Competition Law and Public Interests

Preface xiii
Acknowledgements xv
Terminology xvii

1 Introduction 1
1.1 Why This Book? An Introduction 1
1.2 The Central Questions 3
1.3 Application to the Banking Sector 6
1.4 Outline of This Book 7

2 The Goals of Competition Law 9
2.1 Introduction 9
2.2 The Rationales for Competition Law 11
2.2.1 The Theory of Economic Welfare 11
2.2.1.1 Economic Welfare as a Measure for Economic Prosperity 11
2.2.1.2 Determining the Size of the Consumer Surplus 13
2.2.1.3 Conceptual Difficulties with Determining the Consumer Surplus 13
2.2.1.4 Producer Surplus and Total Welfare 14
2.2.1.5 Society’s Well-Being and Economic Welfare 15
2.2.2 The Harm of Imperfect Competition for Economic Welfarem 15
2.2.2.1 Market Power 15
2.2.2.2 Innovation 17
2.2.3 The Economic Prosperity Rationale: Conclusion 19
2.3 The Goals of EU Antitrust Law 19
2.3.1 Introduction 19
2.3.2 The Goals of EU Antitrust Law: Economic Prosperity 20
2.3.2.1 EU Legislative History 20
2.3.2.2 The Commission’s Policy 22
2.3.2.3 The EU Courts’ Case Law 23
2.3.2.4 Conclusion on Economic Prosperity as a Goal of EU Antitrust Law 25
2.3.3 The Goals of EU Antitrust Law: Market Rivalry 26
2.3.3.1 Introduction 26
2.3.3.2 The Commission’s Policy 26
2.3.3.3 The EU Courts’ Case Law 27
2.3.3.4 Competition as a Form of Economic Freedom 27
2.3.3.5 Conclusion on Market Rivalry as a Goal of EU Competition Law 28
2.3.4 Economic Prosperity and Market Rivalry: A Normative View 29
2.3.5 The Goals of EU Antitrust Law: The Single Market Imperative 32
2.3.5.1 Introduction 32
2.3.5.2 The Hierarchy of the EU Treaties’ Goals 32
2.3.5.3 The EU Courts’ Case Law 33
2.3.5.4 Conclusion on the Single MarketImperative as a Goal of EU Competition Law 34
2.3.6 The Single Market Imperative: A Normative View 34
2.3.7 Goals of EU Antitrust Law: Other EU Policies 37
2.3.8 A Legal Test for the Cartel Prohibition 39
2.3.8.1 The Need for a Definition of ‘a Restriction of Competition’ 39
2.3.8.2 The Two Screens Test 39
2.3.9 The Goals of EU Antitrust Law: Conclusion 41
2.4 The Goals of EU Merger Control 42
2.4.1 Introduction 42
2.4.2 The Goals of EU Merger Control: Economic Prosperity 45
2.4.2.1 Introduction 45
2.4.2.2 The Goal of the 1989 Merger Regulation: Market Rivalry 45
2.4.2.3 The EUMR Introduced the Efficiency Defence 45
2.4.2.4 The ‘No Obstacle to Competition’ Condition 48
2.4.2.5 Economic Prosperity as the Goal of EU Merger Control: Conclusion 49
2.4.3 The Goals of EU Merger Control: Single Market Imperative 49
2.4.4 The Goals of EU Merger Control: Other EU Public Policy Goals 50
2.4.5 The Goals of EU Merger Control: Conclusion 52
2.5 The Goals of Dutch Competition Law 53
2.5.1 Introduction 53
2.5.2 The Goals of Dutch Competition Law: Economic Prosperity 54
2.5.3 The Single Market Imperative and the DCA 55
2.5.4 The Goals of Dutch Competition Law: Other Dutch Public Policy Goals 56
2.5.5 The Goals of Dutch Competition Law: Conclusion 57
2.6 The Goals of Competition Law: Conclusion 57

3 The Goals of Banking Regulation 61
3.1 Introduction 61
3.2 Rationales for Market Regulation 62
3.2.1 Introduction 62
3.2.2 Efficiency Justifications 63
3.2.3 Non-Economic Justifications 64
3.2.4 Paternalism 64
3.3 The Role of Banks in Society 65
3.3.1 Introduction 65
3.3.2 Banks’ Essential Tasks for Society 66
3.4 Competition as a Goal of Banking Regulation 69
3.5 Goals of Prudential Regulation 71
3.5.1 Goals of Prudential Regulation: Introduction 71
3.5.2 Goals of Prudential Regulation: Preventing the Failure of Individual Banks 71
3.5.2.1 Efficiency Justification: Remedying Banks’ Inherent Instability 71
3.5.2.2 Non-Economic Justification: Protection against Grave Consequences of Bank Failures 73
3.5.2.3 Conclusion on Prudential Regulation Regarding Individual Bank Failures 75
3.5.3 Goals of Prudential Regulation: Mitigating Systemic Risk 75
3.5.3.1 Introduction to Systemic Risk Regulation 75
3.5.3.2 Conclusion on Systemic Risk Regulation 78
3.5.4 Conclusion on the Goals of Prudential Regulation 79
3.6 Goals of Business Conduct Regulation 79
3.6.1 Goals of Business Conduct Regulation: Introduction 79
3.6.2 Goals of Business Conduct Regulation: Consumer Protection 80
3.6.2.1 Consumer Protection Law v. Competition Law 80
3.6.2.2 Paternalistic Regulation 81
3.6.2.3 Efficiency Justification: Information Issues 82
3.6.2.4 Non-Economic Justification: Protecting Consumers from Overindebtedness 85
3.6.2.5 Non-Economic Justification: Financial Inclusion 86
3.6.2.6 Non-Economic Justification: Privacy Protection 86
3.6.2.7 Conclusion on Consumer Protection Justifications 87
3.7 Goals of Banking Regulation: Conclusion 88

4 Economic v. Non-Economic Benefits – Article 101(3) TFEU – FirstCondition 91
4.1 Introduction 91
4.1.1 Introduction to this Chapter 91
4.1.2 Introduction to the Exemption Possibility and the Exemption Analytical Framework 92
4.2 Normative View on the First Condition 93
4.2.1 Introduction to the Normative View on the First Condition 93
4.2.2 Why All Economic Benefits Must Fall within the Scope of the First Condition 94
4.2.2.1 EconomicWelfare as a SuitableCommon Denominator 94
4.2.2.2 The Need for Convincing Substantiation of Welfare Effects 96
4.2.2.3 Undertakings Benefit from Anti-Competitive Profits 99
4.2.2.4 Conclusion on the Normative View on Economic Benefits 100
4.2.3 Why Non-Economic Benefits Must Not Fall within the Scope of the First Condition 103
4.2.3.1 No Overarching Goal as a Common Denominator 103
4.2.3.2 Non-Economic Benefits and the Democratic Legitimacy Rule 105
4.2.3.3 Competition Authorities and the Democratic Legitimacy Rule 116
4.2.3.4 The Courts and the Democratic Legitimacy Rule 123
4.2.3.5 Conclusion on theNormative ViewonNon-Economic Benefits 128
4.2.4 Paternalism and Economic Benefits 129
4.2.5 Integration Clauses and Non-Economic Benefits 130
4.2.5.1 The Use of the Integration Clauses 130
4.2.5.2 A Normative View on the Use of Integration Clauses 132
4.2.6 Conclusion on the Normative View on the First Condition 134
4.3 The Legal Status Quo of the First Condition 136
4.3.1 Introduction to the Legal Status Quo of the First Condition 136
4.3.2 The First Condition: EU Case Law 137
4.3.3 The First Condition: Commission Practice 139
4.3.4 The First Condition: ACM Practice 146
4.3.5 Synthesis: EU Courts andAuthorities Do Not Provide a Proper Test for First Condition 148
4.3.6 Conclusion on the Legal Status Quo of the First Condition 150
4.4 The First Condition: Conclusion 151

5 Beneficiaries, Suitability and Innovation – Article 101(3) TFEU – Second, Third & Fourth Condition 155
5.1 Introduction 155
5.2 The Second Condition of the Exemption Possibility 155
5.2.1 Introduction to the Second Condition 155
5.2.2 The SecondCondition:A Normative Viewon the Beneficiaries of the Improvements 156
5.2.3 The Second Condition: A Normative View on the ‘Fair Share’ Requirement 160
5.2.4 Conclusion on the Normative View of the Second Condition 161
5.2.5 The Second Condition: The Legal Status Quo of the Beneficiaries of the Improvements 162
5.2.6 The Second Condition: The Legal Status Quo of the ‘Fair Share’
Requirement 168
5.2.7 Conclusion on the Legal Status Quo of the Second Condition 168
5.2.8 Final Conclusion on the Second Condition 169
5.3 The Third Condition of the Exemption Possibility 169
5.3.1 Introduction to the Third Condition 169
5.3.2 The Third Condition: A Normative View on Its Scope 170
5.3.3 The Third Condition: The Legal Status Quo of Its Scope 171
5.3.4 The Third Condition: Comparison between the Normative View and Legal Status Quo 173
5.3.5 Conclusion on the Third Condition 175
5.4 The Fourth Condition of the Exemption Possibility 176
5.4.1 Introduction to the Fourth Condition 176
5.4.2 The Fourth Condition: A Normative View on Its Scope 176
5.4.3 The Fourth Condition: The Legal Status Quo of Its Scope 178
5.4.4 The Fourth Condition: Comparison between the Normative View and Legal Status Quo 180
5.4.5 Conclusion on the Fourth Condition 181
5.5 The Second, Third and Fourth Condition: Conclusion 182

6 Legitimate Objective Ancillarity 185
6.1 Introduction 185
6.2 The Legitimate Objective Ancillarity Doctrine: Legal Status Quo 188
6.2.1 Introduction to the Legal Status Quo 188
6.2.2 The Scope of ‘Legitimate Objectives’ 188
6.2.3 The Proportionality Test 192
6.2.4 Conclusion on the Legal Status Quo of Legitimate Objective Ancillarity Doctrine 193
6.3 Normative View on the Legitimate Objective Ancillarity Doctrine 193
6.3.1 Introduction to the Normative View 193
6.3.2 Legitimate Objective Ancillarity as an Internal Market Rule of Reason 195
6.3.3 Legitimate Objective Ancillarity Doctrine Needed for Government Instructions? 202
6.3.4 Economic Benefits within the Legitimate Objective Ancillarity Doctrine 204
6.3.5 Conclusion on the Normative Viewon the Legitimate Objective Ancillarity Doctrine 206
6.4 The Legitimate Objective Ancillarity Doctrine: Conclusion 210

7 Reconciliation Mechanisms for Merger Control 213
7.1 Introduction 213
7.2 Emergency Takeovers: The Benefits 218
7.2.1 Introduction to Emergency Takeovers 218
7.2.2 State Intervention and Nationalisations 221
7.2.3 Emergency Takeovers: Benefits for the State 223
7.2.3.1 State Benefit 1: Improvement of Ailing Bank’s Business Model 226
7.2.3.2 State Benefit 2: Piggybacking on Acquirer’s Strong Capital Base 227
7.2.3.3 Other State Benefits 228
7.2.4 Emergency Takeovers: Benefits for Bank Customers 228
7.2.4.1 Customers’ Benefit 1: Lower Bail-In Amount 228
7.2.4.2 Customers’ Benefit 2: Avoidance of Resolution Taxes 229
7.2.5 Emergency Takeovers: Conclusion on the Benefits 229
7.3 Balancing in the SIEC Test 230
7.3.1 Introduction to the SIEC Test 230
7.3.2 The Failing Firm Defence 231
7.3.2.1 Substantive Appraisal of Mergers: A Counterfactual Analysis 231
7.3.2.2 The Failing Firm Defence: The Legal Status Quo 231
7.3.2.3 The Failing Firm Defence: A Normative View 233
7.3.2.4 The Failing Firm Defence: Conclusion 237
7.3.3 The Application of the SIEC Test to Emergency Takeovers 237
7.3.3.1 Balancing of Customers’ Benefits in the SIEC Test 237
7.3.3.2 Balancing of State/Societal Benefits in the SIEC Test 239
7.3.4 Balancing in the SIEC Test: Conclusion 240
7.4 Standstill Requirement 242
7.4.1 Introduction to the Standstill Requirement 242
7.4.2 Derogation from EU Standstill Requirement: The Legal Status Quo 243
7.4.3 Derogation from EU Standstill Requirement: A Normative View 247
7.4.4 Derogation from EU Standstill Requirement: Conclusion 248
7.4.5 Derogation from Dutch Standstill Requirement: The Legal Status Quo 249
7.4.6 Derogation from Dutch Standstill Requirement: A Normative View 252
7.4.7 Derogation from Dutch Standstill Requirement: Rescue Takeover Protocol of the ACM & DNB 252
7.4.8 Derogation from Dutch Standstill Requirement: Conclusion 254
7.5 Article 21(4) EUMR 254
7.5.1 Introduction to Article 21(4) EUMR 254
7.5.2 Article 21(4) EUMR: The Legal Status Quo 256
7.5.3 Article 21(4) EUMR: A Normative View 257
7.5.3.1 Assessment of the Mainstream Interpretation of Article 21(4) EUMR 257
7.5.3.2 A Normative Viewon the MostAppropriateApplication of Article 21(4) EUMR 260
7.5.4 Article 21(4) EUMR: Conclusion 261
7.6 Article 47 DCA 262
7.6.1 Introduction to Article 47 DCA 262
7.6.2 Article 47 DCA: The Legal Status Quo 262
7.6.3 Article 47 DCA: A Normative View 263
7.6.4 Article 47 DCA: Conclusion 264
7.7 Merger Control Regime: Conclusion 265
8 Conclusions 267

8.1 Introduction 267
8.2 Findings on the Exemption Possibility 267
8.3 Findings on the Legitimate Objective Ancillarity Doctrine 270
8.4 A Reconciliation Gap for the Cartel Prohibition? 271
8.5 Findings on the SIEC Test 273
8.6 Overview of the Findings 276
Annex – Introduction to Competition Law 277
1 Introduction to the Annex 277
2 Anti-Competitive Agreements 278
3 Abuse of a Dominant Position 282
4 Anti-Competitive Mergers 283
5 Competition Authorities 285

Case Law and Decisions 287
Bibliography 297