by Kevin Coates | Oct 27, 2009 | Competition, Regulation
(The third part of a general lecture on competition law, state aid and regulation, separated into three posts: Part 1, Part 2, Part 3.) Competition Enforcement in the Financial Crisis What should we make of State aid control? Is it a consistent part of a competition law system? Although it is often difficult to enforce, I think the answer is yes. There is already some recognition of its value in the – far too weak – WTO rules on subsidies, but until State aid laws are seen as important parts of domestic competition laws, I do not think that we are going to see significant multilateral enforcement mechanisms (which is a shame). If you want a consistent system of competition law, however, State aid control should be included to control national and sub-national State aid, and not just aid which has cross-border effects. At first sight, the US Commerce Clause would appear to provide a constitutional basis for that here,(“The central rationale for the rule against discrimination is to prohibit state or municipal laws whose object is local economic protectionism, laws that would excite those jealousies and retaliatory measures the Constitution was designed to prevent”; Toomer v. Witsell, 334 U. S. 385, 403–404 (1948)} but I know very little about US constitutional law so more informed minds may differ.) The present financial crisis has shown the value of the EU’s State aid rules. When he spoke here in September, Professor Jenny gave a number of examples of involvement of the EU competition rules in the financial crisis. The European Commission, as a competition authority, has been deeply involved in...
by Kevin Coates | Oct 27, 2009 | Competition, Regulation
(The second part of a general lecture on competition law, state aid and regulation, separated into three posts: Part 1, Part 2, Part 3.) The Competition Rules and State Action For a US antitrust lawyer, discussion of the competition rules does not extend to State (or state) action. For the drafters of the EC Treaty, however, it would have been obvious that State action would need to be covered. Looking at the different Member States, it would have been very clear that it is not just laws prohibiting trade, or actions of companies that could distort competition on the market. State owned companies were common – in some Member States they still are (even before the nationalisations caused by the financial crisis); state granted monopolies were also common. So completing the single market meant completing the competition rules with control on state action, control being exercised through Articles 86 – which imposes limits on the state’s ability to grant special or exclusive rights – and Article 87 – which imposes limits on the state’s ability to grant aid to individual companies or sectors. From the description of the system of the Treaty above, you can see that these rules aimed at the States have a dual origin – they are part of completing the single market (for example, state monopolies could effectively prevent free movement of goods and services), and they are part of the competition rules (for example, state aid could undermine productive efficiency, and incentives to invest and innovate). No other jurisdiction had, or has, comparable rules – the anti-subsidy provisions of the WTO are a shadow...
by Kevin Coates | Oct 27, 2009 | Competition, Regulation
As part of Professor Eleanor Fox’s comparative EU/US competition law LLM class at NYU, she asked if I would give a lecture on state aid and regulation issues and how they relate to the competition rules. Here is the text of the lecture, separated into three posts: this is Part 1; Part 2; Part 3) Competition law, State aid, and Regulation One of the difficulties about studying the law is that there is never a good place to start. No individual law or rule exists in isolation; if you learn about one rule, you will understand a little; if you learn about more rules you will understand a little more about that first rule. Professor Dworkin’s idealised judge, Hercules, has a perfect knowledge of all rules, and only with that knowledge can the judge form a complete understanding of any individual rule. Fortunately, real life standards are a little lower, but it is useful to think about how any one rule fits into the overall system of laws; this is particularly useful when comparing US and EU competition law, as the EU system of “competition law” is rather different to that in the US. Rather than focused exclusively on company behaviour, the EU system looks at state action as well. The objective is, however, the same. Creating a Single Market When the drafters of the Treaties sat down in the 1950s, they had a specific object in mind – to create a single economic area out of the then six separate national economies (now 27 national economies). One of the major reasons to integrate the economies of the Member...
by Kevin Coates | Sep 29, 2009 | General
At the 2009 Fordham Antitrust conference, there was a long session on EU and US approaches to the control of state aid (state subsidies), in the context of the financial and economic crisis. The EU has an extensive State aid control regime, which requires notification to the European Commission of any aid that may distort competition and that affects inter-state trade. One of the US panelists indicated that there was no mechanism under US law to enforce a similar control over state aid by US states, and nor could there be. I had understood that the US commerce clause (whereby Congress shall have power “to regulate commerce with foreign nations, and among the several states, and with the Indian tribes;”) to be an equivalent of the EU principle that – in this case – the competition rules, including the State aid rules, apply where trade between Member States is affected. To determine whether a law violates this so-called “dormant” aspect of the Commerce Clause, we first ask whether it discriminates on its face against interstate commerce. American Trucking Assns., Inc. v. Michigan Pub. Serv. Comm’n, 545 U.S. 429, 433 (2005); Fort Gratiot Sanitary Landfill, Inc. v. Michigan Dept. of Natural Resources, 504 U.S. 353(1992). In this context, ” ‘discrimination’ simply means differential treatment of in-state and out-of-state economic interests that benefits the former and burdens the latter.” Oregon Waste Systems, Inc. v. Department of Environmental Quality of Ore., 511 U.S. 93 (1994); New Energy Co. of Ind. v. Limbach, 486 U.S. 269(1988). United Haulers Association, Inc. v. Oneida-Herkimer Solid Waste Management Authority 127 S.Ct. 1786 (2007) This reference to...