject, while the sections on abuse and state aid in particular give a comprehensive economic account of two difficult and important topics. Anyone embarking on a major abuse of dominance or state aid case would find it helpful to read those chapters to get their bearings. By contrast, given their importance and the very extensive case law and administrative guidance on those topics, the chapters on horizontal and vertical agreements and mergers are relatively short, so that these chapters are more in the nature of refresher courses on the relevant economic principles.
The last three chapters, on remedies, damages and economic evidence, are more practical in character but are again clearly structured and presented in a way that has been planned carefully to make the inherently complex issues of policy and analysis as accessible as possible to the open-minded and intelligent layman (aka advocate or judge). The remedies chapter, which is based on an earlier Oxera study prepared for the European Commission, is particularly detailed and helpful, setting out two specific ‘conceptual frameworks’ for the analysis of harm resulting from, respectively, hardcore cartels and exclusionary conduct, before providing a systematic ‘classification of methods and models for the quantification of damages’. Although litigators and judges are very familiar with the general principles under which the common law courts award tortious damages, the application of those principles to infringements of competition law is notoriously difficult. This chapter provides an extremely clear introduction to the main issues that arise.
Overall, although the reality of a lawyer’s involvement in any substantial competition matter will inevitably involve a great deal of detailed work on the mass of evidence and data that accumulates in such cases, this book provides a very useful point of entry or means of orientation in addressing the larger economic questions that should act as guides through the mass of detail. Likewise, although the development of competition law is ultimately controlled by judges (and legislators), not by economists or regulators, the quality of justice in this as in many other areas is invariably improved if the lawyers have at least a reasonable preliminary grasp of the subject matter on which they are asked to adjudicate (or legislate). This book provides a valuable step towards that modest but essential goal.
Rhodri Thompson QC
This review was originally published in the Competition Law Journal, published by Jordan Publishing
1 See Sir Peter Roth’s Foreword, at p vi of the Competition Law Journal (2013), Volume 11, Issue 4
2 Miguel Odriosola, Partner, Clifford Chance, Madrid.