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Remedies and commitments in abuse cases – PISARKIEWICZ – December 2022 OECD discussion

  1. Remedies and Commitments in Abuse Cases Dr. Anna Renata Pisarkiewicz OECD Global Forum on Competition Paris, 1-2 December 2022
  2. Remedies and Commitments in Abuse Cases Dr. Anna Renata Pisarkiewicz OECD Global Forum on Competition Paris, 1-2 December 2022*
  3. 2 Detecting an abuse of dominance will on its own do little good for competition and consumers if “ensuing remedy or sanction is too lenient, too late, not administrable, or otherwise poorly conceived or implemented” OECD (2006)
  4. 3 Offered by the firms voluntarily during an ongoing investigation Commitments Imposed by competition authorities on their own initiative Remedies vs Similar measures can be used Involves a formal finding of a violation No admission of guilt or finding of an abuse Can be imposed together with a fine Typically there is no fine Procedure Procedure 01 02 03 04
  5. Percentage of abuse of dominance cases with settlements or commitment procedures 2015-2020 4
  6. 5 What are the issues? 01 How to design optimal remedies? • Have remedies and commitments used so far in abuse cases worked well? • Has the complexity of remedies increased over time? • Do competition authorities shy away too much from using structural remedies? • Is a small number of fines for non-compliance due to a high level of compliance or inadequate monitoring? • Do competition authorities cooperate enough with sectoral regulators to avoid conflicting remedies? • Should they be carried out more frequently in abuse cases? • What are the specific challenges raised ex post evaluations in abuse cases? 02 What is the optimal use of commitments? • Is there a need for more cross-border collaboration? 03 Do competition authorities have adequate resources and expertise? The (increasingly) complex task of designing, implementing and monitoring remedies and commitments The use of remedies and commitments in regulated sectors Ex post evaluations The growing number of authorities that can accept commitments Alleged over-reliance / value of precedents Considering all the above…
  7. 6 An effective remedy puts an end to both a harmful behaviour and its distortive effects. Parameters to take into account vary, and may include: • Appropriate timing and duration: how long will it take for the remedy to produce expected effects? • Practicality: can the remedy be easily implemented, monitored and enforced? • Risk profile: does the remedy offer a high or low degree of certainty that the desired effect will be achieved? These and other potentially relevant parameters concern both: • A remedy’s ability to put an infringement to an end • The competition authority’s capacity to implement it. What happens if a practical remedy cannot be identified? Principles: Effectiveness
  8. 7 Principles: Proportionality Proportionality: a core principle of law, which implies that even if competition law itself does not require a remedy to be proportional such a requirement might nonetheless exist. A proportional remedy addresses the identified competition concern, by restoring the competitive situation that existed prior to the abuse, without going beyond what is necessary (i.e. without seeking to improve the pre- existing situation, a concern particularly relevant in regulated markets). Proportionality determines a number of issues in the design of a remedy • The type of remedy: structural or behavioural, what type of behavioural (more or less intrusive) • Duration of the remedy: for how long should it bind the dominant firm? • Monitoring mechanism: i.e. how often should the dominant firm report on its compliance? To ensure truly proportional remedies NCAs should have the power to modify the remedies and their application period, including the possibility to prescribe an early cessation.
  9. 8 Structural Structural remedies require firms to divest or carve-out certain tangible or intangible assets they own. Main advantage: they move the very source of a dominant firm’s ability and incentive to engage in an anticompetitive conduct. Main disadvantage: highly disruptive to a firm’s business model, structural remedies may lead to inefficiencies. Potentially irreversible in nature: their use may be limited to a narrow set of circumstances prescribed by law • The source of competitive harm is inexorably linked to a company’s structure • Available behavourial remedies might be too burdensome. • Recidivism and a lasting risk of repeated infringement. Is hesitation towards and limited use of structural remedies in abuse of dominance cases still justified? Behavioural remedies alter how a dominant firm conducts its business. Main advantage: Flexibility - as they are tailor-made they can come in various forms and be shaped according to the needs of a specific case. Main disadvantage: behavioural remedies do not remove a firm’s ability and incentive to engage in abusive conduct. Different types of behavioral remedies: • External vs internal: depending on whether the implementation involves third parties, or not. • Positive/declaratory vs negative/prohibitory Is dominant firms’ informational, technological and financial advantage over competition authorities reflected in the final shape of commitments? Behavioural Types of remedies
  10. 9 A need for a comprehensive approach to remedies: competition authorities intervention should intelligently combine remedies, be it structural, behavioural or both, that address competition issues on both the supply and the demand-side. • The role of behavioural economics and heuristicis (cognitive biases):effective remedies need to reflect the functioning of real markets, with real consumers and real firms. • A more compelling explanation of anti-competitive effects can help design more effective remedies. Types of remedies: Consumer- oriented Examples of behavioural biases: • Present bias • Reference dependence / loss aversion • Anchoring effects • Framing effects • Overconfidence bias • Saliency bias • Status quo / default bias The use of behavioural economics in the design of remedies Microsoft Google Android Google Shopping (EU, Brazil) The mere understanding of behavioural bias at play is in itself insufficient.
  11. 10 Compliance monitoring, and ex-post evaluations Effectiveness of a remedy in theory and in practice: the importance of the authority’s track record in monitoring and compliance Effective enforcement requires competition agencies to: • Devise adequate monitoring mechanisms • Commit sufficient resources to monitoring • Have powers to act in case of non-compliance. MONITORING: The choice between a monitoring trustee & reporting obligations • Complexity of commitments and the ability to monitor compliance • The cost of monitoring and who is going to cover it • Adequacy of existing institutional structures: internal (within the competition authority) and external (with other relevant authorities) EX-POST EVALUATIONS: • Currently are still sporadic in abuse of dominance cases but their more extensive use could help determine the effectiveness of remedies overall and in individual cases. If resources are limited, what should be prioritised in the design of remedies?
  12. Thank you! Dr. Anna Renata Pisarkiewicz