INTRODUCTION

In recent years, Competition Law spread into more than a hundred countries in the world. It became one of the most important instruments to protect the market economy. Along with the all Member States and their own national legislation, European Union has its own regulation in the area of Competition Law. Basic structure contains two main provisions, anticompetitive agreements and behaviour at first, and then mergers (in the context it is called concentrations) in second.[1] Treaty on the Functioning of the European Union[2] includes articles concerning competition which has roots from Treaty of Paris[3] – creation treaty of the European Coal and Steel Community (ECSC)- and even before that. European Union Merger Regulation is an important addition to EU Competition Law.[4] These references have substantial effect on the decisions of European Commission and the judgements of EU Courts.[5] Additionally, they form a frame of conduct which Member States, EU and undertakings must implement to protect open market economy and competition.[6]

Clearly, it will be correct to express that Treaty on the Functioning of the European Union (TFEU) is a supranational treaty but it is essential to stress which ideas have influenced this treaty. These ideas could come from Member State legislations, organisations especially CSOs, philosophy schools etc. At this point, Freiburg School should be mentioned (will be called Ordoliberalism in the text) had a signature effect on EU Competition Law in the past for sure. Although it is arguable now whether this concept is still the main foundation of EU Competition Law or not. Main purpose of this essay is to understand fundamentals of Ordoliberalism in terms of Competition Law, including a brief history about its philosophy, then to link them with the goals of competition law of European Union in order to reach the real aims of competition law policy today.

HISTORY AND ORDOLIBERALISM

Second World War was one of the biggest breaking points in the world history, especially in Europe. That era of industrialisation and modernisation produced different ideologies and approaches on the economy and wealth. On one side, in Russia, communism was raised and came into power as a consequence of Russia’s involvement to the First World War. This system is based on common ownership on production instruments in search of development and strong economy. Nearly at the same time after the first war, world affected by a huge crisis on the market and the seeds of national socialism thrown in Germany. That idea, German national socialism (Nazism) leads a war-based approach to economic development of the country. Bearing the scope of this paper, these ideologies will not be analysed here further.

In 1930s, Franz Bohm, Hans Grossmann-Doerth and Walter Eucken shaped their ideas in law and economy and constitute a core to the Ordoliberalism at Freiburg University.[7] They criticise politics of Weimar Republic and Nazi Germany. As a result, ordoliberalism found its place differed from central planned economy (socialism) and laissez-faire liberalism which leads to an unregulated free market.[8] At that time, it was hard to resist to the totalitarian regime because national socialist authorities had silenced opposing groups within the country.[9] Freiburg School protected its existence in a kind of way and after the Second World War it was the main source of the new German economic policy.[10] Many ordoliberals held the key positions in post-war Germany.[11] Not only Germany but in Europe, ordoliberalism influence can be seen clearly. Ordoliberal ideas just fitted with the open market economy notion throughout the Europe and the idea of integration to construct a single market.[12] Influence of ordoliberalism will be discussed in this paper later in the context of Europe.

At this point, it is highly crucial to express that ordoliberalism is a complete economic philosophy analysis and a political approach, not only a school for competition ideas.[13] Its relation to competition is to construct a competition policy in order to protect small and medium-sized undertakings from big enterprises, regardless of the other efficiency gains and thus making a fully competitive market.[14] This economic approach tries to establish a complete free access to the market by all citizens to compete on a relevant market.[15]  In short terms, this approach could be called “individual economic freedom principle”.[16] Consequently, while ordoliberalism is protecting the competitors which are inefficient, this may be contrary to the consumer welfare objective.[17] Protecting economic freedom and competitors not are same with protecting consumers at all; one objective can harm the other.[18] Additionally, for instance, a harm to competitors (contrary to ordoliberalism idea) in some occasions may result in benefitting the consumers.[19]

AIMS OF COMPETITION LAW

Main concern of the Competition Law policy in Europe was always the integration of the market at first place. Therefore, it is important to analyse this issue in the context of EU.[20] Competition Law has the most important role in establishing and protecting the single market of the EU.[21] Internal barriers should be destroyed and free movement of goods, workers and capital could be then achieved.[22] In consequence, undertakings could operate on a more efficient scale throughout EU.[23] It can be said that single market imperative promotes consumer welfare, in other words one of the results of achieving a single market may be to attain consumer welfare, although single market objective means a lot more than that. After Second World War, USA on one hand, was the leader in production in many sectors and leader in economic income at all, on the other hand, Communist countries led by USSR increasing their production rapidly.[24] Unfortunately, Europe was weakened since the war, production reduced all over the continent and its power declined. Therefore, an integration was needed to become stronger economically and to compete on the world market.[25]

US Antitrust Law influenced the early EU Competition Law, at the time of ECSC and while drafting Treaty of Paris. Main influence of antitrust law is on mergers (concentration) part of the law; thus, it is limited to the basic ideas which were already known by the drafters of this treaty[26]. After US Law influence, German ordoliberal thinking and French administrative policy tried to transfer their own legislations to the provisions of newly forming European integration, and other countries (Netherlands, Italy) separated within the two main parties.[27] As a consequence, Article 3(f) of EEC Treaty, Treaty of Rome:

“(f)the institution of a system ensuring that competition in the common market is not distorted;”[28]

Then the following articles of 85,86 and 90 includes provisions which are protecting common market, and competition in it by private and public restraints.[29] As clearly seen from the provisions there is an ordoliberal way of thinking influenced the Treaty. Newly forming European integration objective was fitted ordoliberal “economic freedom principle”.

 Akman discussed ordoliberal influence in a different way,she examinedtravaux préparatoires of the competition provisions of these treaties and tried to find real intention of the drafters.[30] As a result, she concluded that ordoliberal influence was on Commission and Courts and not on the Treaty provisions.[31] Bearing in mind the scope of this paper, travaux préparatoires of the competition provisions will not be examined here.

After 1980s, a significant change could be seen in Competition Law concerns. Since the foundational period of the law, other aims could not emerge that much under the influence of single market imperative.[32] They were not much examined on their own, and stayed obscure.[33] The process of redefining the policy and modernisation of the system’s goals focused on different issues. As a result of this process competition law became a more political issue than a juridical issue and the Commission’s role is significant now according to Court’s role which is less dominant than in the past.[34] That is a natural consequence of the integration for Gerber. A fully unified market does not need integration imperative that much than in its foundation era.

CONSUMER WELFARE

European Commission expressed that objective of EU Competition Law rules should focus on “consumer welfare” issues recently, which is sometimes could be contrary to freedom approach of ordoliberals.[35] More than the difference between approaches, according to Jones and Sufrin, the Commission adopted consumer welfare standard in the competition rules rather than the other interests, but on the other hand, EU Courts and the practice of the Commission is not that clear.[36]

That “consumer welfare” adoption has its fruits with a modernisation trend in the EU Competition Law when Regulation 1/2003 came into force[37]. For instance, Guidelines on Vertical Restraints[38] paragraph 7 claims that protecting consumer welfare is the aim of competition law. Another instance, The Guidance Paper on the Commissions enforcements priorities in applying Article 102[39] paragraph 5 claims that Commissions duty is to stop conduct which is harmful to the consumers.[40] Consumer welfare here means lower prices, high quality products, wider choice of products, effective distribution etc. When the Commission adopted “consumer welfare” rule, this means it formally rejected wider objectives like “economic freedom objective” – ordoliberal point of view.[41] However, an important point here is, when applying its rules to individual cases, Commission seems to rely onto the effects on competitors, redistribution and market structure along with the consumer welfare issue.[42]

First example of the cases[43] which were not on the same route with the Commission is Continental Can Case.[44] The court expresses that not only the customer welfare but protecting the market structure is important in terms of competition law. However, it was a very old case. A second and an up-to-date example is T-Mobile Netherlands Case.[45] The court repeated that protecting competitors or consumers are not the only objectives of competition policy. Protecting the market structure and thus the competition itself is crucial too. In the same direction, the Court held that “well-being” of EU, consumers and competitors are all important to ensure competition, in TeliaSonera Case.[46] The list of cases which indicates the objectives of competition law are not limited to those three. In the light of the cases, this analyse shows that competition law has more goals than just “consumer welfare”. EU Competition Law contains protecting competitors, redistribution and single market objectives alongside with the consumer welfare objective.

CONCLUSION

To summarise the development of the EU Competition Law, it is sufficient to say that Freiburg School and Ordoliberalism had a vast effect on both German and European market economy ideas. Ordoliberalism is a complete philosophy not only a competition policy but it influenced competition law policies a lot. This effect on European market led to an economic freedom movement and incentive to newly emerging undertakings, in order words, “promotion of free enterprise[47]” in the foundation era of EU competition law. In addition, the common market goal fuelled with these ideas. The time passed and European integration ideas developed further and matured, hence the aims of competition law seemed to be changed.

Promotion of free enterprise and consumer welfare standards aims for different kind of solutions in terms competition law policy. Moreover, it is hard to distinguish one objective from another to become the main goal of EU competition law. Seen in some cases, detriments to competition may have effects on only consumers which should have been prevented immediately. On the other hand, in some cases, courts might not encounter any harm related to consumers at all. All these cases should be determined on their own, for instance, while looking to second example it is impossible to say “consumer welfare” standard is really the only aim of the EU Competition law. The European integration evolving rapidly and consequently, the European integration process experiences different phases in its own lifetime, different objectives might be more powerful than the others from time to time, like the ordoliberal influence in foundational period and like the consumer welfare standard in this decade.

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[1] David J. Gerber, Law and Competition in Twentieth Century Europe, Protecting Prometheus (Clerandon pres 2001) p.339

[2] European Union, Consolidated version of the Treaty on the Functioning of the European Union, 13 December 2007, 2008/C 115/01

[3] European Union, Treaty establishing the European Coal and Steel Community, Paris Treaty, 18 April 1951

[4] Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings (the EC Merger Regulation) Official Journal L 24, 29.01.2004

[5] Richard Whish and David Bailey, Competition Law (8th edn, Oxford University Press 2015), p.54

[6] Ibid.

[7] Christian Ahlborn and Carsten Grave, “Walter Eucken and Ordoliberalism: An Introduction from a Consumer Welfare Perspective” (2006) 2(2) CPI, p.198

[8] Ibid.

[9] Matthew Cole, ‘Ordoliberalism and its influence on EU tying law’ (2015) 36(6) ECLR, p.3

[10] Ibid.

[11] Ibid. 7

[12] Ibid. 7

[13] Alison Jones and Brenda Sufrin, EU Competition Law (5th edn, Oxford University Press 2014), p.33

[14] Ibid.

[15] Ibid. 13

[16] Ibid. 13

[17] Pinar Akman, ‘Searching for the Long-Lost Soul of Article 82EC’ (2009) 29(2) Oxford Journal of Legal Studies, p.269

[18] Ibid.

[19] Ibid. 17, p.277

[20] Richard Whish and David Bailey, Competition Law (8th edn, Oxford University Press 2015), p.23

[21] Ibid.

[22] Ibid. 20

[23] Ibid. 20

[24] Ibid. 17, p.278

[25] Ibid. 17, p.278

[26] David J. Gerber, Law and Competition in Twentieth Century Europe, Protecting Prometheus (Clerandon press 2001) p.342

[27] Ibid. 26, p.343

[28] European Union, Treaty Establishing the European Community (Consolidated Version), Rome Treaty, 25 March 1957, article 3(f)

[29] Ibid. 27

[30] Ibid. 17, p.301

[31] Ibid. 30

[32] Ibid. 26, p.388

[33] Ibid. 32

[34] Ibid. 26, p.390

[35] Pinar Akman, `The Role of ‘Freedom’ in EU Competition Law` (2013) 33 Legal Studies, p.184

[36] Alison Jones and Brenda Sufrin, EU Competition Law (5th edn, Oxford University Press 2014), p.41

[37] Ibid.

[38] Guidelines on vertical restraints [2010] OJ C130/1

[39] Guidance on the Commission’s Enforcement Priorities in Applying Article 82 EC Treaty [2009] OJ C45/2

[40] Ibid. 36, p.42

[41] Ibid. 40

[42] Ibid. 40

[43] (Examples from Alison Jones and Brenda Sufrin, p.46)

[44] Case 6/72, Europemballage & Continental Can v Commission [1973] ECR 215

[45] Case C8/08, T-Mobile Netherlands BV v Nederlandse Mededingingsautoriteit [2009] ECR I-4529

[46] Case C52/09, Konkurrensverket v TeliaSonera Sverige AB [2011] ECR I-527

[47] Richard Whish and David Bailey, Competition Law (8th edn, Oxford University Press 2015), p.25