Competition between Legal Systems

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Competition between Legal Systems

1. Foundations and sources

The heading ‘competition between legal systems’, or ‘system competition’ or ‘institutional competition’ is meant to express the idea that legal rules (or institutions) are subject to supply and demand like goods and services. As far as competition between legislation passed by public authorities (state or federal legislatures) is concerned, the legislature is the offeror and the citizens or subjects (natural or legal persons) are the consumers of the product ‘law’. In European private law, the idea of competition between legal systems is discussed as an alternative to harmonization or standardization by the European legislature. Triggered by the [[European Court of Justice (ECJ) decision in Centros (ECJ Case C-212/97 [1999] ECR I-01459), European discussion has particularly focused on company law.

In the literature, the term ‘competition between legal systems’ is used with varying, often imprecise meaning. In the present author’s opinion, three levels must be distinguished (see Kieninger (2002) 8 ff): On the first level, various legal orders coexist, but the legal subjects have no choice between systems. At this level there is only competition between ideas, made fruitful through legal comparison. On the second level, legal subjects can choose between various rules without subjecting themselves to the reaction of the legislature, as supplier of rules. Reaction ensues at the third level and requires some kind of financial or idealistic motivation, which moves the legislature to act. It is only at this level that we can speak of institutional competition in the sense of a cycle of competition. The classic example for this is the development of US company law (see 2 below).

The literature on competition between legal orders is fed from a number of sources. For some authors there is a strong interest in the field of economics (see the works of Manfred E Streit, Wolfgang Kerber and Roger van den Bergh). They argue from the perspective of evolutionary economics that competition was a discovery process (Hayek) not only in relation to goods, but also to institutions, producing a continuous improvement of what is on offer. By others, the market freedoms of the [[Treaty on the Functioning of the European Union (TFEU) are conceived of as the foundation of a regulatory competition, since the acquisition of a foreign good or the transfer of a seat of business to another Member State is indirectly a choice of the institutions (product regulations, environmental law, labour law, companies law, tax law) of that state. The freedom of movement gives the legal subjects, therefore, the possibility to choose between the various state laws, on the one hand, in order to better satisfy their preferences and, on the other hand, to signal acceptance or rejection of the legal system of the respective Member States, thereby urging reform, if necessary.

2. The Delaware effect

An extensive body of literature exists in the United States on competition between systems in company law, where the Delaware effect has provided particular food for thought. In the United States the widely held view on incorporation says that the legal regime of a company is independent of its actual seat in the state of the union where it was founded, the laws of which were preferred by the founders (international company law). Consequently, the company’s place of registration and thereby the applicable law can be changed after incorporation by reincorporating in a different state (most frequently Delaware). This is done through the formation of a new corporation in the target state, followed by the amalgamation of old and new companies. As the states of the United States, unlike the Member States of the EU, charge yearly fees for registration in their state (franchise tax), attracting corporations to their state is a lucrative source of income, especially for small states. This led to competition between states at the end of the 19th century and the beginning of the 20th century, from which the state of Delaware emerged as winner. For a long time, this development was characterized pejoratively in the literature as a race to the bottom. Today it is seen in a positive light (see eg Roberta Romano). It is argued that management does not enrich itself at the cost of shareholders by reincorporating in Delaware, because the power of the capital markets and markets for takeovers have controlling effect. Instead of a race to the bottom the Delaware effect is much better understood as a race to the top, because the shareholders have at their disposal lawyers and judges with special expertise as well as a highly sophisticated company law in which judicial decisions already exist for almost any conceivable legal question. Furthermore, management and shareholders can trust that the legislature of Delaware will make every effort in the future to keep their corporation law attractive.

3. The functions of competition of legal systems

Various functions are attributed to the competition between legal systems, which, however, contradict each other to a certain extent. First, competition is supposed, in contrast to [[uniform law, to make possible the fulfilment of diverging preferences. The starting point for this proposition is that the actors in the market have no uniform preferences. Consumers may, for example, prefer less rigorous consumer contract or product liability laws if this leads to lower prices. A unitary high level of protection deprives them of this choice. A second function is the reduction in the number of erroneous decisions by the legislature. If legislation is made at the Member State level rather than at the level of the European Union, mistakes in the political system or inadequate appreciation of the most efficient solution only affect the Member State concerned. Additionally, it is said that the legislative organs in Brussels are more susceptible of making mistakes than their national counterparts. In particular, the pressure to make compromises and the muddling together of factual issues with political conflicts may lead to suboptimal results. A third function is the suitability of competition for the promotion of innovation. That already happens when the efficiency of diverse legal rules on the same subject can be compared. If a strong financial incentive arises for the offeror to obtain as many customers as possible, as in the case of the Delaware effect, the legislature will even actively search for the most attractive rules and embrace them as their own. This could lead, fourthly, to a convergence of legal systems, and thus the goal of a unitary legal system would be reached ‘from below’. The proponents of competition therefore see in their theory the ideal solution for unification of European law, which even conforms to the principle of subsidiarity. The best solutions emerge over time through the process of competition and are then embraced by the other Member States.

Of course, this last function contradicts the first and third functions. If it is true that the subjects of law, either individually or collectively, have varying preferences in respect of legal rules, then the divergences between legal systems should be preserved. The same is true of the innovative function, because it is also based on coexistence and choice between different legal rules. Whoever favours the competition of legal systems in contrast to unification by supranational law will have to live with substantial legal differences inside the [[European internal market for a considerable time. However, a symbiosis of the competition idea with the pursuit of a uniform law for transnational legal relationships lies in the creation of additional supranational institutions for legal subjects to choose from ([[European Company (Societas Europaea), [[European Private Company (Societas Privata Europaea), European contract law ([[Principles of European Contract Law (PECL)) as an optional instrument).

4. Preconditions for effective competition

Discussions about competition are frequently concerned only with effects, most of all whether it should be considered as a harmful spiral of deregulation or a race to the top. However, in private law, it is unclear whether the preconditions for effective competition are or can be fulfilled. In order to judge correctly, a differentiation has to be made between the various types of competition sketched out in 1. above. Many authors already speak of competition when different legal systems coexist side by side (the second level). In this case it is true that consumers can choose between the various legal rules on offer. This can happen directly, eg in contract law where choice of law exists in private international law, or indirectly through the choice of a place of business, where particular laws are in force, or through the choice of a product or service which is produced and offered for sale under particular legal rules. The so-called ‘bundling problem’ arises where the choice is indirect. It refers to the difficulty that particular institutions can only be chosen in combination with other factual and legal circumstances. The choice of a business location, for example, is seldom determined solely by the [[company law of that place, but rather by a bundle of factual and legal issues, particularly tax law.

5. Institutional competition

Institutional competition as understood in economic theory as well as in the US literature on competition for corporate charters has the additional precondition, beyond coexistence of different legal systems and choice between them, that the legislature as offeror of laws must have incentives both to being successful as well as to searching for improvements. This form of competition, which functions as a cycle of competition much like the cycle for the supply of goods and services, is particularly suited to encouraging innovation and thereby preventing petrification of the legal system. Direct tax income is a strong incentive for the legislature, which, as for example in Delaware, is generated when firms choose to locate in that jurisdiction. In many areas, such direct incentives are either not conceivable, as for example in contract law, or are prohibited in the EU (see Dir 69/335 for company law). Here, other substantially weaker incentives, such as increased prestige or indirect tax income via the promotion of the legal services industry at home, are under discussion.

6. Competition in European private law

a) Company law

In European private law the existence of competition between legal systems, or rather between legislatures, is assumed most notably in the area of company law. The jurisprudence of the ECJ (Case C-212/97 – Centros [1999] ECR I-1459; Case C-208/00 – Überseering [2002] ECR I-9919; Case C-167/01 – Inspire Art [2003] ECR I-10155) obliges the Member States to apply the law of the state of incorporation to companies founded under the law of another Member State of the EU or of the EEA, insofar as the application of the law of the actual seat of the company is not, exceptionally, justified either by mandatory requirements of public interest or by the existence of an abuse of the right of establishment.

However, in Cartesio (Case C-210/06 [2008] ECR I-9641) the ECJ gave the Member States the freedom to wind up companies founded under their domestic law in those cases where only the actual seat of the company moved abroad. In obiter, the Court nevertheless hinted that it would regard the simultaneous transfer of the actual seat and the statutory seat, ie the move of the company’s headquarters together with adaptation of its legal form to the law of the new host Member State, as being protected by the freedom of establishment. The ECJ decision in Sevic (Case C-411/03 – Sevic [2005] ECRnI-10805) and the transposition of Dir 2005/56 make possible cross-border mergers and reincorporations, but only via the roundabout way of new incorporation and merger.

Therefore, it is safe to conclude that insofar as company law is not yet harmonized, competition exists in the form of coexistence of various legal systems and freedom of choice. Furthermore, a fundamental precondition for true institutional competition, namely freedom of choice of law, is fulfilled in the EU and EEA just as in the United States. It is, however, under debate, whether institutional competition (ie competitive behaviour by legislatures as offerors of company law) actually exists in Europe or whether it can still develop. Many consider the recent legislation on limited liability companies in France, Spain, Italy, and finally Germany (see new German Gesetz zur Modernisierung des GmbH-Rechts und zur Bekämpfung von Missbräuchen (MoMiG)) as the result of such competition. Other authors emphasize the absence of financial incentives for the legislatures to participate in competition, as incorporation fees are prohibited in the EU, and therefore consider the legal reform to be motivated mostly by internal needs.

b) General contract law

Freedom of choice of law is an integral principle of the general law of contract (see Art 3 Rome I Regulation (Reg 593/2008)) so that market participants as ‘consumers of contract law’ may freely choose from the various contract law systems of Member States and third party states. Whether the parties’ actual choice in practice is really oriented towards criteria based on content, like the suitability of the chosen law for the transaction at hand, can be doubted. An empirical study of European contract law (see Stefan Vogenauer, Steven Weatherill) has shown that contracting parties almost always prefer their own law because that is what they and their advisers know best. Interestingly, the vast majority of people interviewed thought their own law was, on the whole, the best.

If one considers the chances for competitive behaviour by legislatures as offerors of contract law, only indirect incentives can be made out. Only in exceptional circumstances is it conceivable that such indirect incentives be marked enough to trigger innovative behaviour. For example, a contract law considered particularly suitable internationally, like English law, may contribute to increased income of legal advisers, whereby the state indirectly benefits through the creation of jobs and the increase in income tax paid. Where there is no freedom of choice of law, namely in consumer contracts, only indirect competition can take place. Because of the bundling problem it is certainly difficult to interpret the choice of a particular marketplace as a choice of the consumer protection law prevailing there. Numerous other factors such as sales opportunities, prices, taxes and transport costs will play a dominant role. The so-called competition in consumer law, which is promoted by Roger van den Bergh, is thus reduced to the coexistence of various levels of consumer protection in the Member States, which would make possible a comparison of the effectiveness of various consumer protection theories but which does not tally with the term ‘institutional competition’ as used in the writings of Manfred Streit or the American competition for corporate charter literature.

Literature. Lucian Arye Bebchuk, ‘Federalism and the Corporation: The Desirable Limits on State Competition in Corporate Law’ (1992) 105 Harvard LR 1435; Roberta Romano, The Genius of American Corporate Law (1993); Roger van den Bergh, ‘Subsidiarity as an Economic Demarcation Principle and the Emergence of European Private Law’ (1998) 5 MJ 129; Manfred E Streit and Daniel Kiwit, ‘Zur Theorie des Systemwettbewerbs’ in Manfred E Streit and Michael Wohlgemuth (eds), Systemwettbewerb als Herausforderung an Politik und Theorie (1999) 13; Anthony Ogus, ‘Competition between National Legal Systems: A Contribution of Economic Analysis to Comparative Law’ (1999) 48 ICLQ 405; Wolfgang Kerber, ‘Interjurisdictional Competition within the European Union’ (2000) 23 Fordham Int’l LJ 217; Eva-Maria Kieninger, Wettbewerb der Privatrechtsordnungen im Europäischen Binnenmarkt (2002); Stefan Vogenauer and Steve Weatherill, ‘The European Community’s Competence to Pursue the Harmonisation of Contract Law—an Empirical Contribution to the Debate’ in Stefan Vogenauer and Steve Weatherill (eds), Harmonisation of European Contract Law: Implications for European Private Laws, Business and Legal Practice (2006) 105; Eva-Maria Kieninger, ‘Aktuelle Entwicklungen des Wettbewerbs der Gesellschaftsrechte’ in Hans-Bernd Schäfer and Thomas Eger (eds), Ökonomische Analyse der europäischen Zivilrechtsentwicklung (2007) 170; William W Bratton, Joseph A McCahery and Erik PM Vermeulen, ‘How Does Corporate Mobility Affect Lawmaking? A Comparative Analysis’ (2009) 57 Am J Comp L 347.

= Competition (Internal Market)

1. Concept and functions

In economic life the concept of competition refers to the conflict between economic rivals who want to optimize the results of their own market activities by appropriate action without coordination of their plans and decisions. Competition is an inevitable consequence of divergent business plans of individual actors relating to the same market. Such divergences may be reduced or even excluded by comprehensive state planning at the various levels of production and distribution as has been demonstrated by the central administration in some economic systems. However, the preferences of the individual consumers can be influenced by orders, prohibitions and advertisements only to a limited extent. The remaining and unalterable differences of demand have repercussions on the kind and extent of supply and practically exclude an effective and permanent coordination as has been shown by the experience of the socialist states in the 20th century.

Under a long-term perspective, competition is thus an inevitable and constant factor of economic life. Its intensity varies, however, from market to market and may be impacted by manifold measures of state or private origin. The antagonistic interests and preferences of economic actors are adjusted to each other in markets. In respect of quantity and quality, supply and demand are brought into balance by the price mechanism. The foundation of that process in civil law is the freedom of contract in its various forms: the freedom to use the market instead of reserving one’s own production for private purposes or of satisfying one’s demand by self-production (freedom of conclusion); the freedom to choose the contracting party; the freedom of price and of content ([[freedom of contract). It is only where these freedoms are essentially ensured that the quantities and qualities supplied and demanded may continuously be brought into balance. Competition guarantees that economic resources migrate to where they cause the greatest satisfaction of demand (allocative function) and that the market actors time and again devise new and more efficient means of production and distribution of goods and services (innovative function). This process also ensures that the revenue attained by the single actors corresponds to the social valuation of their performance. These economic functions are supplemented by a political détente: competition allows consumers to articulate their preferences and provides incentives to suppliers to satisfy them. Contrary to systems of central state planning, the scarcity of goods therefore is not perceived as a political problem to be solved by the state administration and persons who are accountable to the public at large. It is rather a private problem expressed in terms of the individual’s willingness to pay.

Competition produces its effects in markets. The size of the market may be very influential for the intensity of competition. In small markets, economies of scale may have the effect that the demand can most effectively be served by a single supplier who will be able to seek monopoly rents, thereby causing welfare losses and even aggravating social conflicts by the abuse of market power. The extension of markets beyond the traditional borders of nation states thus pursues several objectives: it is meant to further European integration by the cross-border exchange of goods and services; by enlarging demand it shall allow for a multitude of suppliers serving the market in efficient competition; and it shall curb the power of dominant firms in the interest of a depolitization of economic life.

2. The protection of competition in Union law

Union law has valued the protection of competition from the outset. The 1951 European Coal and Steel Treaty already provided for a prohibition of cartels and merger control. In accordance with the concerns prevailing in the aftermath of World War II, these safeguards were primarily meant to prevent German industry from escaping the survey of the High Authority by a new concentration of power. It was only during the application of those precepts that the idea of competition gained influence and consequently inspired the 1957 EEC Treaty in a very profound manner. The establishment of a system ensuring that competition in the internal market is not distorted was one of the objectives of the Community in accordance with Art 3(1)(g) EC. The Treaty of Lisbon has relocated this target into a Protocol on the internal market. It refers to the objective laid down in Art 3(3) EU (2007) to establish an internal market and explicitly states that this target includes a system ensuring that competition is not distorted. While this goal initially referred to the common market, the internal market ([[European internal market) has taken its place under the Single European Act of 1986 and, by virtue of the Treaty of Lisbon, also in the chapter on competition. In substance, the terminological modification does not bring about any change.

Union law protects competition in the internal market from state-origined restrictions (see 3 below) and from private restrictions. This occurs in a multi-layered system composed of provisions of primary and secondary Union law. The 1957 Treaty of Rome had prohibited both horizontal and vertical agreements restricting competition in Art 85 (101 TFEU/81 EC, [[prohibition of restrictive agreements and exemptions) and the [[abuse of a dominant position in Art 86 (102 TFEU/82 EC). Contrary to the Coal and Steel Treaty, the EEC Treaty did not provide for the control of mergers, but the Court of Justice has applied the aforementioned prohibitions to certain types of mergers as well, ECJ Case 6/72 – Continental Can [1973] ECR 215; ECJ Joined Cases 142 and 156/84 – BAT and Reynolds Industries [1987] ECR 4487. To avoid legal uncertainty, the Council finally enacted Reg 4064/89 which has meanwhile been replaced by Reg 139/2004. It covers all concentrations having a Community dimension ([[merger control).

According to Art 101(3) TFEU/81(3) EC certain agreements and concerted practices are exempted from the basic prohibition under para 1 of that provision. The exemption applies to agreements and practices which increase efficiency while allowing consumers a fair share of the resulting benefit provided that the restrictions agreed to are indispensable for those gains and do not eliminate substantial competition in the market. These conditions are met by many cooperation agreements. The Community institutions therefore soon agreed on a standardization of harmless types of agreements. On the basis of Council regulations such as Reg 19/65, the Commission has issued a number of [[block exemption regulations, see eg Reg 330/2010 for vertical agreements ([[vertical agreements in EU competition law) or Reg 1217/2010 for agreements on research and development. Further sectoral block exemption regulations cover vertical agreements in the motor vehicle sector (Reg 330/2010) or agreements in the insurance industry (Reg 267/2010). The number of such group exemption regulations has grown continuously. Where a regulation applies, the respective agreement cannot be attacked as being against European competition law, but the exemption may be withdrawn in particular cases.

The founding treaties have entrusted the Community with the enactment of implementing provisions for the enforcement of the substantive prohibitions of the treaty, see Art 103 TFEU/83 EC. At first, the Community made use of these powers by issuing Reg 17/1962 ([[competition law (procedure)). This instrument imposed a duty of notification for restrictive agreements upon the undertakings and reserved the competence for issuing exemptions under Art 101(3) TFEU/81(3) EC to the Commission; only notified agreements were eligible for exemption. Where national authorities or courts had to deal for example with contractual disputes and a party invoked a breach of competition law and the consequential nullity of the contract under Art 101(2) TFEU/81(2) EC, the proceedings had to be stayed until the Commission took a decision, ECJ Case C-234/89 – Delimitis/Henninger Bräu [1991] ECR I-934, para 48. Over many years, the Commission was, however, unable to cope with the heavy workload caused by the high number of exemption applications. As a compromise solution it conceived the aforementioned block exemptions and—for individual cases—so-called comfort letters. They inform the applicant that the Commission has no objections to the agreement for the time being, but that it reserves a later investigation. Thus, the legal certainty that it aimed to create was not attained.

In the light of this experience and the imminent enlargement of the internal market after the accession of numerous new Member States, the Commission urged the Council to modify the enforcement mechanism. Regulation 1/2003 replaced Reg 17/1962 and did away with the Commission monopoly on exemptions. Article 101(3) TFEU/81(3) EC is now directly applicable in all national courts and authorities. At the same time, the new instrument limited the possibilities for national institutions to apply their national competition law instead of Arts 101 and 102 TFEU/81 and 82 EC. A European competition network (ECN) was established to safeguard a uniform practice of national competition authorities in the application of Union law. More recently, the Commission has taken the initiative for an improvement of the private enforcement of competition law ([[competition law (private enforcement)).

3. Restrictions of competition implemented by states

Competition in the internal market can be restricted, not only by private acts of undertakings, but also by sovereign measures adopted by Member States or the Community itself. The Treaty of Rome has paid particular attention to restrictions of competition caused by Member States. The fundamental freedoms, concerning the [[free movement of goods (Art 34 TFEU/28 EC), the → free movement of workers (Art 45 TFEU/39 EC), the [[freedom of establishment (Art 49 TFEU/43 EC), the [[free movement of services (Art 56 TFEU/49 EC) as well as the [[free movement of capital and payments (Art 63 TFEU/56 EC) are directed against measures of the Member States which have the effect of restricting the free flow of resources within the internal market. They are thus a legal basis for the opening of markets in favour of foreign suppliers and customers. They are an essential part of the [[European Economic Constitution protecting competition in the internal market against national measures designed to cut off the national market from the rest of Europe. They conflict not only with outright restrictions of import and export, but also with other measures having an equal effect including customs.

Member States may further distort competition by granting state aid ([[state aid law). While the prohibition of Art 107 TFEU/87 EC is primarily, but not exclusively, directed against state subsidies, numerous exceptions provided by, or on the basis of, Art 108 TFEU/88 EC limit its effect. A corresponding prohibition of subsidies afforded by the → European Union itself is lacking completely. Further state-originated restrictions of competition are widespread in the form of privileges for undertakings entrusted with the operation of services of general economic interest; however, European competition law is basically applicable to them, see Art 106(2) TFEU/ 86(2) EC. Not infrequent are distortions of international competition caused by dumping practices. The Treaty of Rome had therefore authorized protective measures by the Member States affected, see Art 91 EEC. Since such practices lose their significance in open markets, this provision has been subsequently deleted. None of the founding treaties has dealt with competition in relation to public procurement although the purchasing practices of the state entities are very often guided by political, rather than economic, considerations. The Court of Justice has, however, reviewed such restrictions of competition under the fundamental freedoms, ECJ Case 305/87 – Commission v Greece [1989] ECR 1473, para 28; ECJ Case C-177/94 – Perfili [1996] ECR I-170, para 14. This has triggered comprehensive legislation by the Community on public procurement, see the consolidation in Dir 2004/17 and 2004/18.

4. Guiding principles of European competition policy

Competition policy and the application of competition law are often guided by model perceptions about the optimal organization of markets. In the pioneer phase of German and European competition law, ie in the 1950s, the balancing of economic power by competition prevailed. This objective is served by a market structure which leaves little or no power to the single market actor: perfect competition. The low market share thresholds which trigger the presumption of market dominance under s 19(3) of the German Act against Restrictions of Competition (33 per cent for dominance by a single firm, 50 per cent for collective dominance by two or three undertakings) point to the market structure as it was ideally conceived in those years. This ordoliberal approach is close to the focus on the freedom of economic actors in the neo-classical model. It does not aim at the achievement of a certain market structure, but at the conservation of individual liberties by unequivocal and general prohibitions of certain anticompetitive practices. Both approaches can be traced in German competition law and, to a lesser extent, in the practice of the [[European Commission and the [[Court of Justice over many years.

The target of perfect competition has not only proven to be unrealistic, it can also be criticized from a theoretical point of view because it assumes a final market structure which would not allow for further improvement in the efficient allocation of resources; moreover, there would be no further economic incentives for innovation. It is therefore a static model which would not allow the aforementioned functions of competition (see 1. above) to be performed. These functions require undertakings of a certain size and the possibility of self-financing on the side of the market actors. It follows that perfect competition cannot be the ideal market structure and that limited market power has to be tolerated. This would imply a wide oligopoly which would still sufficiently discipline the single market actors.

Since the 1970s a new school of competition policy has evolved mainly at the University of Chicago. The Chicago School of Antitrust no longer conceives a visible role for notions of freedom and power. The sole benchmark for competition policy and competition law is rather said to be welfare, sometimes understood as general welfare, but mostly as consumer welfare. Consumer welfare can also be promoted by anti-competitive agreements and practices insofar as they generate gains in efficiency which benefit consumers. As a consequence, the analysis of competition would therefore not look into the behaviour of market actors and its impact on market structures, but rather into the likely effects of that behaviour for consumers. This approach raises obvious prognostic difficulties for competition authorities and tribunals. In our context, it is however relevant for its influence on competition law and competition policy in the European internal market.

The [[European Commission has suggested, since the late 1990s, a progressive turn to a more economic approach in European competition law. This includes an increased reference to econometric models for the interpretation of open legal concepts such as market dominance. Thus, the concentration of a market will increasingly be measured in accordance with the so-called Herfindahl-Hirschman-Index (HHI) which results from the addition of the squared market shares of the undertakings of a market. Another example is the delimitation of a market by the so-called SSNIP Test (small but significant and non-transitory increase in price) which allows the identification of goods which have to be included as substitutes in the relevant market. Such economic methods have the advantage of providing a clear and empirically manageable content to general and open legal concepts like the relevant market or market dominance which require very complex considerations. It is understandable that the Commission would make use of such methods which may help to clarify the law and make it more predictable. A different issue relates to the significance of new paradigms of economic policy in the application of competition law. It is not uncommon that unamended legal precepts are interpreted, over the course of time and under the impression of changed circumstances, in the light of new purposes; this process is not limited to competition law. However, novel interpretations must keep within the limits drawn by the law in force. Articles 101 and 102 TFEU/81 and 82 EC contribute to a system of undistorted competition which is specified by the founding treaties as the ultimate goal of European competition policy. On the other hand, ‘consumer welfare’ is only enunciated in individual treaty provisions which refer to its significance, in particular in Art 101(3) TFEU/81(3) EC, but not in the prohibition of cartels laid down in Art 101(1) TFEU/81(1) EC ([[prohibition of restrictive agreements and exemptions) and not in the prohibition of abuses of dominant power in Art 102 TFEU/82 EC. In view of the special rank of the internal market including the system of undistorted competition as an objective of the European Community, consumer welfare cannot be allowed to impair the goal of undistorted competition. Moreover, this goal is indirectly served by the protection of a market competition structure under Arts 101 and 102 TFEU, ECJ Case C-95/04 P – British Airways 2007 ECR I-2331.

Literature. Monopolkommission, Problems conseqent upon the reform of the European cartel procedures (2002); DG Goyder, EC Competition Law (4th edn, 2003); Christian von Weizsäcker, ‘Abuse of a Dominant Position and Economic Efficiency’ [2003] Zeitschrift für Wettbewerbsrecht 58; Ernst-Joachim Mestmäcker and Heike Schweitzer, Europäisches Wettbewerbsrecht (2nd edn, 2004); Ingo Schmidt, Wettbewerbspolitik und Kartellrecht (8th edn, 2005); Meinrad Dreher and Michael Adam, ‘The More Economic Approach to Art 82 EC and the Legal Process’ [2006] Zeitschrift für Wettbewerbsrecht 259; Christina Oelke, Das Europäische Wettbewerbsnetz (2006); Ulrich Immenga, ‘Ökonomie und Recht in der europäischen Wettbewerbspolitik’ [2006] Zeitschrift für Wettbewerbsrecht 346; Ulrich Schwalbe and Daniel Zimmer, Kartellrecht und Ökonomie (2006); Ulrich Immenga and Ernst-Joachim Mestmäcker (eds), Wettbewerbsrecht, vol 1/EG parts 1 and 2 (4th edn, 2007); Jürgen Basedow, ‘Konsumentenwohlfahrt und Effizienz—Neue Leitbilder der Wettbewerbspolitik?’ [2007] Wirtschaft und Wettbewerb (WuW) 712; Christopher Bellamy, Graham Child and Peter M Roth, European Community Law of Competition (6th edn, 2008); Jürgen Basedow and Wolfgang Wurmnest (eds), Structure and Effects in European Competition Law (2011).

Retrieved from Competition between Legal Systems – Max-EuP 2012 on 28 March 2024.

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