Enforcement Priorities Research Articles

Antitrust enforcement: an inflection point?

PurposeThis paper seeks to examine the possibility that antitrust enforcement will strengthen in the USA. The study sets out to assess whether the merger of two large rivals into one even larger firm is likelier to prompt government challenge than has been true in the recent past.Design/methodology/approachThe paper examines the history of fluctuations in antitrust enforcement. Also, it reviews research in economics questioning the idea that mergers lead to efficiencies that bring about lower prices to consumers and allow struggling firms to survive. Finally, the paper assesses the negative effect of recession‐prompted bailouts on public perceptions of “behemoth” firms.FindingsThe study finds signs of possible change in enforcement priorities. Recent actions by the Federal Trade Commission and the Antitrust Division of the Department of Justice include considerations beyond the “Chicago School” emphasis on efficiency. Economic research questions that emphasis as well. So may voter unhappiness with government bailouts and the firm size that made them seem necessary.Practical implicationsSmall firms may want to encourage stronger enforcement; it may spare them the price‐setting power of megafirms they would otherwise face as suppliers or customers – or competitors. Larger firms, by contrast, may want to advocate the opposite, but draw up contingency plans if their chief growth strategy has been to purchase rivals.Originality/valueThis paper juxtaposes economic research, antitrust history, and recent economic issues to offer a perspective on what may be an important shift in antitrust enforcement.

Use and Abuse of Competition Law in Pursuit of the Single Market - Has Competition Law Served as Regulation Subject to a Quasi Industrial Policy Agenda?

The call for an enhanced role for industrial policy considerations has traditionally been relegated to the darkest corner of the competition law universe with limited support. In accordance with this the presumption has been that no such considerations have influenced the Commission's enforcement priorities. However, the reality tends, as often is the case, to be more complicated. In pursuit of the Single Market, competition law has occasionally served a regulatory role that comes with a flavour of industrial policy. Hence, it would be too simplistic to exclude industrial policy considerations as an objective advanced under competition law if a broader definition is applied.

FINRA's 2011 enforcement record, priorities, and trends

PurposeThe paper's aim is to describe a recent increase in FINRA enforcement activity and to discuss how broker‐dealers and representatives may want to prepare themselves for FINRA's increasing willingness to sanction members in the wake of the recent financial crisis.Design/methodology/approachThe paper analyzes FINRA's recent enforcement record, including trends over the past several years in disciplinary actions and fines. It also discusses FINRA's top enforcement issues in 2011; advertising, short selling, auction rate securities, and suitability; and recommends increased compliance efforts in light of FINRA's growing aggressiveness.FindingsIt is important that firms and representatives understand how the priorities of this self‐regulatory organization have changed since the financial crisis, fueling this recent growth in FINRA enforcement activity.Originality/valueThe paper offers practical guidance from experienced financial services lawyers.

Analysing the Commission's Guidance on Enforcement Priorities in Applying Article 102 TFEU — An Efficiency Defence for Abusive Behaviour of Dominant Undertakings?

Considering that in an EU competition law context, dominant undertakings have traditionally been placed under a more stringent regime than their non-dominant counterparts, the introduction of an efficiency defence in the latest Commission's Guidance on the application of Article 102 TFEU can be evaluated as a true novelty. Given the success of the Article 101-regime it is not surprising that the requirements for using the efficiency defence are very similar to the preconditions asked for under Article 101(3) TFEU. While it should be welcomed that efficiencies are acknowledged in an Article 102-context, it is questionable whether a defence that is modelled so closely along the lines of a regime applicable to non-dominant undertakings will be equally effective for dominant market participants. The following article gives an exhaustive overview of the development and possible employment of the newly introduced efficiency defence for dominant undertakings. While familiarizing the reader with the Guidance in general and the requirements of the efficiency defence in particular, the main focus of this article will be on whether the efficiency defence in its current form can be a useful tool for dominant undertakings in practice.

Patchwork Immigration Laws and Federal Enforcement Priorities

Despite predictions that the Supreme Court would uphold some if not all of the challenged provisions of Arizona’s S.B. 1070, on June 25, 2012, the Court struck down three out of four of the provisions challenged by the U.S. government, while indicating that the fourth, § 2(B), the “show me your papers” provision, while not facially unconstitutional, could be subject to an as applied challenge. Despite Arizona’s arguments that the challenged provisions were not preempted because they mirrored federal immigration law, the majority appears to have rejected this theory as well as the notion that Arizona was cooperating in enforcement. Heading off Justice Scalia’s dissent that individual states have the sovereign authority to control their own borders, the Court writes, “It is fundamental that foreign countries concerned about the status, safety, and security of their nationals in the United States be able to confer and communicate on this subject with one national government, not the 50 separate states.” The majority took an almost textbook approach to preemption analysis. In striking down § 3, which made it a state crime to fail to register or carry an alien registration document in violation of federal law, the Court found that the federal government had “occupied the field” of alien registration, thus leaving no room for the states to regulate. In striking down §§ 5(C) and 6, which respectively, made it a state crime to seek or engage in unauthorized employment, and allowed for warrantless arrests of removable aliens, it found that both provisions stood as “obstacle[s] to the accomplishment and execution of the full purposes and objectives of Congress.” While the Court upheld § 2(B) on its face, it indicated that it would raise constitutional difficulties if § 2(B) were utilized to detain individuals solely for the purposes of verifying their immigration status. This updated version provides a chart for thinking about the relationship between Arizona's legislative intent to discourage and deter 1.) unlawful entry, 2.) unlawful presence and 3.) economic activity of undocumented immigrants, and the specific means chosen. The Court’s decision showed surprising deference to the federal government in its making of immigration policy and its enforcement of the immigration laws. It was consistent with the direction in which the federal government has been moving on these issues, including its prosecutorial discretion policy and its decision to grant deferred action to certain undocumented immigrant youth. While the majority recognized Arizona’s frustrations with federal enforcement, it underscored that Arizona may not pursue policies that undermine federal law.

Assessing the efficiency of priorities for traffic law enforcement in Norway

This paper assesses the efficiency of priorities for traffic law enforcement in Norway. Priorities are regarded as efficient if: (1) enforcement ensures a sufficient level of deterrence to keep down the rate of violations; (2) selection of target violations for enforcement is based on the risk attributable to them; and (3) an optimal level of enforcement is selected, i.e. the marginal benefits of enforcement in terms of preventing accidents equal the marginal costs of enforcement. The efficiency of current traffic law enforcement in Norway is assessed in terms of these criteria. It is found that the risk of apprehension varies considerably between different traffic violations. These variations do not reflect the risk attributable to the violations, i.e. it is not the case that the risk of apprehension is higher for violations that make a large contribution to fatalities and injuries than for violations that make a smaller contribution. In principle, shifting priorities so as to increase the risk of apprehension for some violations and reduce it for other violations could make police enforcement slightly more efficient. The main finding, however, is that the current level of enforcement is too low. Cost-benefit analyses show that substantially increasing the amount of police enforcement is cost-effective.

A Look Into LTC's Future: Inspector General's 2012 Work Plan Foreshadows Enforcement

A Look Into LTC's Future: Inspector General's 2012 Work Plan Foreshadows Enforcement

The Clash of Civilizations, Much Ado About Nothing or Something Rotten in the Kingdom of Enforcement! Do IP Rights Merit Special Considerations Under Competition Law?

It is often claimed, but rarely in further detail, that IP rights create tensions under competition law and thus merit special considerations. While little can be held against the first, the latter is significantly less evidential if it involves a restrictive, or no application, as strong arguments can be held against both suggestions. Further, rather than a conflict between colliding interests the interaction has been haunted by a mix of unsettled questions and enforcement priorities to which the European Commission, as the supreme enforcer in EU, has not always demonstrated a coherent approach.

Remises de fidélité et abus d'éviction : quelles évolutions dans la pratique décisionnelle de la Commission européenne ?

Enfévrier 2009, la Commission européenne publiait de nouvelles orientations quant au traitement des pratiques des entreprises dominantes pouvant conduire à des évictions anticoncurrentielles. Parmi les pratiques analysées figuraient les rabais de fidélité, lesquels occupent une place particulièrement importante dans les débats engagés autour des décisions de la Commission et des arrêts de la Cour de justice. En effet, les remises de fidélité constituent l’un des principaux domaines pour lesquels il est reproché aux autorités européennes de privilégier une approche formaliste au détriment d’une analyse au cas par cas des effets concrets des pratiques sur le marché. À ce titre, la décision rendue quelques mois plus tard dans l’affaire Intel témoigne-t-elle de la convergence annoncée vers une approche plus économique ? Au-delà même du cas des abus d’éviction reposant sur des remises de fidélité, il est possible de s’interroger non seulement sur les conditions d’une mise en œuvre d’une telle approche mais également sur l’impact que celle-ci pourrait avoir en matière de sanction des abus de position dominante.

Excessive Pricing: The Flaws of 'Tea Party' Competition Policy

Since the adoption of the Guidance Communication in 2009, the Commission has kept exploitative abuses— and in particular excessive pricing cases—in a state of artificial hibernation, and focused on exclusionary cases as a matter of enforcement priority. The Commission’s small antitrust policy against exploitative abuses is predicated on ‘Tea Party’ competition economics: in the long term, high prices are presumed to deliver efficient outcomes, and competition enforcers risk doing more harm than good in trying to improve market outcomes. Tea Party competition gurus are, however, wrong on three counts. First, they are wrong on the theory. Contrary to the ominous suspicion that competition agencies fiddle with excessive pricing laws to tax dominant firms’ profits and achieve distributional transfers, there is a sound conceptual basis to justify the control of dominant firms’ excessive prices. Take a monopolist charging excessive prices in market A. With this, the monopolist dries up demand in neighbouring markets (B, C, D, etc.). But the monopolist also dries up a range of unrelated markets (W, X, Y, Z) which include all the markets where customers purchase goods/ services. For instance, a customer faced with surging oil prices will purchase lower quantities of milk, cereals, fruits, etc. (assuming finite resources). As a consequence, the monopolist’s pricing policy on market A thus forecloses—possibly unwillingly—sales opportunities for other producers on a range of markets. In turn, this may force out a number of firms from those markets, increase concentration, decrease entry opportunities and eventually harm consumer welfare. Competition authorities should thus pay attention to the foreclosure effects that arise on ir-relevant markets. Second, Tea Party competition enthusiasts are wrong on the practice. In particular, the assertion that excessive prices cannot be objectively determined is not persuasive. Most of us have, for instance, noticed that the price of competition law conferences, books, or subscriptions has reached insanely high levels. And beyond such personal experiences, policy makers at all levels routinely consider that some prices are excessive, and craft policy decisions on this basis. This occurs, for instance, in all markets where States facilitate the purchase of high price products with subsidies (for instance, pharmaceutical products) or discourage the purchase of low priced products with taxation (for instance, cigarettes). Last but not least, firms themselves often recognize that their prices are excessive. This is aptly illustrated in markets where firms engage in price discrimination (and thus slash some of their prices), in order to serve additional categories of customers with low reservation prices. Of course, the remaining issue is of a methodological nature. It boils down to devising a standard of price excessiveness that ensures economic efficiency. But as in other legal disciplines (e.g. risk regulation), the absence of a ‘silver bullet’ evidentiary method—or the existence of several methods with intrinsic limitations—should not hinder the enforcement of the law. Rather, the sole admissible limitation is that in such areas where legal standards are blurred, competition agencies should not inflict sanctions on non-compliant firms. This issue is at the heart of the Microsoft case currently pending before the EU courts. Third, Tea Party scholars and practitioners are wrong from an institutional perspective. Often, opponents of Article 102 (a) TFEU resort to scaremongering, suggesting that the application of excessive pricing doctrines would open the floodgates to litigation, with angry customers clogging up courts and competition agencies with requests to change the price

The Law and Economics of Article 82 EC and the Commission Guidance Paper on Exclusionary Conduct

This article discusses the approach to Article 82 in O'Donoghue and Padilla's book The Law and Economics of Article 82 EC'' (Hart Publishing, Oxford 2006), compares it with the new European Commission Guidance Paper on the Commission's enforcement priorities in applying Article 82 EC to abusive exclusionary conduct by dominant undertakings and addresses some aspects of competition law remedies.

The widening FCPA dragnet: The increasing pursuit of individuals and foreign persons and expansive use of legal theories

Foreign issuers, subsidiaries, and individuals increasingly are targets of US Foreign Corrupt Practice Act (FCPA) investigations and enforcement. US authorities are using expansive jurisdictional theories in cases with only minimal connections to the USA. Prosecution of individuals is now a long-term enforcement priority. For example, US authorities brought more defendants to trial in FCPA cases in 2009 than in the preceding five years combined, and obtained convictions on at least some counts in each trial. Several recent cases also reflect expansive interpretations of anti-corruption standards and related provisions of US law. US authorities are regularly asserting violations of the accounting provisions or ancillary statutes, even when the elements of an anti-bribery offence are not present. As a result, the extraterritorial reach of the FCPA and related laws continues to grow. This trend, coupled with new whistleblower bounty provisions and other enforcement initiatives, make it as important as ever that companies operating outside the USA adopt and fully implement effective compliance programmes.

The European Commission's Guidance on Article 102TFEU: From Inferno to Paradiso?

The European Commission has for the first time issued a document expressing its official position on the enforcement of Article 102TFEU which prohibits the abuse of a dominant position on the Common Market. The Commission Guidance on enforcement priorities in applying Article 102TFEU to exclusionary abuses (adopted in December 2008) has ended a review of about four years. Given the increased enforcement of Article 102TFEU at the European level and the fact that many national provisions in the EU on unilateral conduct are modelled after Article 102TFEU, how the Commission intends to enforce Article 102TFEU is crucial for the application of competition law and the undertakings subject to it under European and/or national laws. The review period was preceded by severe criticisms of the Commission's approach to Article 102TFEU for protecting competitors instead of competition and for being insufficiently grounded in modern economic thinking. At the heart of the review and the discussions surrounding it lay the question of the objective of Article 102TFEU. Some, including the Directorate General for Competition claimed the objective to be ‘consumer welfare’, whereas some argued that ‘consumer welfare’ cannot be adopted as the objective at the expense of the protection of the competitive process. This article critically reviews the Commission Guidance, with an eye to assessing the ultimate objective of and the test of harm under Article 102TFEU. After discussing whether the Guidance indeed sets priorities, it examines the general approach of the Guidance to exclusionary conduct. It points out that despite there being some welcome novelties in the Guidance, there are also suggestions therein whose legitimacy and legality are questionable. Reflecting on the Guidance as a soft‐law instrument, the article argues that although regarding the objective of Article 102TFEU, the Commission's apparent tendency towards ‘consumer welfare’ is not unlawful, the reform of Article 102TFEU to bring it more in line with modern economic and legal thinking seems to be far from complete.

The Public Health Aspects of Environmental Enforcement

Beyond being an environmental concern, pollution is a public health problem. As a result, enforcement of anti-pollution statutes, such as the Clean Air Act and the Clean Water Act, not only protects the environment, but also furthers fundamental public health goals. Moreover, public health benefits provide politically salient arguments for continuing and even strengthening environmental protection that can counteract any political opposition that can arise as a result of the costs of environmental regulation and compliance to regulated entities and the taxpayers.Thus, it is worth examining the extent to which the Environmental Protection Agency (“EPA”) considers the public health in its environmental enforcement priorities and decisions. Focusing on the Clean Air Act and the Clean Water Act, this Article undertakes such an examination by: (1) outlining the statutory connections between public health considerations and environmental regulation; (2) examining the EPA’s enforcement priorities and guidance; and (3) criticizing the EPA’s presentation of its own enforcement effectiveness over the last decade.This Article concludes that public health considerations do play a significant role in environmental enforcement policies and decisionmaking. However, the EPA’s commitment to presenting the public health benefits of its enforcement actions has varied considerably over the last decade. With the release of its FY2009 enforcement assessment, however, the EPA has both expanded its analysis of the connection between environmental pollution enforcement and public health benefits and created new tools to enhance the transparency of these benefits to the affected public.

Dominant Firms’ Obligation to Share Innovations - Killing or Promoting Innovation?

The purpose of this article is to discuss whether the Commission's position in relation to refusal to supply and intellectual property rights as set out in the “Guidance on the Commission’s enforcement priorities in applying Article 82 of the EC Treaty to abusive exclusionary conduct by dominant undertakings” may undermine the incentive to innovate. The guidance reveals the shortcomings of the European competition law policy and underlines the need for a single EU patent and a new patent court in the EU.

Is the Guidance Paper on the Commission’s Enforcement Priorities in Applying Article 102 TFEU to Abusive Exclusionary Conduct Useful?

In December 2008, the European Commission (hereafter, the “Commission”) published a guidance paper on its enforcement priorities in applying Article 82 of the EC Treaty (now Article 102 TFEU) to abusive exclusionary conduct by dominant undertakings (hereafter, the “Guidance Paper”). This document is of a sui generis nature as it “sets out the enforcement priorities that will guide the Commission’s action in applying Article [102] to exclusionary conduct by dominant undertakings.” The Commission does not therefore state or restate the way in which Article 102 should be interpreted, a task which falls within the exclusive remit of the European Court of Justice (hereafter, the ECJ”), but explains the circumstances in which a given dominant firm’s conduct is likely to be subject to enforcement action by the Commission. Against this background, this paper seeks to answer the following question: Is the Guidance Paper useful? Considering that the Guidance Paper has generally been well received by commentators, one could be tempted to respond to this question positively, but a careful review of the document suggests that the answer may be less straightforward than would appear at first blush. To respond to the question posed above, this paper is divided into five parts. Part I explains the context leading to the adoption of the Guidance Paper. Part II briefly describes the content of the Guidance Paper, focusing on the general principles that will guide the Commission’s assessment of foreclosure rather than on its review of the various types of conduct that are likely to fall within the purview of Article 102. Part III addresses the question of whether the Guidance Paper provides sufficient guidance to dominant firms and their advisors as to whether certain conduct they may wish to pursue is compatible with Article 102. Part IV discusses whether the Commission is likely to comply with the effects-based approach promoted in its Guidance Paper or is likely to revert to a form-based approach when this better suits its enforcement objectives. Finally, Part V concludes that while the Guidance Paper gives encouraging signs that the Commission will adopt a modern, effects-based approach when defining its enforcement priorities questions remain as to the practical impact of this document for dominant firms. First, the principles contained in the Guidance Paper are subject to significant exceptions and caveats and provide no safe harbors, hence reducing the overall level of guidance provided for in this document. Second, the approach taken by the Commission in the Intel case suggests that the Commission may still be tempted to rely on the formalistic case-law of the ECJ in order to ensure that its decision does not become subject to a successful appeal.

Why the EU Merger Regulation Should Not Enjoy a Monopoly Over Tacit Collusion - A Close Look at Five Common Misconceptions

Over the past two decades, the European Commission (“the Commission”) has adopted a stance whereby the implementation of ex ante, structural merger rules is deemed more appropriate when seeking to challenge tacit collusion than ex post, behavioural instruments (e.g. on the basis of Article 102 of the Treaty on the Functioning of the EU (“TFEU”). As a result, the EU merger regulation (“EUMR”) is the preferred, if not sole, legal instrument deployed by the Commission in order to avert any potential risk of tacit collusion. Since the entry into force of the EUMR, the number of Commission decisions in which the future emergence of risks of collective dominance was examined lies in the region of 130. In stark contrast, and despite pronouncements of the General Court (“GC”, or the Court) that Article 102 TFEU may apply to tacit collusion, the Commission has not yet taken a single decision enforcing Article 102 TFEU against tacitly collusive oligopolies. Similarly, the stillness of the 2009 Guidance Communication on Enforcement Priorities in applying Article 102 TFEU in this context implicitly confirms the Commission’s reluctance to use the abuse of dominance rules in order to address the phenomenon of tacit collusion. Overall, within the realm of EU competition law, the provisions of the EUMR de facto enjoy a jurisdictional monopoly over issues pertaining to collective dominance. The present article challenges the conventional view that tacit collusion should be exclusively addressed through the use of the EUMR. To this end, it examines and seeks to set straight five widespread misconceptions on which such view is based.

Looking Ahead: 2010 OIG Work Plan

The Office of Inspector General (OIG) of the US Department of Health and Human Services has published its annual Work Plan for 2010 [ 1 Office of Inspector GeneralWork plan: fiscal year 2010. http://oig.hhs.gov/publications/docs/workplan/2010/Work_Plan_FY_2010.pdf Google Scholar ]. The purposes of the annual Work Plan are to address the areas and issues the OIG intends to audit, evaluate, and inspect in the upcoming year and to notify Medicare providers of the OIG's investigative, enforcement, and compliance priorities. The Work Plan is a valuable source of information for Medicare providers and may be used to help organize and plan future compliance operations and initiatives.

Article 82 EC: What Future for the Effects-Based Approach?

Analyses the European Commission guidance paper of December 2008 on the enforcement of the EC Treaty art.82 in respect of exclusionary conduct by dominant undertakings, including: (1) its tests of dominance; (2) its approaches to various forms of abuse of dominance; (3) the efficiency defence; (4) its enforcement priorities; (5) the establishment of safe harbours; and (6) the principles of simplicity and legal certainty. Considers whether the Commission's emphasis on consumer harm will prevail over the EU courts' concern with restriction of competition. Discusses the implications of the efficiency defence, with reference to the Commission's Decision in COMP/C-3/37.990-Intel.

Responding to Clandestine Methamphetamine Manufacturing: A Case Study in Situational Crime Prevention

During the 1990s, Oklahoma experienced an increase in clandestine methamphetamine laboratories in operation in the state. Identifying and responding to this problem became a law enforcement priority. Clandestine laboratories were extremely dangerous and volatile, as they posed great risks to individuals and local communities. Initial efforts to control the problem proved difficult, given the availability of all the key ingredients and supplies. In response to this problem, the Oklahoma Bureau of Narcotics and Dangerous Drugs (OBNDD) worked to inform the Oklahoma legislature, which passed a number of laws aimed at affecting clandestine manufacturing. This case study explores Oklahoma’s legislative responses to methamphetamine manufacturing and retroactively examines whether these laws fit within the situational crime prevention perspective.