The Pros and Cons of New Tools

The moderator Ms. Evelin Pärn-Lee began the first panel by introducing the panellists, followed by a directed question to Peitz about the existence of a regulatory gap and his views on the need of a new competition tool (NCT).

Mr. Martin Peitz opened the discussion by explaining that a new competition tool is an attempt to address certain problematic business practices that are inefficiently dealt with using the currently available toolbox. An NCT can particularly be used to address entrenched market power that is not based in merit or superior products. He concluded his speech by talking about alternative solutions to an NCT. In the open discussion, he emphasized the point that an NCT is not a one-size-fits-all solution, but rather a targeted approach for markets that the current toolbox cannot reach.

Mr. Georg Boettcher argued that the existing toolbox is extensive and sufficient to deal with potential market problems. He acknowledged that there may be markets in need of a new tool, such as the tech market. However, ex-ante regulation, like the DMA, should be preferred over an NCT. During the open discussion, Boettcher used a soccer game as an analogy for an NCT’s impact on businesses to highlight the fairness problems of an ex-post regulation. He explained that even if you follow all the rules, the referee could still deem the match unfair and make your team play with nine players instead of eleven.

Ms. Elin Moen continued the discussion and stated that an NCT should only be introduced to a well-defined problem, and a government should require an empirically backed, detailed description of the problem before granting these powers. Specifically in Norway, a competition tool shifts the competence to regulate markets from the government to the competition authority. In the open discussion, she emphasized that a country-fragmented regulatory framework increases companies’ regulatory burden for cross-border expansions. Therefore, a harmonized NCT framework at the European level would be preferred.

Mr. Jens Munk Plum echoed the concerns of Moen that an NCT moves the competence out, in a broad sense. He acknowledged that there may be instances where there is a regulatory gap but argued that there are better alternatives. According to Plum, the key question to ask is who should be the one to decide. Further, there is a concern about the lack of transparency as well as the absence of judicial review associated with a new competition tool. In the open discussion, Plum seconded Boettcher's concerns that it is difficult for businesses to know in advance whether an action complies with an ex-post regulatory framework.

Mr. Daniel Turnbull started by describing the practical experience of using the market investigation tool. Starting with its strength, it is flexible regarding which markets to look at and allows an extensive range of remedies. It allows the Competition and Markets Authority (CMA) to address concerns that other tools do not reach. Among its weaknesses Turnbull notes that the process is resource-intensive and long. Selecting the correct case is important, but information is limited at that stage. The process can be rigid and there can difficulties in reacting to external developments during investigations. It is difficult to tailor remedies to evolving markets due to the investigation being a one-off intervention.

Ms. Caroline Thomas stressed that market investigation is a powerful tool, and for that reason needs to be carefully targeted at markets where the burden of an investigation is balanced by the needs for it. Thomas argued that a strength of market investigations is their transparency and their being performed by an independent regulator in an evidence-based way, allowing parties to get a fair and thorough hearing. While transparent, the process requires a lot of work from companies. Just going through and responding to material continuously published by the CMA is a substantial task. The threat of a market investigation and uncertainties during the investigation may also affect business decisions.

Ms. Helen Ralston-Smith remarked that the prevalence of market investigations and diversity of remedies point toward the tool being useful. She further noted that a key strength is its focus on remedies. A market investigation is only opened if there is a reasonable belief that any problem found can be fixed. Weaknesses include the tool comprehensives of the tool potentially resulting in too unwieldly investigations. As Turnbull also noted, it can be difficult to future-proof a one-off intervention.

Mr. Joshua Sherer explained that HSBC is subject to an order from 2017, which they are still devoting resources to follow. Since remedies can be intrusive, Sherer argued that it is important that there is an opportunity for appeal so as to constrain the remedies. He furthermore described how burdensome market investigations can be for companies. Although the process is transparent, Sherer argued that transparency does not guarantee open-mindedness.

Ms. Silke Hossenfelder opened the panel by discussing the optimal design of a New Competition Tool (NCT) from four perspectives: substantive, procedural, institutional, and resource-related. Using Germany's recently adopted NCT as an example, she emphasized addressing market failures only when traditional competition law is inapplicable. Investigations should be timely, with a designated decision-making institution. Structural remedies, like divestitures, should be last resorts, and the resource allocation is dependable on each jurisdictions budgeting process.

Mr. Ronny Gjendemsjø stressed the need for an independent body, free from political and National Competition Authority (NCA) influence, to impose remedies through an NCT. He argued against designing an NCT to lower substantive standards or the burden of proof compared to competition law. Unlike Hossenfelder, Gjendemsjø contended that the NCA should justify why market investigation remedies are more efficient in specific cases than traditional antitrust enforcement. Remedies should address actual market failures, not potential distortions, and undergo judicial review with a clear burden of proof if an independent body is unattainable.

Ms. Pauline Kuipers explained that the Dutch NCA has broad enforcement responsibilities, including consumer and sector-specific regulations, making the national discussion on proportionality for an NCT different from other jurisdictions. Kuipers advocated for an independent body to oversee market investigation decisions, citing the UK model. She argued that NCT remedies should be market-wide to gain acceptance from affected companies and decrease the likelihood of punitive experiences. Kuipers emphasized the need for an initial independent review before opening market investigations and cautioned against designing tools that the NCA could easily exploit, such as having too low standards for intervention.

Mr. Stefan Sagebro questioned the necessity of debating an NCT, as he does not see markets experiencing significant issues entitling a new, broader toolbox. He attributed competition problems to fierce global competition and increasing market dynamism, using the food sector as an example. Sagebro acknowledged the risks of an NCT discussed by previous panels but praised Sweden's thorough process, including public inquiries. He advocated for a limited toolbox focused on markets difficult to address through legislation, emphasizing that any new tool should be proportionate, respect the investment climate, avoid structural remedies and not allow for slow interim interventions which risk due process.