This presentation by Pinar Akman, Professor of Competition Law & Director of Centre for Business Law and Practice, University of Leeds, was made during the discussion “How can competition contribute to fairer societies?”, held during the 17th OECD Global Forum on Competition on 29 November 2018. More documents and presentations on this topic can be found at oe.cd/cfs.

1. The Role of ‘Fairness’ in Competition Enforcement
Professor Pınar Akman
Director, Centre for Business Law and Practice
School of Law
p.akman@leeds.ac.uk
@drpinarakman
OECD 17th Global Forum on Competition, Paris, 29 November 2018

2. How can competition contribute to fairer societies?
• ‘Policies that enhance competition – by reducing anti-competitive regulation or trade barriers,
empowering consumer choice, fighting illegal cartels, empowering consumers through market
studies, preventing mergers that create market power, or the abuse of market power – can …
help reduce inequality’.
• ‘… reduced inequality is a beneficial by-product of government actions and policies to reduce
illegitimate market power’.
• This is not to say that ‘competition law and policy should specifically target inequality’.
Ennis, S et al (2017) Inequality: A Hidden Cost of Market Power, OECD Discussion Paper
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3. Fairness has a limited role to play in competition law
enforcement.
Ways in which ‘fairness’ could be taken into account in the competition law assessment
- procedural fairness
- prevention of state aid; bid-rigging
- where the rule itself requires assessment of ‘unfairness’ (eg in ‘unfair pricing’ abuse)
Ways in which ‘fairness’ should not be taken into account in the competition law assessment
- to substitute an assessment of ‘anticompetitive effects’ (on the basis of economic evidence)
with an assessment of ‘unfairness’
- to pursue enforcement cases on the basis that practice appears ‘unfair’
- to protect rivals of a company from competition
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4. There is an important distinction between procedural fairness
and substantive fairness regarding legal assessment.
• Law and judges normally comfortable with scrutinising procedural fairness, but not substantive fairness (ie
fairness of outcome).
• Eg contract law, consumer law, ‘unfair commercial practices’ – none scrutinises the ‘fairness’ of price (ie the
fairness of substantive bargain).
• Even where outcome is scrutinised in transactional context, this is done through doctrines such as
‘inequality of bargaining power’, ‘economic duress’, ‘undue influence’ etc all of which focus on the procedure
through which an objectionable bargain was reached.
• Same in competition law: companies’ right to be heard; access to file; oral hearing; etc.
• Rules on bid-rigging; state aid, etc can also be understood on procedural fairness grounds.
As assessment starts moving from procedural to substantive fairness, formidable difficulties abound. 4

5. The first difficulty with substantive fairness assessment is
lack of a single definition.
Fairness = treating everyone the same?
Fairness = treating like for like?
Fairness = distributive justice?
Fairness = eye for an eye, tooth for a tooth?
• Who decides?
• When? Ex ante or ex post?
• On which objective criteria?
There is a long list of possible definitions of ‘fairness’, many of which potentially contradict one another.
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6. In competition law assessment, the subject of ‘fairness’ is also
unclear with potentially different outcomes.
• Fairness to competitors? Comes close to prohibition of ‘unfair competition’.
• Unfair competition law aims to prevent ‘unfair’ conduct by market participants in trade (de Vrey,
2006).
• Competition law aims to prevent conduct by market participants that may distort competition in the
interest of the market as a whole (ibid).
• CoJ: some rules of unfair competition law themselves may be anticompetitive (Yves Rocher, [22]).
Eg a rule that prohibits ‘eye-catching individual price comparisons’ as unfair competition.
• Fairness to customers or consumers? Interests of (intermediate) customers and (final)
consumers not (always) aligned (Akman, 2010).
• Fairness to competitors and to customers/consumers? Might be impossible to achieve
concurrently.
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7. Where the rule involves an explicit element of (un)fairness, the
enforcers have struggled to apply it.
• Article 102(a)TFEU: abuse of a dominant position by ‘directly or indirectly imposing unfair purchase or
selling prices…’ prohibited.
• CoJ in United Brands (1978): ‘Abusive’ = ‘no reasonable relation to the economic value of the product’.
• Test: Stage 1- It should be determined whether the price-cost margin is excessive. If so,
Stage 2- It should be determined ‘whether a price has been imposed that is either unfair in itself or
when compared to competing products’.
• EU Commission: ‘[C]ase law of the [General Court] and [CoJ] as well as the decisional practice of the
Commission provide little guidance on how to determine whether a price must be considered unfair in itself’
(Scandlines, 2004). Same goes for prices ‘unfair in comparison’.
• Little case law, and most commentary proceeds on the basis that it is ‘excessive’ pricing that is prohibited.
• Further, how can price be ‘unfair’ if customer purchased the product (ie p ≤ WTP)? Focus should be on
deadweight loss (ie those who could not afford the product) (Akman, 2012).
The inherent problems with the prohibition of ‘unfair’ pricing make it unoperational. 7

8. Behavioural economics is enlightening, but not a panacea.
• ‘Unfair pricing’ explicitly calls for a judgement on ‘(un)fairness’ which makes it susceptible to application of
behavioural insights: neither law nor conventional economics has much to contribute in establishing
‘unfairness’ of price.
• Eg ‘principle of dual entitlement’ (Kahneman, et al, 1986) can be used as a basis on which to model
‘unfairness’ of price for prohibition of abuse of dominance (see Akman and Garrod, 2011)
• But…
• Other insights from behavioural economics suggest that the ‘fair’ price may require discrimination because it
depends on the consumer’s valuation of the product (see eg Rabin, 1993).
• Catch-22 situation for a prohibition of abuse that bans unfair pricing as well as discrimination:
• a dominant undertaking can comply with either the prohibition of unfair pricing or that of
discrimination, but not both, if the ‘fair’ price is different for every customer (Akman, 2012).
• Behavioural fairness models usually involve relativity and subjectivity, rather than categorical/objective
notions of fairness.
Legal and business certainty would be undermined by relative and subjective concepts of ‘fairness’. 8

9. Prohibiting practices for ‘fairness’ grounds can have unintended
consequences.
• Price discrimination may ‘create an assumption of unfairness’, but there ‘is nothing intrinsically unfair
about price discrimination’ (OECD, 2016).
• Discrimination often makes markets more competitive (ibid).
• Ofgem – the UK energy regulator – imposed non-discrimination license requirement on energy retailers to
ensure that they charge the same mark-up in different regions of the country (2009).
• Introduction on ‘fairness’ grounds: aim of the requirement was to address disadvantages suffered by
‘vulnerable consumers’.
• The introduction of the non-discrimination rule increased offline tariffs, but also the discounts given for
online tariffs.
• Vulnerable consumers normally have less access to broadband. Further detrimental distributional effects
(Hviid and Waddams Price, 2012).
• Because the non-discrimination condition weakened competition for direct-debit payers, its most likely result
is to increase prices for all (as supported by empirical evidence) (ibid).
Prohibiting discrimination on fairness grounds may not only have welfare-decreasing effects, but also lead to
more ‘unfair’ outcomes. 9

10. Adopting ‘fairness’ as a stand alone competition policy or
enforcement goal should be avoided.
• Fairness vs Welfare - legal rules should be selected entirely with respect to their effects on the
well-being of individuals and notions of ‘fairness’ should receive no independent weight in the
assessment (Kaplow and Shavell, 2002).
• Legal certainty is a fundamental principle in all modern laws, and a human right in many.
• It is unclear ex ante what a ‘fairness’ objective might involve in competition enforcement.
• Even in cases where the provision itself includes an element of fairness (unfair pricing,
discrimination, etc), the outcome of pursuing a fairness objective may make those sought to be
protected worse-off.
• Potential for ‘fairness’ imperative to push competition law into ‘unfair competition law’.
• ‘… while fairness is a guiding principle, it is not an instrument that competition enforcers can use
off the shelf to go about their work in detail’ (Laitenberger, 2018).
• ‘Most of the time, we get consumers a fairer deal by keeping markets competitive…’ (Vestager,
2016). 10

11. References
• Akman, P (2010) ‘“Consumer” versus “Customer”: The Devil in the Detail’ 37(2) Journal of Law and Society 315
• Akman, P (2012) The Concept of Abuse in EU Competition Law: Law and Economics Approaches (Hart Publishing)
• Akman, P and Garrod, L (2011) ‘When are Excessive Prices Unfair?’ 7(2) Journal of Competition Law & Econ. 403
• de Vrey, RW (2006) Towards a European Unfair Competition Law (Martinus Nijhoff)
• Ennis, S et al (2017) Inequality: A Hidden Cost of Market Power, OECD Discussion Paper
• Hviid, M and Waddams Price, C (2012) ‘Non-Discrimination Clauses in the Retail Energy Sector’ 122 The Econ. J.
F236
• Kahneman, D et al (1986) ‘Fairness as a Constraint on Profit Seeking: Entitlements in the Market’ 76 Am. Econ. Rev.
728
• Kaplow, L and Shavell, S (2002) Fairness versus Welfare (Harvard University Press)
• Laitenberger, J (2018) ‘Fairness in EU Competition Law Enforcement’, Speech, 20 June 2018
• OECD (2016) Price Discrimination, Background Note by the Secreteriat, DAF/COMP(2016)15
• Rabin, M (1993) ‘Incorporating Fairness into Game Theory’ 93 Am. Econ. Rev. 1281
• Vestager, M (2016) ‘Protecting Consumers from Exploitation’, Speech, 21 November 2016
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