L EGAL R ESEARCH M ASTER
– P ART II –
THESIS
THE GOALS OF EU COMPETITION LAW
FROM A MORAL POINT OF VIEW
20 N O V E MB E R 2013
A RNE E.M. M OMBERS
( ST U D EN T
S UPERVISOR
D R . A NNA G ERBRAN DY
N U MB E R :
3265536)
S ECOND READER
P ROF . B ART H ESSEL
TABLE
OF CONTENTS
TABLE OF CONTENTS........................................................................................................................................II
I. INTRODUCTION ............................................................................................................................................ 1
1.1 PART I: CASE STUDY ON THE NETHERLANDS FORENSIC INSTITUTE ................................................................................ 1
1.2 PART II: THE GOALS OF EU COMPETITION LAW AND MORALITY ................................................................................... 2
1.3 RESEARCH QUESTION ......................................................................................................................................... 4
1.4 RESEARCH METHODOLOGY .................................................................................................................................. 4
II. THE MARKETPLACE IN RELATION TO MORALITY .......................................................................................... 6
2.1 INTRODUCTION ................................................................................................................................................. 6
2.2 WHY A MORAL ACCOUNT OF THE MARKET? ............................................................................................................ 6
2.3 THE TROLLEY CAR – CONSEQUENTIALIST AND CATEGORICAL MORALISM ........................................................................ 7
2.3.1 The paradox .......................................................................................................................................... 7
2.3.2 Consequential and categorical moral reasoning................................................................................... 8
2.4 UTILITARIANISM AS BASIS OF WELFARE ECONOMICS .................................................................................................. 9
2.5 CATEGORICAL MORAL REASONING AND THE MARKET .............................................................................................. 11
2.5.1 The inherent categorical morality of markets ..................................................................................... 11
2.5.2 What should be for sale? .................................................................................................................... 12
2.7 CONCLUSION .................................................................................................................................................. 14
III. EUROPEAN LAW AND MORALITY .............................................................................................................. 15
3.1 INTRODUCTION ............................................................................................................................................... 15
3.2 LAW AND MORALITY IN GENERAL ........................................................................................................................ 15
3.2.1 The relationship between law and morality........................................................................................ 15
3.2.2 The link between law and morality ..................................................................................................... 15
3.2.3 The force and enforceability of laws and moral claims ....................................................................... 17
3.3 MORALITY IN EU LAW ...................................................................................................................................... 18
3.3.1 How it all began .................................................................................................................................. 18
3.3.2 Morality in EU case law....................................................................................................................... 18
3.3.3 EU law and the ‘judge moralist’ .......................................................................................................... 21
3.4 CONCLUSION .................................................................................................................................................. 22
IV. THE GOALS OF EU COMPETITION LAW...................................................................................................... 24
4.1 INTRODUCTION ............................................................................................................................................... 24
4.2 WHY FOCUS ON THE GOALS OF COMPETITION LAW? ............................................................................................... 24
4.2.1 The rise of the economisation of competition law .............................................................................. 24
4.2.2 Searching for the goals of EU competition law ................................................................................... 25
4.3 MARKET INTEGRATION ..................................................................................................................................... 26
4.3.1 Why market integration? .................................................................................................................... 26
4.3.2 Coup de Sarkozy: consequences for market integration? ................................................................... 26
4.3.3 The Court in GlaxoSmithKline .............................................................................................................. 28
ii
4.4 THE CONSUMER WELFARE STANDARD .................................................................................................................. 29
4.4.1 The interests of consumers in competition law ................................................................................... 29
4.4.2 The scope of the consumer welfare standard ..................................................................................... 29
4.5 ECONOMIC EFFICIENCY ..................................................................................................................................... 32
4.5.1 An introduction to economic efficiency ............................................................................................... 32
4.5.2 Economic efficiency in EU competition law practice ........................................................................... 33
4.6 NON-ECONOMIC GOALS AND EU COMPETITION LAW .............................................................................................. 34
4.6.1 Socio-political goals placed outside EU competition law .................................................................... 34
4.6.2 Socio-political goals within EU competition law ................................................................................. 35
4.7 CONCLUSION .................................................................................................................................................. 37
V. THE GOALS OF EU COMPETITION LAW FROM A MORAL POINT OF VIEW ................................................... 39
5.1 INTRODUCTION ............................................................................................................................................... 39
5.2 THE ENERGY AGREEMENT: SUSTAINABILITY V. COMPETITION LAW ............................................................................. 39
5.3 MARKET INTEGRATION AND MORALITY................................................................................................................. 40
5.4 CONSUMER WELFARE AND MORALITY .................................................................................................................. 41
5.5 ECONOMIC EFFICIENCY AND MORALITY................................................................................................................. 42
VI. CONCLUSION ............................................................................................................................................ 43
6.1 THE RESEARCH QUESTION .................................................................................................................................. 43
6.2 THE MARKETPLACE IN RELATION TO MORALITY....................................................................................................... 43
6.3 EUROPEAN LAW AND MORALITY ......................................................................................................................... 43
6.4 THE GOALS OF EU COMPETITION LAW ................................................................................................................. 44
6.5 MORALITY AND THE GOALS OF EU COMPETITION LAW ............................................................................................ 44
BIBLIOGRAPHY ............................................................................................................................................... 46
CASE LAW ............................................................................................................................................................ 46
Court of Justice of the European Union .................................................................................................................... 46
General Court ............................................................................................................................................................ 46
BOOKS ................................................................................................................................................................ 46
ARTICLES ............................................................................................................................................................. 48
REPORTS ............................................................................................................................................................. 49
NEWS ARTICLES..................................................................................................................................................... 50
BLOGS................................................................................................................................................................. 50
SPEECHES ............................................................................................................................................................ 50
iii
I. INTRODUCTION
1.1 P ART I: C ASE
STUDY ON THE
N ETHERLANDS F ORENSIC I NSTITUTE
In the Netherlands forensic investigations in relation to criminal law cases are almost
exclusively carried out by the Netherlands Forensic Institute (‘NFI’). As a semi-autonomous
body under state supervision, this high-end laboratory aims to strengthen the rule of law. For
that purpose, it mainly provides the Netherlands’ police force, public prosecution service and
judiciary with a wide range of forensic products and services.1
Since the turn of the 21st century, scientific breakthroughs, for example in the field of DNAidentification, resulted in a significant rise in commercial demand for dynamic and high-end
forensic expertise. This has already found expression in, for example, a television programme
format where an alleged parent is biologically related to a child. However, as the NFI is legally
restricted in offering its services to commercial parties, this demand is for a handful of privately
owned competitors to fulfil. In response to this changing forensic market environment, in the
general parliamentary meeting of 18 December 2012 the Dutch minister of justice committed to
investigate to what extent the NFI could offer its products and services to commercial entities.
A scenario wherein the NFI increases its commercial activities could involve potential conflict
with EU and national competition law. After all, if the NFI would enter a market for forensic
products and services, all of its current (public) truth-finding tasks are also likely to come under
competition law’s close scrutiny. The ministry of justice recognised the possible legal
consequences that truth finding by the NFI for commercial parties might bring, and therefore
asked Utrecht University’s Europe Institute to map and assess (potential) competition risks.2
The final rapport on the NFI case study by the Europe Institute’s research team constitutes the
first part of my Legal Research Master thesis. The second part, the research in question,
elaborates on a more fundamental line of thought. Although the choice for further research was
made during the final stages of the NFI case study, it has had no influence on the conclusions
and recommendations of the initial rapport.
Unlike in the UK with its more adversarial criminal process, in the Netherlands the objectivity of
the investigation by the police and public prosecution service is essential in substantive truth
finding. It goes without saying that this also holds true in retrieving forensic evidence. The
authorities’ responsibility in objectively establishing innocence or guilt raises the question
whether forensic products and services should be provided by market players. Introducing
economic market-driven incentives in objective forensic truth-finding could potentially lead to
an erosion of this normative frame work and could hence be morally undesirable.3 The
indistinct interaction between market-driven incentives and moral considerations led to the
following, more fundamental, research into the moral foundations of laws overseeing
competition in the European internal market.
1 See also www.forensicinstitute.nl/about_nfi/organisation_profile (accessed digitally on 28 June 2013).
2 The research is expected to be made public in December 2013.
3 Piret 2005, p. 54.
1
1.2 P ART II: T HE
GOALS OF
EU
COMPET ITION LAW AND MORALITY
From the Adam Smith’s works onwards, public policy worldwide has increasingly
accommodated neo-liberal market-oriented schools of thought.4 The public confidence in
competitive markets to deliver positive outcomes seemed at its ultimate high in the decennium
before the subprime mortgage crisis. Hence, when it hit in 2007 many were shocked by the
structural catastrophe caused by the giant financial market institutions. Bankers and mortgage
brokers were blamed for their devising of innovative but risky financial structures. The collapse
of these complex structures induced a public awareness that corporate market players first and
foremost seek to maximise personal gain and thereby choose to neglect their moral obligations
to society. Economists and politicians were in turn chastised for neglecting to assess the
systemic risks posed by the financial market players. For many, the failure of the financial
markets worldwide and the personal losses it entailed proved that Adam Smith’s invisible hand
had not protected society as a whole.5
With regard to free market-thinking, Harvard professor Michael Sandel claims in his best-selling
The Moral Limits of Markets that the past decades have witnessed a shift from having a market
economy to becoming a market society.6 The distinction is apparent: where a market economy
serves as a mere instrument for the efficient allocation of resources, a market society embodies
the organisation of a lifestyle with economic gain as yardstick for success. Three years prior to
Sandel’s claims, Rutger Claassen published his dissertation titled The Market’s Place in the
Provision of Goods, in which he provides a more academic record of the question which goods
should be on the market and which should not.7 Both authors agree that in the current economic
environment, the relationship between morality and market behaviour seems troubled at least.
Unlike the reference to the 2007-2008 financial crisis might suggest, the discussion in politics,
ethics and the social sciences on the underlying values of market economies is hardly a new
phenomenon. Even Adam Smith recognised severe misgivings about the moral desirability of a
capitalistic system.8 What is relatively new, however, is that modern-day economics has been
‘substantially impoverished by the distance that has grown between economics and ethics’.9
Since the turn of the 20th century, modern-day economics has changed from a branch of moral
philosophy embedded in society to a mathematical discipline focused on the allocation of
resources.10 Consequently it is generally accepted that modern economics has grown into a
discipline in its own right. However, while the study of economics does primarily focus on the
4 See for a more recent example The Netherlands government’s policy shift since the 1990s. Van Damme & Schinkel
2009, pp. 2-5. De Zeeuw 2012, pp. 119-150. In May 2002, The Economist explicitly praised this ‘pragmatic tradition’
in which it is ‘understood and accepted […] that it does not matter who delivers public services, so long as the job is
well done, [and] competition, in some form, can help to make that more likely’, The Economist 2002; Van Damme &
Schinkel 2009, p.1.
5 See Smith 1977.
6 Sandel 2012, pp. 8-15.
7 Sandel 2012, p. 202. See also Buchanan 2011.
8 See, among others, Pack 1991, p. 1.
9 Sen 1992, p. 7. See also Sedlacek 2011, and work by James Buchanan, a 1986 Nobel laureate in economics who was
one of the few in his field to advocated economics as a normative science, see Coleman 1988, p. xi. Unless otherwise
specified, in this research morality and ethics are distinguished as the latter meaning the academic philosophical
study into questions regarding the former.
10 Sedlacek 2011, p. 311. Notably Adam Smith, the father of modern-day economics, was a Professor of Moral
Philosophy at Glasgow University and had, like Sen, already taken interest in the interaction between ethics and
markets, Sen 1992, p. 2. At the moment, Amartya Sen is currently Professor of Economics and Philosophy at Harvard
University. See also Kotkin, Hall & Beaulier 2010, p. 46.
2
creation of wealth, the close connection to other studies on a deeper level does signal more
basic goals. It is impossible to deny the many virtues the market economy has brought in the
efficient allocation of resources and the identification and remedying of scarcity. Nevertheless, it
is hard to miss the resurgence of John Maynard Keynes11 and Aristotle, whom, in the latter’s
words, argued that ‘wealth is evidently not the good we are seeking; for it is merely useful and
for the sake of something else’.12 Also present-day leading philosophers such as Amartya Sen
and Martha Nussbaum advocate for economics to be made more productive ‘by paying greater
and more explicit attention to the ethical considerations that shape human behaviour and
judgement’.13
This thesis leaves the challenge to decide on how markets should function for economists,
philosophers and politicians to meet. For legal scholars, the focus in this debate lies with the –
legally complicated – rules governing the relationship between the marketplace and ethics. In
the European Union competition laws form a strong neo-liberal foundation aimed at promoting
a minimum level of rivalry between market players. By preserving competitive conditions, these
laws serve as an instrument aimed at increasing market efficiency and look after the economic
interests of society.14 Competition law is subject to constant revision and change by the
European legislators. Following the financial crises of the 20th century, strong political
incentives to ‘fix the market’ often resulted in significant changes to the legal framework of
competition laws. These measures were often less successful for averting systemic economic
risks than was hoped for.15 Today’s legislators have learned from these past experiences and
will most likely abstain from fundamentally changing these foundations to parry the current
economic recession. Nevertheless, in the last half-decade the EU has witnessed many exceptions
to the neo-liberal rationale behind the free and unfettered market ideal.16 Also an increasing
group of academics seem convinced that the Chicago School movement has lost momentum.
Some even argue that in the current economic climate the United States is ripe for a new
antitrust policy cycle.17 With the Chicago School on the retreat in the US, the European economic
11 The teachings of John Maynard Keynes, one of the most influential economists in 20th century Britain, have
witnessed a major resurgence following the 2007-2008 crisis. With a stronger role for the government and central
banks, the fundamental damage caused by free market thinking would, in Keynes’ theory, be mitigated.
12 Ross 1980, p. 1-7 on Aristotle’s The Nicomanchean Ethics, I.1-I.5, as cited in Sen 1992, p. 3. See for Keynes also
Sidelsky 2009, p. 131. ‘Keynes was a philosopher and a moralist as well as an economist. He never ceased to question
the purposes of economic activity. Briefly states, his conclusion was that the pursuit of money – what he called ‘love
of money’ – was justified only to the extent that it led to a ‘good life’. And a good life was not what made people better
off: it was what made them good. To make the world ethically better was the only justifiable purpose of economic
striving.’, Skidelsky 2009, p. 131.
13 Sen 1992, p. 9.
14 Cseres 2006, p. 124. In the European Union, these rules are codified in the Treaty on the Functioning of the
European Union.
15 Kokkoris & Olivaris-Caminal 2010, p. 390-397. The most prominent example dates back to the US’ Great
Depression, during which the government adopted the National Industrial Recovery Act (NIRA). This Act allowed
hundreds of industries to ‘legally meet and agree upon rules limiting “excessive” competition’, which unfortunately
resulted in a slow recovery of the US economy. Kokkoris & Olivaris-Caminal 2010, p. 390.
16 Also in the current crisis legislators have tolerated anti-competitive interventions in the economy, such as the
European Commission condoning the nationalisation of banks and EU member states’ more lenient approaches in
merger and cartel assessments. Kokkoris & Olivaris-Caminal 2010, p. 392.
17 See Stucke 2012, p. 551, who also argues that since the 1980s the neo-liberal convictions of the Chicago School
have largely failed to materialise general economic growth and that its underlying assumptions have yielded an
incomplete conception of competition. Supporting this view are figures showing that while the worldwide Gross
Domestic Product has grown with an estimated €19.000 billion between 1981 and 2001, 1,5% of this amount has
come to the benefit of those who live on $1 a day; Simms & Woodward 2006, p. 14.
3
approach seems also ‘well enough established to review it in fundamental ways’. 18 More
importantly, however, regardless of the legislative climate the last crisis highlights the gap
between modern economics and moral considerations. Using economics as yardstick in
competition law assessment therefore seems at odds with the growing societal call for
incorporating a different kind of moral considerations. This research takes one step back.
Instead of facing the daunting task of providing a fundamental review of European competition
law, this research aims to explore the goals of the current EU competition law regime and
identifies several moral foundations underlying these rules. Hopefully, this strategy provides
insight in the connection between markets and morality and demonstrates that moral
considerations still percolate in EU competition law today.
1.3 R ESEARCH
QUES TION
The above translates to the following research question:
To what extent are the goals of today’s EU competition law based on moral foundations?
To come to an answer to the research question, several other questions need to be answered.
Before the research places the free market ideal in a moral context, two moral yardsticks are
provided. Subsequently, light is shed on the opaque relationship between (European) law and
morality, after which the focus shifts towards the current goals of EU competition law. A final
chapter provides a succinct analysis and is followed by the conclusion of the research.
1.4 R ESEARCH
MET HODOLOGY
Considering the more pragmatic nature of the NFI rapport and the considerable time and effort
that was invested, I considered a descriptive research question to be sufficient to conclude my
studies in the Legal Research Master programme. As no specific literature on the goals of EU
competition law in relation to morality yet exists, hopefully this research can serve as a stepping
stone for those wishing to explore the relation between morality and competition law more
thoroughly.
The research topic was drawn from a book by Michael Sandel in which he describes the moral
limits of markets. I recognised a link between the importance of objective truth finding in the
rapport for the NFI and the question what should be for sale. This made me wonder whether the
goals of EU competition law address or at least recognise these moral values or whether the
legitimacy of this legal regime is derived from neo-liberal notions.
Initially, the lack of tangible cases or other sources dealing with the relationship between EU
competition law and morality formed an obstacle. After some time, instead of coming up with
hypothetical moral dilemmas in competition law, I figured that the research required a more
philosophic angle to prove its relevance in today’s academic debate. I attempted to compensate
my limited knowledge of legal, political, deontological and consequential philosophy by
discussing my thesis with some experts. Nevertheless, my inexperience in this field of academics
sometimes translates to succinct and sometimes incomplete philosophical statements. The
18 Drexl, Kerber & Podszun 2011, p. 1.
4
topic’s lack guidance led to multiple alterations in the research’s scope and the research
question was modified many times. In the end, I decided not to answer questions on what the
role of neo-liberal ideals in society should be, nor does this research discuss how morality can
or should influence market player’s behaviour, government interference or general market
conditions. Topical and interesting as these questions are, at an academic level these are best
explored by those educated in economics and/or political philosophy. Instead, this research
aims to spark the debate among legal scholars on the moral foundations of the objectives of EU
competition law.
The research itself consisted of desk research. Using the Utrecht University’s online library
facilities has helped in gathering the sources required for exploring the topic. Academic
literature and other academic contributions such as articles and research rapports were my first
and foremost source of information. I also relied on European and national case law, legislation,
decisions and other legislative instruments. News articles, speeches, documentaries and
contribution on highly regarded blogs were generally used to provide some context to the
academic sources. Lastly, I conducted several interviews with university staff and legal
practitioners.
5
II. THE
MARKETPLACE IN RELATION TO
MORALITY
2.1 I NTRODUCTION
This chapter first addresses why this research requires a moral account of the market. Then,
two strands of moral reasoning are discussed which can serve as this research’s moral
yardsticks. In the light of one of these yardsticks this chapter discusses the welfare standard,
followed by two sections on what the market should entail. The final section provides some
concluding remarks.
2.2 W HY
A MORAL ACCOUNT O F THE MARKET ?
Modern-day economists sometimes argue that morality represents the way people would like
the world to work, whereas economics represents how it actually works.19 Frequently relying
their argument on Adam Smith’s The Wealth of Nations, these academics demonstrate an
economic reality in which uncoordinated individual preference satisfaction will ultimately serve
society as a whole. In Smith’s words:
‘It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our
dinner, but from their regard to their own interest. We address ourselves, not to their humanity
but to their self-love, and never talk to them of our own necessities but of their advantages.’ 20
Two centuries later, the vast progress in individual and collective wealth can be directly traced
back to the refinement of this economic insight. History has shown that economic theory and its
many models and numbers have had unparalleled influence on both the public and private
spheres of society. Nevertheless, starting in the late 1970s many distinguished authors have
made increasing efforts to show that economic growth does not satisfy all of society’s needs.21
The heart of the problem seems to lie in the increased level of complexity and ambiguity of
economic growth, which comes to bear as soon as the basic human needs have been satisfied.22
Money, which was originally meant as a means of trade and method of calculation, has evolved
into a financial obligation in itself and has proven to be incapable of qualifying numerous human
– mainly social – values. With this in mind, a careful study of Adam Smith’s work reveals that the
founding father of economics himself was not an unequivocal supporter of the capitalist system.
Smith recognised severe misgivings about the moral desirability of a capitalistic system and
explicitly balanced his economic analysis in The Wealth of Nations against his social analysis in
The Theory of Moral Sentiment.23 The precise connection between these contributions is still
subject of debate, but in an attempt to make this connection explicit it is argued that
19Levitt&Dubner 2009, p. 11.
20 Smith 1977, p. 27.
21 See e.g. Hirsch 1978.
22 Hirsch 1978, p. 1.
23 Pack 1991, pp. 1-3.
6
‘[men] could safely be trusted to pursue their own self-interest without undue harm to the
community not only because of the restrictions imposed by the law, but also because they were
subject to built-in restraints derived from morals, religion, custom and education’. 24
The rise of modern economics has driven a wedge between economics and ethics. However,
today the conviction that economics encompasses more than mathematical figures and models
alone has not been more widespread since the divide between economics and moral philosophy
in the 20th century.25 The realisation that economic models are imperfect products of the human
mind (which by definition cannot encompass the complexities everyday life) shifts attention to
the role of morality in societies.
The relationship between markets and moral values can be made more explicit. Take, for
instance, a recent study by Armin Falk and Nora Szech.26 The research, published in Science in
May 2013, yielded that appealing to morality ‘has only limited potential for alleviating negative
market externalities’. Falk and Szech empirically show the decay of moral values through
market interaction. By doing so they provide an explanation why projects such as anti–childlabour or environmental protection campaigns may not be that effective: markets for goods can
erode or even undermine the relevant social values.27 It is the same immorality of the
marketplace that underlies the public indignation over excessive remunerations in the private
sector. While some argue that the outcomes of the market’s functioning of demand satisfaction
should not be up for moral judgment, others claim that people do not want to live in a free
market-controlled environment.28 By requiring salaries, prices of goods and other expressions
of economic value to purport amount of fairness, people demand a moral component in addition
the economic demand satisfaction. This leads to another question: what yardsticks can be used
in judging the morality of the market environment?
2.3 T HE
TROLLEY CAR
–
CONSEQUENTIALIST AND CATEGORICAL MORAL ISM
2.3.1 T HE PARADOX
In order to transcend a populist level of argument, a yardstick is required for indentifying what
constitutes a ‘moral infringement’ and when such moral issues arise.
24 Hirsch 1978, p. 137, referring to Coats 1971, p. 9. See Smith 1976 and Smith 1977. See also Pack 1991, in which
Spencer Pack claims that Smith himself was not an unequivocal supporter of the system of capitalism. According to
Pack, Smith was aware of the moral misgivings of capitalistic system, but nevertheless felt that any other system
would be inferior to it.
25 See e.g. Sedlácek 2011.
26 Falk &Szech 2013.
27 An extreme example of the intervention in a market’s functioning based on social values is the American Civil War,
in which ‘the North’ pursued the abolishment of ‘the South’s’ trade in human beings. See Falk &Szech 2013, p.710.
Falk &Szech 2013, p. 707. The researchers aimed to avoid a culturally or institutionally biased ‘market’ definition and
corrupt data on values across societies. They therefore implemented a controlled environment in which human
subjects had to decide either to save the life of a mouse or to receive money. Where in the individual treatment
subjects faced a simple choice between saving a mouse’s life and receiving money, in the artificial market
environment subjects would bilaterally or multilaterally bargain over the life of the mouse. The research yielded that
in the artificial market environments the willingness to save the life of the mouse declined substantially compared to
the individual environment. ‘In the individual decision treatment, 45,9% of subjects were willing to kill their mouse
for 10 euros. In contrast, 72,2% of sellers in the bilateral market were willing to trade for prices below or equal to 10
euros.’
28 See e.g. Dubbink 2013.
7
Discussing morality in relation to firmly established welfare economics requires some
understanding of the differences between consequential and categorical moral reasoning. This
is illustrated by the well-known trolley car paradox, posed in 1967 by Philippa Root. In this
moral paradox a person would be faced with two morally complex scenarios.29In the first
scenario an out-of-control trolley car hurdles down a train track. The brakes no longer work and
if no immediate action is taken five people standing on the track would die. A bystander is
aware of this situation and spots a lever that will guide the trolley to an auxiliary track, thereby
saving all five. Before pulling the lever, however, the bystander notices another person standing
on the auxiliary track, who would inevitably be killed upon altering the trolley car’s original
direction. What would in this scenario be the ‘right’ thing to do? Divert the trolley which would
kill one person instead of five, or do nothing and thereby letting five die and the sixth man live?
The second, slightly adapted, scenario also involves an out-of-control trolley car hurdling down
a track, with five people on the track facing imminent death. Again a bystander observes the
situation but this time there is no auxiliary track. Instead, a sixth man stands next to the track on
which the trolley car is about to pass. The weight of this man would surely slow down the
trolley and save all five people on the tracks, even though pushing the sixth man on the track
would surely kill him. Again, what to do?
The majority of people would choose to save the five people in the first scenario by diverting the
trolley to the auxiliary track. However, a similar majority would most likely condemn saving the
five people in the second scenario as this would involve pushing the sixth man on the track. The
conviction that pushing the man on the track is not the right thing to do is remarkable when
considering that pushing the sixth man track would not result in more harm to the man
compared to diverting the trolley in the first scenario.
2.3.2 C ONSEQUENTIAL
AND CATEGORICAL MORAL REASO NING
The explanation for this – at first intangible – difference is embodied in two strands of moral
reasoning. In the first scenario, the rightness of the decision to save five and sacrifice one lies in
the result of an action. Locating morality in the consequences of an act is part of consequentialist
moral reasoning.30 This type of this line of reasoning is found in utilitarian theory, as it was first
developed by philosopher Jeremy Bentham. His pupil, John Stuart Mill, elaborated on Bentham’s
theory and articulated a slightly adapted utilitarian theory in his work Utilitarianism. In this
work Mill argued that the right thing to do or the right decision to take is the one that results in
the greatest possible good for the greatest number of people, thereby aiming to justify
utilitarianism as the foundation of morals and moral behaviour.31
Applying the consequentialist approach to the second scenario would, however, conflict with
the majority’s moral compass. Even though both scenarios entail a trade-off of one life to save
five, the actual pushing of the sixth man on the track is generally considered an intrinsically
immoral thing to do. This view on moral action points towards so-called categorical moral
reasoning, a branch of philosophy which locates morality in certain absolute moral duties and
rights in the decision or action itself. In the moral assessment categorical moral reasoning does
29 Root 1967.
30 See also Sandel 2009.
31 See Mill 2004.
8
not take the consequences of such action into account.32 Pushing a man towards his death is
wrong, period. Founding father and most famous proponent of this theory is Immanuel Kant. In
his Groundwork for the Metaphysics of Morals he identified the ‘categorical imperative’, which
evaluates the motivation of persons for certain actions.33 In order to meet Kant’s deontological
moral benchmark, the categorical imperative asks of persons to
‘[a]ct in such a way that you always treat humanity, whether in your own person or in the person
of any other, never simply as a means, but always at the same time as an end’. 34
With this in mind, regardless of the endangered lives of five people standing on the train track,
from a categorical point of view pushing the fat man on the track would be morally wrong.
In sum, choosing to apply a consequential or categorical notion of what is the moral thing to do
can yield different results. Being aware of these different approaches and subtleties included in
them can contribute to understanding the moral foundations of markets’ functioning.
2.4 U TILITARIANISM
AS BASIS OF WELFARE ECONOMICS
In this research, a market is meant to represent a nominal place where forces of demand and
supply operate and buyers and sellers interact in pursuit of satisfying their demands. This can
include actual or virtual goods or services.35 In this definition, a market serves merely as a
platform for forces of demand and supply and is therefore in itself incapable of making a
normative statement such as failure or success. Instead, the value judgment on the market’s
functioning is based on the assessment of the interacting institutions operating on a market. In
welfare economics, these institutions, be it individuals or public or private bodies or
organisations, operate in a system of natural liberty and are expected to act in a rational manner
with their own self-interest taken at heart. This results in the achievement of a high level of
efficiency in the production and allocation of resources, which in mainstream economics is
defined as ‘market success’.36 The successes or benefits of a competitive market where all
market players keep each other in check are found in lower prices, higher quality of products, a
wider variety of products and an overall greater level of efficiency compared to non-competitive
markets.
In neo-liberal thought the benefits a well-functioning market contributes to social welfare,
which is commonly defined as the allocative and productive efficiency. 37 Yardstick in
establishing whether a market functions properly is the notion of ‘perfect competition’. This
requires amongst others perfect mobility of resources, full knowledge of their potential uses, no
barriers to enter a market, no transaction costs, perfect information supply and a number of
competitors large enough so that one competitor’s actions will not necessarily affect other’s
immediate behaviour. The achievement of these basic conditions is a utopia pur sang. Systemic
problems in their realisation are but some of the impediments to today’s markets are ever
32Sandel 2009.
33 Kant 1964.
34 Idem, p. 96.
35 The Business Dictionary, available via http://www.businessdictionary.com/definition/market.html.
36 Buchanan 2011, p. 2.
37 For an overview see also Whish & Bailey 2012, pp. 3-19. See also Chapter 4 below.
9
experiencing perfect competition.38 In addition, the assumption that all business in a given
market is the product of a solely rational decision making process is commonly accepted to be
obsolete.39 Businesses are lead by people, and human beings do not make decisions based on
rational (i.e. utility maximisation) thought alone.40
In neo-liberal schools of thought increasing the welfare of a large number of individual citizens
is portrayed as the firmly established and accepted ethical justification behind public policy on
markets’ functioning.41 When a market fails to create such efficiency of welfare, it should either
be fixed or abandoned. However, reliance on this standard ‘is sound only if the principle of
utility – that we should seek the greatest good for the greatest number – is the proper standard
for public policy discussion’.42 In line with John Rawls, Brown argues that this is extremely
unlikely as this yardstick does not distinguish between choices made on an individual and those
made on a collective level.43 Contrary to decisions on individual level, Brown argues that due to
the ‘deeply pluralistic society such as ours’ with ‘disparate, incommensurable ends’, problems
arise when social choice is concerned.44 In its search for maximum utility, utilitarianism is
renowned for seeking as many good consequences as possible. Just like the moral paradox
above illustrated, this approach clashes with the categorical convictions that certain actions are
simply wrong. Today’s western society has chosen to firmly legally establish that all people have
human rights, even when these rights result in suboptimal utility. This flows into another of
Brown’s problem with utilitarianism: the scenario where maximum utility is attained when one
person receives all the benefits to the detriment of another person. In addition, the single
definition of rationality imposed by utilitarianism (which thereby disregards other tradition’s
rationality) and the incompatibility of utilitarianism with a coherent perception of personhood
(persons are forced to act too altruistically in favour of overall utility compared to their own
preference satisfaction), Brown rejects utilitarianism as a standard for markets’ functioning.45
All in all, citizens’ well-being is not solely defined by the monetary gain or preference
satisfaction of the majority. By rejecting utilitarianism as the proper standard for public policy
discussion Brown rejects the sole reliance on consequential moral reasoning in welfare
economics and instead urges the market debate to integrate categorical values. This leads to the
thought that, from a categorical point of view, a perfect market with perfect competition is a
‘morally free zone’.46
38 Given that the pursuit of perfect competition in practice proves to be a utopian concept, some academics have
asserted the added value of identifying the so-called ‘theory of the second best’. This theory concerns the situation
where one of the optimal criteria of perfect competition cannot be met and suggests that in these situations another
more pragmatic economic approach could contribute to improving actual market conditions. See Lipsey & Lancaster
1956, pp. 33-38.
39 This is evidenced by the rising popularity of behavioural economics since 1985 and increasing integration of
insights in psychology with the neo-liberal schools of thought. According to Cohen ‘homo economicus’ acts
irrationally, even thought ‘there is method to the madness’; Cohen 2013.
40 See also Whish & Bailey 2012, pp. 8-9; Coleman 1988, p. 311. Coleman shows that moral principles are derivable
from rationality, depending on the correct analysis of these concepts. See, on rational utility maximisation and a
perfectly competitive market also Claassen 2008, pp. 17-25 and Gauthier 1986, pp. 84-102.
41 See Stokey & Zeckhauser 1978, as discussed by Brown 1992, pp. 3-6.
42 Brown 1992, p. 3, referring to John Stuart Mill and Jeremy Bentham.
43 Idem, pp. 3-4, Rawls 1971, pp. 22-23.
44 Brown 1992, p. 3.
45 Idem, p. 4.
46 This research does not revolve around the achievability of perfect competition. Rather it addresses the reliance on
the neo-liberal paradigm in arguing what constitutes a ‘good’ market. Gauthier 1986. Claassen criticises the statement
10
In a direct response to Brown’s contribution, Vining and Weimer agree that welfare economics
is incomplete and flawed as a foundation of public policy analysis but hold that it is nevertheless
desirable.47 They deflect the main objections raised by Brown to the use of utilitarian theory by
using an approach similar to Rawl’s ‘veil of ignorance’ in which utility would be attributed to a
society without one knowing one’s position in it.48 The authors acknowledge the imperfect
nature of this so-called rule-utilitarianism, but rebut most of Brown’s criticism by challenging
him (or any other critic of welfare economics for that matter) to demonstrate an alternative
theory that can replace utilitarianism and contributes to collective decision making and to
society’s well-being.49 To strengthen their point, the authors ardently argue that there is not ‘a
single case in Western Democracy in which formal benefit-cost analysis was the sole basis for a
major public policy decision of dubious wisdom’.50 In addition, while they acknowledge that
welfare economics could distort public policy by promoting an ethic of efficiency to the
detriment of social policy goals, they doubt that in political practice – due to the democraticallyelected representation in western politics – too much weight is given to economic efficiency.51
This research does not concern itself with picking a side in the debate on whether utilitarianism
provides the proper standard for public policy. Nevertheless, the above illustrates that if the
free market principle is placed outside a utilitarian (consequential) world view, the morality
derived from welfare economics no longer suffices. Phrased slightly differently, welfare
economics would lack moral justification if placed outside a utilitarian world view.
2.5 C ATEGORICAL
2.5.1 T HE INHERENT
MORAL REASONING AND THE MA RKET
CATEGORICAL MORALITY OF MARKETS
Depending on one’s paradigm of choice, the consequential utilitarian moral yardstick does or
does not apply in judging market behaviour. If a categorical yardstick is used, questions are
raised whether markets are categorically moral or immoral and whether categorical morally
right market behaviour is actually rewarded in a market environment. A recent article by Rachel
Kotkin, Joshua Hall and Scott Beaulier, published in The Journal of Markets and Morality,
questions the market’s immorality and points towards the many virtues of business.52 In short,
their argument draws its strength from the premise that if individuals are ethical, markets will
enhance such behaviour.53 In their view, social ostracism and persuasion help to discourage the
consumption of undesirable goods and, ultimately, businesses can only prosper in the long run
when some degree of ethical awareness is displayed.54 In addition, by referring to John Mueller’s
Capitalism, Democracy and Ralph’s Pretty Good Grocery published in 1999, the authors also
by Gauthier that ‘moral constraints [would] arise only […] when mutual benefit is not assured by the pursuit of
individual gain’, Claassen 2008, pp. 17-25.
47 Vining & Weimer 1992.
48 Idem, p. 27.
49 Idem, pp. 28-30.
50 Idem, p. 31.
51 Idem, p. 31.
52 Kotkin , Hall & Beaulier 2010.
53 Idem, pp. 45-46.
54 Idem, pp. 45-47.
11
argue that companies who treat their customers and employees in a virtuous manner are given
a competitive advantage over other companies.55
However, with an eye on the recent discoveries by Falk and Szech, one can wonder to what
extent the marketplace actually stimulates moral decision making. Their research has shown
that commercial (market) impulses do not contribute to the proliferation of moral values; much
to the contrary. Also moral hazards and other money-based decisions plead against a
categorical moral nature of western markets. On a more fundamental level, some of the
arguments brought forward by Kotkin, Hall and Beaulier can be rebutted by using their own
arguments against them. When moral behaviour becomes a competitive advantage, and thus
more companies are tempted to apply a moral assessment in their strategy, morality becomes
an asset just like other tradable goods. This can be applauded, at least from a moral point of
view. In the same vein, however, if moral behaviour no longer provides a competitive advantage
to businesses, just like any other product it will most likely disappear from the marketplace.
Therefore, the market’s embracing of ethical behaviour tells us little of the intrinsic moral
qualities of the marketplace. From a pragmatic point of view, the central point in this debate is
whether categorical moral market behaviour is competitive enough to heavily impact and help
evolve markets in the long term. If such behaviour fails to do so, it becomes a story parallel to
the enduring environmental sustainability debate; a debate which is dominated by good
intentions but lacks a serious overhaul of the major industry processes.
2.5.2 W HAT
SHOULD BE FOR SALE ?
The free market and morality are often used to represent two opposing sides of the debate on
what should and should not be for sale. In addition to general criticism on welfare economics as
basis for public policy, some authors aim to reveal the overly strong and superficial nature of
the free market approach by ascertaining whether certain moral and social values will not or
insufficiently be protected when left to free market powers. In other words, what should be for
sale?56 An answer to this question requires research on what values are acknowledged and
realised by the market.57 With regard to the free market ideal in western market economies, a
conception of freedom is the dominant underlying value. This freedom is most apparent in the
freedom of choice and offering of goods and services in the private sphere.58 As the producers
and consumers of these goods and services are typically strangers to each other, the worldwide
marketplace today is frequently rid of personal relationships. The subsequent pursuance of
one’s personal monetary status and preferences translates to an obligation where solely the
exchange plays a role of importance.59 This kind of arrangement allows for efficient mobility of
goods and services, but does not qualify as a means to attribute any normative value to the
transaction other than one derived from wealth maximisation.
The wide variety of societies and societal changes makes any delineation of the economic ideal
of freedom an almost impossible task. Coming up with illustrative examples is not too difficult.
The sale of socially sensitive goods and services, such as prostitution, abortion and human
55 Mueller 1999.
56 Brown 1992, pp. 6-11.
57 Anderson 1990, pp. 180-181. See for a more historic overview, also Friedman and McNeill 2013.
58 Anderson 1990, pp. 181-182.
59 Idem, p. 182.
12
organs prove to be difficult to justify in public policy. The same holds true for academic titles,
medals of honour and other awards attributed to meritorious citizen which meet the required
demands. Depending on the society one lives in, the perception of what is morally allowable
leads to a list of ‘blocked exchanges’.60 This list contains two kinds of exchanges: those items and
services that are illegal, and those that are not necessarily illegal but are forbidden from being
sold in a market environment, such as babies and human organs. These examples are aimed at
illustrating the moral field of tension that obstructs an unconditional acceptance of welfare
economics and its free market philosophy as basis for western market economies.
The main criticism on any delineation of the free market is directed against some of Locke’s
ideas in his Two Treatises of Government. In this work, Locke argues that if publicly provided
goods such as roads and parks would be privately owned and controlled individual freedom and
efficiency would be enhanced.61 In response to this statement, some authors illustrate that
certain preferences for public goods and other forms of freedom can only be secured through
public institutions of voice that guarantee such public access.62 City parks maintained by
funding from local or national taxes, which makes them open for all people, gain public
character which makes these parks a common good in the city’s community. 63 The resulting
diversity of visitors in these places and the public ownership prevents ownership in the hands
of just one or several individuals. Hence, what people do or do not do in public places, is a
matter for political democratic power rather than the exercise of private control.64
In addition to the added value of publicly owned goods compared those in privately ownership,
a change in value does also occur when providing goods in kind, rather than in cash. An
frequently used example is the donation of blood; an action which is widespread among
western societies as a ‘good thing to do’. Although welfare economists would most likely adhere
to some payment in cash for the donation, others argue that the value of donated blood is
enhanced when the underlying motives are not commercial.65 However, this inherent goodness
of providing goods in kind rather than cash is limited to those goods that a member of a society
should not fall short of. Put slightly differently, the realisation of certain values demands certain
goods to be of a nonexclusive nature and therefore should be kept far from the commercial
domain. This brings us back to the indistinct contours of goods that should not be for sale.
Leaving this debate for scholars and politicians to elaborate on further, this research follows
Anderson when she argues that ‘[t]he difficult task for modern societies is to reap the
advantages of the market while keeping its activities confined to the goods proper to it’.66
60 Brown 1992, p. 7, referring to Walzer 1983, p. 100.
61 Anderson 1990, p. 194. See also Locke 1997.
62Claassen 2008, pp. 20-21; Anderson 1990, pp. 194-196.
63 Anderson 1990, pp. 195-196.
64 Idem, p. 196.
65 Idem, p. 197, referring to Titmuss 1971, pp. 315-316.
66 Anderson 1990, p. 204. This, in turn, begs the question whether the marketplace itself is capable of instituting
ethical limitations. Does the marketplace maintain a similar function as many centuries ago where customers come to
meet their materialistic demands, with only the government or religious institutions restricting what should and
should not be for sale? Should, therefore, any criticism on the immorality of the market place not be attributed to its
customers’ quest to satisfy its desires?
13
2.7 C ONCLUSION
The realisation that economic models are products of the human mind, which, by definition,
cannot encompass the complexities everyday life, shifts attention to the role of morality in
societies today. Also recent empirical studies seem to suggest the decay of moral values when
these are exposed to marketplace interaction. Whether these moral values are actually eroded
or undermined depends on the moral yardstick used. The trolley car paradox shows how
seemingly similar situations can carry a different moral judgment, depending on the strand of
philosophical reasoning used. Locating morality in the consequences of an act (consequential
moral reasoning) sometimes conflicts with morality derived from the action itself, regardless of
the consequences (categorical moral reasoning). When these yardsticks are applied to the
market environment, from a consequential point of view reliance on the neo-liberal paradigm
would be capable of constituting a ‘good’ market. The free market contributes to the
maximisation of utility and thereby the greatest good for the greatest number. However, it has
been argued that reliance on this standard is sound only if the principle of utility is the proper
standard in this respect. With regard to human and social rights of individuals, which form the
basis of western democracies’ constitutions, certain actions are categorically classified as
wrong. While efficient mobility of goods and services allows wealth maximisation, it does not
qualify as a means to attribute any categorical normative value to the transaction.
Morally blocked exchanges, comprising of both illegal items (e.g. hard drugs) and legal items
forbidden from being sold on a market (e.g. babies) and the value of non-commercial exchanges
force society to consider the moral limits of markets. While the utilitarian approach favoured in
welfare economics might be incomplete and flawed, it appears that an alternative system does
not exist. Moreover, it is argued that the democratically-elected representation in western
makes it likely that politics will not attribute too much weight to economic efficiency to the
detriment of social and moral values. From a pragmatic point of view, the question therefore
remains whether categorically moral market behaviour is competitive and desirable enough to
heavily impact and help evolve markets in the long term.
14
III. EUROPEAN
LAW AND MORALITY
3.1 I NTRODUCTION
Since the establishment of the European Communities in the 1950s, the scope of its Europeanwide laws have broadened significantly to include a wide array of legal disciplines. The recently
implemented Lisbon Treaty brought the most recent constitutional changes, causing the
European Union laws to be more influential in everyday life than they were before. In the light
of this research the rapid expansion begs the question what role morality plays in European
Union and how this morality takes shape in legal theory and legal practice.67 Therefore, before
the relationship between European competition law and morality is discussed in chapter 5, this
chapter first sheds some light on the relationship between law and morality in general. Then the
role of morality is placed in a wider European law context. Attention is paid to how the
relationship between EU law and morality has changed over the years and conclusions are draw
as to the extent moral notions percolate to European law today. In addition to contributing to
the qualification of morality in EU competition law, this chapter warrants the debate on EU law
in relation to morality in the first place.
3.2 L AW
3.2.1 T HE RELATIONSHIP
AND MORALITY IN GENERAL
BETW EEN LAW AND MORALITY
Both law and moral values influence individuals, private institutions and public authorities and
provide standards for regulating their behaviour. For this purpose legal and moral standards
are shaped in societal codes of conduct, ultimately aimed at averting societal unrest and
anarchy. It goes without saying that law and morality have common ground regarding the
values these notions purport. This relationship is, however, of a complex and often abstract
nature. Countless legal and political philosophers have elaborated on this topic, resulting in a
wide array of academic and popular literature. Therefore, without doing justice to the debate on
this topic, this section aims to provide a starting point in understanding the similarities,
differences and close connection between law and morality. Between the lines, it shows that
both notions are intertwined and derive their right of existence from one another.
3.2.2 T HE LINK
BETWEEN LAW AND MORALITY
The bulk of law in place today is a product of human effort. The legal rules codified in these
intentional laws purport at least one specific aim.68 These aims consist of codified rights and
obligations created under a state’s mandate. Depending on the common or civil nature of the
jurisdiction, these laws are most often respectively found by judges or created by an appointed
67 Another question in this respect would be whether the intensified grasp of European law on the European society
has become too comprehensive and thereby loses touch with its moral objectives.
68 Natural law (‘it has always been there’) and customary law (‘it has always been done this way’) are examples of
laws that lack such predetermination. For simplicity’s sake this research does not take such non-intentional laws into
account. See also Gardner 2010.
15
legislative power. The enforcement of these laws is usually described and attributed to specified
authorities in the laws themselves.69 Besides the power bestowed on these authorities, legal
recourse is allowed for all those who feel or are wronged. These cases may involve the state in
its governing capacity under public law or private companies, institutions or individuals under
private law such as contract law or tort law.70 Compared to the legal system, morality is a far
more opaque notion. Unlike law, it is no product of human effort but, in line with the Latin
moralitas, encompasses largely indefinable concepts such as right and wrong, good character
and bad behaviour.71 As is shown above, many branches of moral philosophy (hereafter
sometimes referred to as ‘ethics’)72 have issued persuasive arguments on the contours of
morality; a debate that has been touched upon in chapter 2 in relation to the marketplace.73
Many legal scholars and philosophers have commonly argued that laws are likely to carry, are
bound by or even are founded on moral aims.74 This connection between the two notions in turn
begs the question whether laws should inherently be ‘just’ and if so, how this should be
achieved. Is law required to actively meet a moral benchmark in order to qualify as legal, or
does morality merely pass into law of its own accord, without human intervention?75 The
answers to these questions are all but straightforward and in part depend on the paradigm law
sets for itself. When law makes moral claims for itself, it aims to be so and hence the paradigm
or ideal-type of law is morally justified law.76 When law subsequently lives up to the moral
standards it is morally justified law. A legislative practice in which law-making can go goes hand
in hand with cynicism and self-serving interests rather than the pursuit of moral values detracts
nothing from the value of this paradigm. After all, in order for laws to be socially acceptable
legislators are always bound to provide some moral justification for the laws’ existence.77 Judges
and legal officials are faced with a similar moral obligation. They have sworn to uphold the law,
which does not merely entail an obligation to apply the law but rather to render just decisions.
In their attempts to do so, these legal institutions are expected to rely on laws that purport some
moral force.78 This way, law actively becomes part of morality and vice versa.
Others argue that, even when moral values enters into the law of its accord, laws still have to
pass some ‘moral test’ before any norm can be qualified as a legal norm.79 One proponent of this
view was Ronald Dworkin, who argued that norms can only be deemed legal if they exhibit the
69 See e.g. http://legal-dictionary.thefreedictionary.com/What+is+law (accessed on 20 September 2013).
70 The phrases ‘public law’ and ‘private law’ are not For an introduction to morality, justice and judicial moralism see
e.g. http://www.friesian.com/moral-2.htm (accessed on 20 September 2013).
71 Source required (http://en.wikipedia.org/wiki/Morality)
72 Morality and ethics can, however, also be interpreted as two related but separate concepts. According to the
Oxford Dictionary of philosophy (2008 edition) ‘[a]lthough the morality of people and their ethics amounts to the
same thing, there is a usage that restricts morality to systems such as that of Kant, based on notions such as duty,
obligation, and principles of conduct, reserving ethics for the more Aristotelian approach to practical reasoning,
based on the notion of a virtue, and generally avoiding the separation of 'moral' considerations from other practical
considerations.’. See also http://en.wikipedia.org/wiki/Morality (accessed on 4 October 2013).
73 In addition to the differences between consequentialist and categorical moral reasoning, one can distinguish
theories that depart from a normative starting point (‘what isactually right or wrong?’) from those that argue from a
more descriptive angle (‘what rules are considered moral?’).
74 Gardner 2010, p. 420, referring to Dworkin 1986, p. 93. One step further is the principle that all moral wrongs
should be legally sanctioned thereby erasing the distinction between law and morality, also known as ‘judicial
moralism’, http://www.friesian.com/moral-2.htm (accessed on 2 August 2013).
75 Gardner 2010, p. 426.
76 Idem, p. 421; Finnis 1980, pp. 14-15.
77 Idem, pp. 420-421.
78 Idem, p. 425.
79 Idem, p. 426, referring to Dworkin 2004.
16
moral value of ‘legality’.80 This debate is, however, best left to legal philosophers to elaborate on
further.
3.2.3 T HE FORCE
AND ENFORCEABI LITY OF LAWS AND MORAL CLAIMS
If moral norms are not codified in law, arguments based thereupon lack legal authority. In Hart’s
view, when legal norms have left a gap, judges can use their legal discretion to fill this gap with
moral norms.81 However, in practice judges only rarely explicitly use this legal discretion and,
instead, often resort to filling the gap by applying some form of legal reasoning.82 Therefore,
when a natural of corporate person’s behaviour does not align with society’s moral benchmark
the enforceability of morality is usually limited to the inconvenience of public discredit and
discontent.83 Adding to the difficulty of enforcing moral claims is the view that morality is
inherently controversial. After all, one could argue that appealing to moral arguments in an
attempt to regulate human or corporate behaviour would, create ‘uncertainty concerning the
limits of permissible conduct and the nature and scope of one’s moral obligations to others’. 84
Law, on the other hand, is man-made and knowable and hence within reach for anyone who
wishes to find what it requires him or her to do or abstain from, which explains why legal
positivists advocate a clear separation between the two.85
Also Jeremy Bentham rejected the application of moral arguments in legal discussion. The
greatest good for the greatest number was secured best by applying detailed policy schemes
‘which can be laid down in detail, preferably in elaborate statutory codes, and enforced to the
letter’.86 Only in this way would the government of a complex society be able to reach some
form of efficiency, which, in turn, is legality’s virtue.87 This efficiency is threatened or even
undermined by chaos when moral tests are incorporated in legal assessment as every individual
would, both privately and professionally, be allowed to argue in line with their own perception
of legal standards.88 In other words, ‘law stops where [the legislator’s] decree ends’.89
The premise for separating law from morality, i.e. the controversial nature of morality, has been
countered by Ronald Dworkin, who argues that also law is controversial and not merely based
on ‘hard facts’.90 Moral norms can contribute to deciding between conflicting legal norms or
80 Gardner 2010, p. 426, referring to Dworkin 2004, pp. 23-37.
81 Hart 1961, pp. 124-154; see also Gardner 2010, pp. 423-424.
82 Gardner 2010, p. 424. Another question that can be posed is to what extent such legal reasoning implicitly
includes moral norms not recognised in the law itself.
83 For instance, when bankers receive a large bonus while they have left the bank worse off than when they were
appointed, the decision to collect the bonus is often met with societal rejection. The legislature can, of course, answer
society’s call by adopting new regulations and laws. However, until these new legal rules have been adopted the
bankers are legally entitled to enjoy the voluptuousness of their contracts. Governments worldwide have made
attempts to consider how to control executive pay, especially when the executive’s company has faced or is facing a
bail out by the state. See e.g. Stolberg & Labaton 2009.
84 Coleman 1988, p. 9.
85 Idem, p. 9.
86 Dworkin 2004, p. 28.
87 Ibid.
88 Ibid.
89 Ibid.
90 Coleman 1988, p. 10-13. Coleman argues that, regardless of the legal force of moral principles, not every moral
principle is a legal one. Essential for this theory to work is, according to Coleman, to devise a test that distinguishes
between legally binding and non-legally binding moral principles. This co-called ‘rule of recognition’ would permit
moral principles as well as rules to be binding legal standards.
17
substantiate existing legislation. It is, however, quite rare for judges to fill in such gaps or base
their judgment on non-codified arguments of morality alone.91
3.3 M ORALITY
3.3.1 H OW
IN
EU
LAW
IT ALL BEGAN
The European Union is rooted in several European Communities, which since the 1950s have
been increasingly influential in altering the legal, political and economic landscape of its
member states. In the wake of the Second World War, promoting economic cooperation
between European nations aimed to prevent future wars on the continent.92 Initially, this socalled ‘functionalist’ approach resulted in the establishment of concentrated sectoral
communities, intended to stimulate economic integration and efficiency by limiting member
states’ political interference.93 The moral rationale behind the establishment of the European
Communities proved to be successful; the Coal and Steel Community, established by the Treaty
of Paris in 1951, resulted in, amongst other, the more comprehensive Economic Community
(‘EEC’) and the European Atomic Energy Community (‘Euratom’) in the late 1950s. In this
process the main catalyst behind these Communities was no longer the prevention of war but
the proliferation of the European Community as single and strong economic world power.94
With the evolutionary cycle of the European cooperation came an expansion of the European
mandate. Slowly but surely, during the years the European Union enhanced its span of control
to also include their member states’ social and non-economic policies. Following the Treaty of
Amsterdam in 1997 and the Treaty of Nice in 2001, the democratic legitimacy and efficiency of
the Union was further enhanced. This process was completed, for the time being, with the entry
into force of the Lisbon Treaty in 2009. With the competences and activities of the European
Union transcending the enhancement of economic synergy and prosperity and influencing
nearly every dimension of the European societies, the Union has – although rather tacitly – reengaged itself in moral debates. The following two sections aim to provide an understanding of
the scope of such moral interference.95
3.3.2 M ORALITY IN EU
CASE LAW
The few examples where European institutions directly affect moral values are found in case
law by the Court of Justice. These cases principally revolve around the freedom of goods and the
freedom of services.
91 Gardner 2010, pp. 423-424.
92 See also Lodge 1993 and Dickson &Eleftheriadis 2013.
93 See for an extensive overview of the coming into existence of the European Union also Craig & De Búrca 2011, pp.
1-30.
94 Craig & De Búrca 2008, pp. 6-7.
95 In European legal discourse the concept of ‘moral rights’ usually refers to the personal and reputational rights of
an author or creator. These rights, derived from a creation, are often unalienable and continue to exist after
ownership is transferred, thereby going beyond the monetary rights bestowed upon this author or creator by
copyright laws. See also http://cyber.law.harvard.edu/property/library/moralprimer.html (accessed on 2 October
2013); http://www.plagiarismtoday.com/2006/06/12/us-vs-europe-moral-rights/ (accessed on 2 October 2013).
18
With regard to the freedom of goods, Article 36 TFEU excludes prohibitions or restrictions of
the freedom of goods in the European markets on ground ‘public morality, public policy or
public security’. These restrictions and similar measures are not allowed to constitute a means
of arbitrary discrimination or a disguised restriction on trade between member states. As long
as this criterion is met, it is in principle for each member state to determine in its own scale of
public moral values.
Case law in which parties call upon the public morality exception is scarce. In the Henn & Darby
case the House of Lords referred a case for preliminary ruling in which public morality
exception was used as a quantitative import restriction of obscene films and magazines.96
National provisions stated that
‘indecent or obscene articles are liable for forfeiture and destructions upon arrival in the UK and
that whoever attempts fraudulently to bring such articles into the UK shall be guilty of an
offence.’97
In the view of the Court of Justice, the law did not constitute any arbitrary discrimination as
there was no lawful trade in such goods in the United Kingdom. Hence the member state’s
prohibition of importation of goods was justified on ground of public morality.
The Conegate case, in multiple areas quite similar to Henn & Darby, revolved around national
proceedings regarding seizure of inflatable dolls by the UK customs authorities.98 Also in this
case national legislation explicitly prohibited the import of such products. However, as the
importing company argued, the manufacture of products in question was not subject to any
restriction and the marketing was subject to only minor restrictions. The Court of Justice
disapproved of this – albeit indirect – protection of a national product and held that
‘Member States may not rely on grounds of public morality in order to prohibit the importation
of goods from other Member States when its legislation contains no prohibition on the
manufacture or marketing of the same goods on its territory.’ 99
With regard to the freedom of services, the Treaty does not explicitly include a public morality
exception to any restriction. In several cases Court had to give judgment where the right of free
movement conflicted with socially sensitive services such as abortion, gambling or
prostitution.100 In these cases, it was argued that these and similar services should not fall under
the Treaty’s free movement provisions due to their controversial nature.
The Schindler case addressed the claim that gambling was prohibited in certain states and
therefore could not qualify as a service.101 The Court ruled that
‘lotteries cannot be regarded as activities whose harmful nature causes them to be prohibited in
all Member States and whose position under [European Union]law may be likened to that of
96 Case 34/79, Regina v. Maurice Donald Henn and John Frederick Ernest Darby [1979] ECR 3795.
97 Case 34/79, Regina v. Maurice Donald Henn and John Frederick Ernest Darby [1979] ECR 3795, para. 10.
98 Case 121/85, Conegate Limited v. HM Customs and Excise [1986] ECR 1007.
99 Case 121/85, Conegate Limited v. HM Customs and Excise [1986] ECR 1007, para. 16. See also
http://caselawofeu.com/public-morality/ (accessed on 10 November 2013).
100 See Chalmers, Davies & Monti 2010, pp. 786, 811-812.
101 Case C-275/92, Her Majesty's Customs and Excise v. Gerhart Schindler and Jörg Schindler [1994] ECR I-1039.
19
activities involving illegal products […] even though […] the law of certain Member States treats
gaming contracts as void’.102
A similar line of argument was used in the Jany case, which involved the activity of prostitution.
In response to arguments in this case based on the immorality of prostitution, the Court of
Justice noted that prostitution is tolerated and even regulated in most EU member states.103
Therefore, the Court referred to its settled case law on the matter in which the Court
consistently stresses that
‘the special nature of certain services does not remove [member states] from the ambit of the
fundamental principle of the freedom of movement’. 104
However, sometimes activities do fall outside the free movement provisions, although these
exceptional cases are explicitly based on social rather than moral considerations. For example,
in the Humble case the Court of Justice ruled that national education systems fall outside the
scope of the freedom to provide services.105 These exclusions from the elementary freedom of
services should, however, not be interpreted too enthusiastically, as is shown in the Smiths &
Peerbooms case.106 In his conclusion, Advocate-General Dámaso Ruiz-Jarabo Colomer had taken
the view that health-care benefits in kind, provided to insured persons, lack the element of
remuneration and hence do not qualify as services under the Treaty.107 The Court of Justice did
not share this view and referred, again, to its decision in Koll.108
More recently the Court of Justice delivered a judgment wherein the absolute nature of
fundamental values surpassed the obligations imposed by European rules. When asked for a
preliminary ruling by the German Supreme Administrative Court, the Court of Justice ruled in
the Omega case on the German police forbidding laser game facilities. These facilities were
legally produced and provided by a UK business.109 In Germany, where human dignity forms
part of the constitutional principles, the acts of simulated homicide and the resulting
trivialisation of violence were deemed contrary to fundamental values prevailing in public
opinion.110 The European Court of Justice found that the protection of human dignity was a
principle common to the EU Member States and emphasised that
‘fundamental rights form an integral part of the general principles of law the observance of which
the Court ensures […] [and the] European Convention on Human Rights and Fundamental
Freedoms has special significance in that respect. […]There can therefore be no doubt that the
objective of protecting human dignity is compatible with Community law, it being immaterial in
102 Case C-275/92, Her Majesty's Customs and Excise v. Gerhart Schindler and Jörg Schindler [1994] ECR I-1039, para.
32.
103 Case C-268/99, AldonaMalgorzataJany and Others v. Staatssecretaris van Justitie [2001] ECR I-8615, para. 57; See
Craig & De Búrca 2008, p. 824; Chalmers, Davies &Monti 2010, pp. 786, 811-812.
104 See Case C-158/96, Koll v. Union des Caisses de Maladie [1998] ECR I-1931; Chalmers, Davies &Monti 2010, p.
811. See also Ottow 2013, pp. […]; Eilmansberger&Herzig 2008, pp. 7-8.
105 Case 263/86, Belgian State v. Humbel [1988] ECR 5375, par. 20; and Case C-109/92, Wirth v. Landeshauptstadt
Hannover [1993] ECR I-6447, par. 19. See also Eilmansberger & Herzig 2008, pp. 7-8.
106 Although outside the sphere of EU competition provisions, this is shown in
107 See the AG’s conclusion in Case C-157/99, Smits and Peerbooms [2001] ECR I-5473, para. 49.
108 See Case C-157/99, Smits and Peerbooms [2001] ECR I-5473, para. 54.
109 Case C-36/02, Omega GmbH v. Bundesstadt Bonn [2004]ECR I-9609.
110 Idem, para. 7.
20
that respect that, in Germany, the principle of respect for human dignity has a particular status as
an independent fundamental right.’111
The Court concluded that
‘[s]ince both the [European Union] and its Member States are required to respect fundamental
rights, the protection of those rights is a legitimate interest which, in principle, justifies a
restriction of the obligations imposed by [European Union]law, even under a fundamental
freedom guaranteed by the Treaty such as the freedom to provide services.’112
With an eye on the above sketch of case law, it seems that the strictness of the Court of Justice in
the Conegate case seems on the retreat to the benefit of a common market in human values. The
accession of the European Union to the European Convention of Human Rights under the Treaty
of Lisbon enhances the likeliness that social and other human values, and the closely related
moral values, will carry more weight in the Court of Justice’s future assessments. It remains to
be seen what this evolution means for cases regarding abortion, soft drug and prostitution.
What is sure is that cases where morally sensitive issues conflict with free movement
provisions, a delicate balance has to be struck between what is (categorically speaking) morally
right and what is right for the realisation of the internal EU marketplace.113
3.3.3 EU
LAW AND THE ‘ JUDGE MORALIST ’
Although the scope of EU law has been significantly widened with regard to the alleged
immorality of an activity which is legally practiced in a member state, the Court of Justice
explicitly held that it is not within its mandate to substitute its own assessment for that of the
legislatures of the member states.114 As a result, by including ethically sensitive activities in the
sphere of freedom of movement, the Court abstains from taking a stance in moral debate. The
Court’s hesitance in ruling on moral issues is understandable for a number of reasons.
First, the subsidiarity principle as codified in Article 5 TEU aims to ensure that constant checks
are made to verify that the Union shall only act when there are no or insufficient possibilities
available at national, regional or local level.115 Regulating the lawfulness of the European Union
exercising its competences within the limits of its power is not an easy task, which makes the
precise meaning of the principle unclear.116 Generally, as long as member states restrict or
regulate without arbitrary discrimination, particularly in areas with limited European
interference member states still own a wide margin of discretion in many areas of European
law. In this sense, morality issues seem to remain a domestic issue best dealt with within the
national democratic system.
Second, the Court’s evasive attitude to rule on moral issues is likely to be rooted in the diverse
take of ethically sensitive areas in the different member states. Closely related to the anti-
111 Idem, para. 33.
112 Idem, para. 35.
113 Chalmers, Davies &Monti 2010, p. 812.
114 Case C-268/99, AldonaMalgorzataJany and Others v. Staatssecretaris van Justitie [2001] ECR I-8615, para. 56. The
Court refers to Case C-159/90 Society for the Protection of Unborn Children v. Grogan [1991] ECR I-4685, para. 20 and
to Case C-275/92 Schindler [1994] ECR I-1039, para. 32.
115 See also http://europa.eu/legislation_summaries/glossary/subsidiarity_en.htm (accessed 25 September 2013).
116 See also Craig & De Búrca 2008, pp. 100-105.
21
federalist rationale behind the subsidiarity principle, a ruling by the European institutions on
moral issues would likely run counter to the moral compass of at least one member state. This,
in turn, could give cause for these member states to reconsider their commitment to the Union’s
striving for unification.
Third, there is discord on the role of Court judges – or any judges for that matter – on their
moral responsibility in deciding cases. Some, including US Supreme Court Judge Antonin Scalia,
believe that a task description including judges to be ‘judge moralists’ endangers constitutional
law.117 According to Scalia, amongst others it is not up to judges to rule on issues which cannot
be scientifically proven. In other words, Scalia argues that there is no objective measure on
societal values and hence the judiciary should not jump in when these values are involved. It is
also argued that the founding principles of the US Constitution object to the judiciary ruling on
moral issues. Therefore, still according to Scalia, it should up to the public to decide on these
matters by democratic means. On the other side of the bench, proponents of judicial moralism
argue that the US Constitution should be a ‘living thing’ that ‘reflects common standards of
decency’.118 As was shown in the previous section, in the European context the penetration of
moral values in the debate should mainly be sought in the enhanced and more livid inclusion of
core human values and, thereby, moral dilemmas.
3.4 C ONCLUSION
The relationship between law and morality is a complex one. Academic debate commonly
emphasises the ambiguity and uncertainty inherent in moral values and addresses claims that
all laws should be morally just. In order for laws to be socially acceptable legislators – and to
some extent also law enforcers – are bound to provide some moral justification for the laws’
existence. With an eye on the complexities brought about by conflicting moral rationales, it
seems overly ambitious to expect from judges that they explicitly rely on and apply these moral
standards, especially when this application prove to be detrimental to the law as it stands.
In a European context, over half a century ago the moral rationale of keeping the peace proved
to be a good start in ensuring the Union’s success. Nowadays, this moral rationale has lost some
of its force. Nevertheless, with the expansion of its geographical scope and increased
competences of the European Union comes the responsibility to design morally acceptable
legislation and to render morally just decisions. With regard to the latter, since several decades
morality has taken its place in case law by the Court of Justice, although its decisions are limited
to separate instances in which domestic moral values clash with European-wide economic
notions such as the freedom to provide goods and services. This specific, case-oriented
application of moral issues makes it difficult to put the finger on the role of morality in a nonspecific case transcending context.
As is shown in several cases illustrated abode, the Court of Justice remains cautious in ruling on
conflicts involving moral values. However, with the accession of the European Union to the
European Convention of Human Rights under the Treaty of Lisbon it is likely that the Court will
117 Fitzgerald 2013. Scalia made these comments a few days before the US Supreme Court ruled in Hollingsworth v
Perry, thereby bringing same-sex marriage a large step closer to becoming reality.
118 Fitzgerald 2013.
22
have to face moral dilemmas. Judging its most recent case law it seems that the Court of Justice
has somewhat lowered its ambition to protect the traditional European economic notions;
instead it clearly acknowledged its role in protecting absolute human – and thereby moral –
values.
23
IV. THE
GOALS OF
EU
COMPETITION LAW
4.1 I NTRODUCTION
The structure of this chapter is straightforward. First, the economisation of competition law in
general is briefly discussed, after which the goals of today’s EU competition law are identified.
With regard to the goal of European-wide market integration, special attention is paid to the
consequences of the implementation of the Lisbon Treaty: the so-called Coup de Sarkozy. The
consumer welfare standard is outlined in the next section, followed by an analysis of the goal of
economic efficiency. In addition to these objectives of EU competition law, some attention is
paid to the rise of non-economic goals. The last section summarises this fourth chapter.
4.2 W HY
4.2.1 T HE RISE OF THE
FOCUS ON THE GOAL S OF COMPETITION LAW ?
ECONO MISATION OF COMPETITION LAW
Originally, the enforcement of competition laws entailed a form-based analysis of agreements
and subsequent identification of market behaviour. In the US, lawyers dominated antitrust
enforcement until the 1970s.119 Economic assessment played only a marginal role. This changed
in the mid-1980s with the ‘Post-Chicago school’, which emphasised efficiency and promoted an
effects-based approach.120 From that decade onwards, the role of economists at federal antitrust
agencies grew in importance due to ‘a shift in emphasis away from matters of legislative intent
and due process toward economic theories of industrial organization’.121 This resulted in a more
prominent role for economic analysis in competition law assessment.122 In the late 1990s,
Europe followed the US in relying on economic models which aim to identify, assess, predict and
address actual or potential effects on the market and the impact on competition.123 Following
the implementation of Regulation 1/2003 the national competition authorities were given more
leeway in enforcing and interpreting the Treaty’s competition provisions, something which was
before the Commission’s and the Court’s field of competence.124 Although the empowerment of
national authorities relieved the Commission’s workload, it inevitably carried the risk of
divergent national practices. In order to guarantee a minimum level of consistency among the
27 (now 28) member states’ competition law enforcement, the Commission promoted an
approach freed from jurisdictional jamming: an economic effects-based approach.125 This
approach was strengthened by a large number of block exemption regulations and policy
119Foer 2007, p. 567.
120 See also Crane 2009.
121Foer 2007, p. 567.
122 See Vogelaar 2002, p. 19; Lavrijssen 2010.
123 Idem.
124 See Whish 2012, pp. 166-167.
125 See, for example, the Communication from the Commission, ‘A pro-active competition policy for a competitive
Europe’, 2004, pp. 7-9, where the Commission refers to ‘a stronger emphasis on economic analysis’ and of its focus to
the ‘economic effects of firm behaviour or of government measures’. See also Cseres 2007, p. 123.
24
guidelines, along with the Commission’s focus on the effects of competitive restrictions on
‘consumer welfare’ and ‘market power’.126
4.2.2 S EARCHING FOR THE
GOALS OF
EU
COMPETITION LAW
One of the principle issues with regard to the economisation of competition law concerns its
normative foundation, i.e. what does competition law ultimately stand for and what/whose
interests is it meant to protect?127As the recently deceased Robert Bork famously said:
‘Antitrust policy cannot be made rational until we are able to give a firm answer to one question:
What is the point of the law – what are its goals? Everything else follows from the answer we
give.128
Over the years legal academics have spent considerable time and effort in search for the goal(s)
of EU competition law.129Where the Chicago School liaisons assert economic efficiency as a
single objective,130 others advocate a milder or completely different theoretical approach.
Partially due to the overall consensus in the EU on the economic benefits of competition law,
this debate is less polarized in the EU than in the United States.131Nevertheless, there is still
disagreement on, amongst others, ‘the role and extent of welfare analysis […] as opposed to a
rights and principles-based approach, and the interplay between the different goals’.132
Unfortunately, the EU Treaties do not provide a satisfying answer as to what goals European
Union competition policy aims to achieve. In an attempt to remedy this legal obscurity, the
Court of Justice held in its judgment in the Continental Can case that the competition rules must
be read in the light of the broader goals of the European Union.133 However, the Court remains
ambiguous on the scope of these goals and on whether any form of hierarchy exists.
Nonetheless, it is safe to say that ‘the Treaty’s commitment to “undistorted competition”
enshrines a multifaceted concept’. 134 In this respect, for legal scholars, judiciary and
practitioners alike it is important to realise that EU competition law is a public policy tool.
Thereby it is subject to the whims of politics and public pressure and accords to changing
economic realisations and societal fashions. Hence it becomes a product of political economy.135
Despite of the dynamic – almost elusive – features of the goals of EU competition law, the
European Commission, the NCAs, the Court of Justice and legal doctrine seem to agree on three
particularly prevalent objectives: market integration, consumer welfare and economic
126 See also Lianos 2012, p. 262.
127Vanberg 2012, p. 44.
128 Bork 1978, p. 50. Drawn from Townley 2009, p. 1.
129 See Lianos 2013, p. 2 at footnote 4.
130 Richard Posner, key representative of the Chicago School, summarised that ‘[e]fficiency is the ultimate goal of
antitrust’, Posner 2001, p. 29. Another neoclassical economist who was appointed Ronald Raegan’s first Assistant
Attorney General for Antitrust, William Baxter, said: ‘The only goal of antitrust is economic efficiency’, Taylor 1982.
131 See Lianos 2013, p. 2. In her 2013 working paper, IonannisLianos eloquently sketches recent European angles in
this debate and illustrates the normative perspectives advanced on the goal of EU competition law.
132Lianos 2013, p. 2.
133 Case 6-72, Europemballage Corporation and Continental Can Company v. European Commission [1973], ECR I-215,
paras. 22-27. See also Schweitzer 2007, p. 2 under
134 Geradin, Layne-Farrar & Petit 2012, p. 23.
135 See also Foer 2007.
25
efficiency.136 The consensus on the well-established nature of these three objectives justifies the
limited scope of this chapter. However, in line with the research question in addition to these
objectives also some socio-political and other non-efficiency goals will pass in review. This
research incorporates the thought that the interpretation and implementation of EU
competition law is affected by social goals which, in turn, evolve under the influence of society’s
institutional and political context.137 Hence, ‘the quest for the goals of competition law may
prove in the end a meaningless exercise’.138 With this in mind, this chapter aims to establish a
basic understanding on the underlying motives of competition law. Providing an exhaustive
account of these notions and their interrelation therefore far exceeds the ambition of this
chapter.139
4.3 M ARKET
4.3.1 W HY
INTEGRATION
MARKET INTEGRATION ?
The merging of national markets into the European Union’s single market finds its origin in the
1957 Treaty of Rome. Obstacles such as tariff and non-tariff barriers were eliminated and
regulations on principles of mutual recognition were adopted. This allowed goods, services,
capital and labour to flow more freely from member state to member state.140 The levelling of
European playing fields confronted large domestic firms with an increased competitive
pressure from other – formerly non-domestic – firms. Moreover, an internal market with no or
only minor barriers to trade European enabled market players to enhance their area of
distribution and hence achieve significant economies of scale.141 EU competition law aims to
protect the single market and its economic benefits by preventing firms from establishing
private obstacles to trade.142 With regard to these private obstacles, already in 1966 the Court of
Justice held that undertakings’ agreements, which intended to recreate national barriers, would
‘frustrate the most fundamental objectives of the [then] Community’.143 Also the promotion of
the economic approach in EU competition law by the Commission after Regulation 1/2003 can
be interpreted in this light; as is mentioned below the rationale behind introducing an effectsbased approach in member states’ competition enforcement is the preservation of a consistent
application of competition law and policy.
4.3.2 C OUP
DE
S ARKOZY : CONSEQUENCES
FOR MARKET INTEGRATION ?
Terminology-wise EU competition law has hardly been affected by the overhauls of the
European Community’s Treaties. In the EC Treaty, firmly-established Article 3(1)(g) aimed to
ensure a system in which competition in the internal market was not distorted. In many of its
136 Mainly academic literature sometimes also refers to the goals of innovation, plurality, consumer choice, economic
freedom and competitive fairness. See Geradin, Layne-Farrar & Petit pp. 19-26.
137 Lianos 2013, p. 3.
138 Ibid.
139 For a more extensive and accessible account of these concepts, see Jones &Sufrin 2011 and Whish & Bailey 2012.
140 See also Jones &Sufrin 2011.
141 Geradin, Layne-Farrar & Petit 2012, pp. 10-11, 24-26; see also Whish & Bailey 2012, pp. 23-24.
142 Geradin, Layne-Farrar & Petit 2012, pp. 11-12
143 Joined cases 56, 58/64, Établissements Consten S.à.R.L. and Grundig-Verkaufs-GmbH v. Commission [1966] ECR
429, at p. 340.
26
judgments, the Court of Justice relied on this article when dealing with competition cases,
considering the pursuit of competition as ‘indispensable for the achievement of the
Community’s tasks’. 144 The provision was also used when the Court balanced between
competition and social objectives.145 The most prominent example of the latter is the Albany
case, in which the Court concluded that agreements concluded in the context of collective
negotiations between management and labour in pursuit of objectives of general interest fall
outside the scope of the competition rules.146 However, in the advent of the Lisbon Treaty the
so-called Coup de Sarkozy had Article 3(1)(g)repealed as a constitutive element of the European
Union.147 Other member states agreed with France’s president of the time and believed that
competition was not or no longer an objective of the Union itself.148 Therefore, instead of
making an appearance in the new EU Treaty, competition was reallocated to Protocol 27 to the
Treaty [‘the Protocol’]. In this Protocol market integration is phrased as the specific aim of EU
competition law.149
It has been asked whether competition’s reallocation the Protocol and its altered content will
have any practical or theoretical consequences in the future. For instance, unlike the
competition objectives, the social objectives did find their way into the new Treaty, which might
suggest that social objectives outrank competition goals.150 Moreover, in cases where objectives
within competition law conflict the wording of the Protocol suggests that the internal market
objective should take priority over other aims mentioned in the Treaty such as consumer
protection.151 Nevertheless, it seems unlikely that Lisbon will leave EU competition law ‘cribbed,
crabbed and confined’.152 First and foremost, pursuant to Article 51 TEU the Protocols carry the
same legal force as Treaty provisions.153In accordance with this provision, the Court has
referred to the Protocol in relation to Treaty provisions ‘as though there was no difference from
Article 3(1)(g) EC’.154 Also ample past judgments the Court indicated that competition is
essential for the functioning of the internal market, a terminology which is also adopted in the
Protocol. 155 In addition, former Competition Commissioner Neelie Kroes and high-level
Eurocrats have voiced that competition has never been an objective of the European
144 See Case 6-72, Europemballage Corporation and Continental Can Company v. European Commission [1973], ECR I215, para. 23.
145 In its judgments, the ECJ referred to article 3(1)(g), among others, as a fundamental provision, a general principle
and a main objective and, see respectively Case C-126/97, EcoSwiss [1999] ECR I-3055, para. 36; Case 240/83,
Procureur de la Republique v. ADBHU [1985] ECR 531, para. 9 and Case T-306/01, Yusuf and Al Barakaat International
Foundation v. Council and Commission [2005] ECR II-3533, para. 68. These examples were drawn from an
unpublished 2009 research draft paper by A.S. Tousis.
146 Case C-67/96, Albany International BV v. Stichting Bedrijfspensioenfonds Textielindustrie [1999] ECR I-6025,
paras. 59-60.
147 Article 3(1)(g) of the EC Treaty was with the introduction of the Lisbon Treaty moved to the Protocol of the new
Treaty. See also Financial Times 2007, p. 6.
148 Riley 2007, p. 706.
149 See Protocol 27 on the Internal Market and Competition.
150 The social objectives are currently codified in Articles 2 and 3(3) TEU.
151 ‘Protocol no. 27 stresses that the system of competition law is part of the broader internal market objective. In
doing so, it clarifies that market integration constitutes the specific aim of competition law, meaning that in case of
conflict between this and other more general aims followed by the Treaty – such as protection of the interest of
consumers – the objective of the internal market should take priority.’, Lianos 2012, p. 264.
152 See, for instance Riley 2007, p. 703, who argues the opposite.
153 See Article 51 TEU: ‘The Protocols and Annexes to the Treaties shall form an integral part thereof.’; see also
Whish & Bailey 2012, pp. 50-51, Lianos 2012, p. 264, Nowag 2012, pp. 406-407.
154 See Whish & Bailey 2012, p. 50, referring to Case C-52/09, Konkurrensverket v. TeliaSoneraSverige AB [2011] ECR
I-527, paras. 20-22.
155 See, for instance, Case C-453/99, Courage v. Crehan [2001] ECR I-6297, para. 20.
27
Community but, instead, is and has only been a means to achieve the internal market.156 This is
in line with the Commission’s practice as it still seems relentlessly determined to protect the
single market. To top it all off, the accession of a 13 new member states since 2004 and the risk
of economic nationalisation caused by the 2008 crisis increase the likelihood that market
integration will remain at the core of competition policy.157
In short, it seems unlikely that the Lisbon Treaty has brought about a major reorientation of
competition in the European Union. Even more optimistic from a pro-competition point of view
is the line of argumentation that the post-Lisbon indissoluble link between competition and the
internal market stresses their two-way relationship. In other words: where competition aims to
protect and promote market integration, the internal market encompasses a system where
competition may not be distorted. Therefore, when applying Treaty provisions that refer to the
internal market or an equivalent thereof, the relevant authority would, arguably, be obliged to
assess and weigh the effects on competition when reaching its decision.158 As a result, the
Lisbon Treaty could potentially be responsible for a constitutional strengthening of competition.
4.3.3 T HE C OURT
IN
G LAXO S MITH K LINE
The Court of Justice has in many of its cases touched on competition as a means for achieving a
single integrated market. In 2009 the Court of Justice reaffirmed the internal market’s
imperative nature by quashing the General Court’s judgment in GlaxoSmithKline.159 This case
revolved around the conflict rising from possible consumer benefits of restrictions to parallel
trade to the detriment of market integration.160In its judgment, the Court emphasised that
‘[f]irst of all, there is nothing in [Article 101(1) TFEU] to indicate that only those agreements
which deprive consumers of certain advantages may have an anti-competitive object. Secondly, it
must be borne in mind that the Court has held that, like other competition rules laid down in the
Treaty, [Article 101 TFEU] aims to protect not only the interests of competitors or of consumers,
but also the structure of the market and, in so doing, competition as such. Consequently, for a
finding that an agreement has an anti-competitive object, it is not necessary that final consumers
be deprived of the advantages of effective competition in terms of supply or price’. 161
This judgment challenges previous case law in which the Court somewhat weakened market
integration as goal of EU competition law162, although it remains to be seen what the
consequences are of this judgment. Comparing this judgment to other case law by the Court, it
appears that the Court is ambiguous as to clarifying whether any form of hierarchy exists of
156 Nowag 2012, p. 405, referring to Petit 2007 and Kroes 2007. In the US antitrust represents the means ‘to achieve
broader government objectives for the economy or for a given industry’, Stucke 2012, p. 596.
157 See also Whish & Bailey 2012, pp. 23-24 and 51; see for recent statements on the importance on market
integration by the Commission also its Guidelines on Vertical Restraints, OJ [2010] C 130/01, para. 7.
158 See Nowag 2012, p. 409-410.
159 See Case T-168/01 GlaxoSmithKline Unlimited v Commission [2006] ECR II-2969, para. 118; Joined Cases C-501,
513, 515 and 519/06P, GlaxoSmithKline Service Unlimited v Commission [2009] ECR I-9291; see also Joined Cases C468/06 etc., Sot LeloskaiSia v. GlaxoSmithKline [2008] ECR I-7139, paras. 56-57. For the single market imperative in
the EU, see also Whish & Bailey 2012, p. 51.
160Lianos 2012, p. 263-264.
161 Joined Cases C-501, 513, 515 and 519/06P, GlaxoSmithKline Service Unlimited v Commission [2009] ECR I-9291,
para. 63.
162 See Case C-02/01P, Bundesverband der Arzneimittel-ImporteureeV and Commission v. Bayer AG [2004] ECR I-23.
28
objectives of EU competition law.163 It happens to be that this judgment is also topical with
regard to the proclaimed goal of EU competition policy discussed below: the consumer welfare
standard.
4.4 T HE
CONSUMER WELFARE STANDARD
4.4.1 T HE INTERESTS OF CONSUMERS IN
COMPETITION LAW
Legislators, practitioners, academics and the judiciary generally agree that competition in the
European Union aims to achieve the effective allocation of scarce resources, the economic
benefits of which should contribute to the welfare society as a whole. Consequently, a fair
argument can be made that today’s EU competition law enforcement should not distinguish
between different groups of society unless required by the circumstances of a particular case.164
Nevertheless, in practice competition regimes do not focus on achieving economic efficiency
solely at the behest of society and the single market imperative. On the contrary, as requirement
to declare the pro-competitive prohibition in Article 101(1) inapplicable, its third paragraph
demands that a fair share of the benefits generated by the agreement is aimed at consumers. In
addition, for many years it has been a spearhead effort of competition authorities worldwide to
ensure that consumers attain a fair share of the benefits of competitive markets.165Also the
European Commission has shown a strong determined to establish the consumer welfare
standard as the central aim when assessing mergers and infringements of the Treaty
competition rules.166
The objective of consumer welfare is intertwined and sometimes conflicts with the objectives of
market integration and achieving and increasing economic efficiency and growth. In order to
form some level of understanding of that the consumer welfare standard entails, this notion is
discussed below, both as a stand-alone goal of competition law as well as in relation to each
other goals. Some of the Court of Justice’s recent case law also passes in review.
4.4.2 T HE SCOPE OF THE
CONSUMER WELFARE STANDARD
What does this consumer welfare standard entail? A basic understanding of role of the
consumer welfare standard in EU competition law requires at least three questions to be
answered: what does ‘welfare’ encompass, whose welfare is taken into account, and what role
does the consumer welfare standard play in EU competition law?
First, even though there is no international consensus on the definition of ‘welfare’, EU
competition policy generally identifies the maximisation of consumer surplus as most important
element.167Consumer surplus can, in turn, be defined as the monetary gain when consumers can
163 Lianos 2013.
164 Cseres 2006, p. 124. Competition policy is, according to Cseres, most apt to target and promote total economic
welfare of society ‘instead of making value judgments on how such economic welfare should be distributed between
different groups’, p. 127.
165 See, e.g. Pittman 2007; Drexl, Kerber&Podszun 2011, pp. 11-80; Whish & Bailey 2012, pp. 19-21; ICN 2011;
Geradin, Layne-Farrar & Petit 2012, p. 22.
166 See Kroes 2005 and the Guidelines on the assessment of horizontal mergers, para. 79.
167 Zimmer 2011, p. 72.
29
purchase a product or service for less than the highest monetary price they were willing to
pay.168In practice, this boils down to direct and indisputable economic benefits to consumers of
products or services in terms of price, quality and undistorted output.169With consumer surplus
as most prominent element in defining consumer welfare, it can be qualified as a mainly
economic concept. This does not mean that the notion of ‘welfare’ lacks any socio-political
characteristics.170 On the contrary, Alexander Italianer, DG Competition at the European
Commission, recently emphasised that the notion of welfare also relates to concepts of
solidarity and social protection.171 Thereby, the standard seems to include all inherent aspects
of the market such as health, safety and – sometimes – even culture and environmental
protection.172
Second, when compared to the definition of ‘consumer’ in EU and member state consumer
protection laws in EU competition law the ‘consumer’ comprises a broader group.173 In its
Guidelines on the application of Article 101(3) TFEU regarding anti-competitive agreements,
the Commission delineates the concept of consumer to ‘encompass all users of the products […]
including wholesalers, retailers and final consumers’.174By this definition, in EU competition law
the consumer notion is stretched to include all buyers, be it intermediate and final, of products
or services. It goes without saying that the interests of corporate intermediate buyers can differ
from – or even conflict with – natural persons who do not act for professional
purposes.175Nevertheless, the Commission and national competition authorities do often not
differentiate between intermediate buyers and final consumers as they assume that competitive
harm to the former also results in harm to the latter.176Even though a 2011 ICN questionnaire
revealed that national competition authorities look at welfare of intermediate consumers as
well as final consumers in at least some of their investigations, it still seems as if investigative
authorities are less apt to pay attention to this difference.177 Therefore, it seems safe to say that
in EU competition law, the consumer welfare standard sees to protect all users of the product,
only occasionally focussing on the economic benefits for final consumers.178This current
practice seems in line with the goal of competition law in which competitive market players are
stimulated to create general economic benefits for society as a whole.179
168 Drinking water is an illustrative example of a product with high consumer surplus. Being indispensible for their
survival, if they had to consumers would be willing to pay significantly more for this product than they currently do,
hence resulting in a high consumer surplus.
169 See Cseres 2006, pp. 124-126.
170 Cseres 2006, p. 122.
171 Italianer 2013, p. 2.
172 Cseres 2006, pp. 122, 135. See with regard to the Commission’s focus on economic efficiency and growth to the
detriment of the environment also Ottervanger 2010, p. 95. Also, multiple sections in the Commission’s Guidelines on
the application of Article [101(3)]of the Treaty imply environmental protection’s inferiority to efficiency gains.
173Cseres 2006, p. 131-133.
174 Guidelines on the application of Article 81(3) of the Treaty [OJ No C 101 of 27.4.2004]. See also Jones &Sufrin
2011, p. 248. In his 2006 contribution, Cseres offers an extensive overview of the consequences of not differentiating
between intermediates and final consumers.
175 See also Cseres 2006, pp. 131-133; Heyer 2006, pp. 17-18.
176 See, e.g. the European Commission’s 2005 Discussion paper on former Article 82 EC (now Article 102 TFEU),
para. 55. Available via http://ec.europa.eu/competition/antitrust/art82/discpaper2005.pdf.
177 ICN 2011, p. 4. Authorities do seem to pay attention to the difference between intermediates and final consumers
when investigating the retail market, see e.g. Case T-168/01 GlaxoSmithKline Unlimited v. Commission [2006] ECR II2969.
178 Cseres 2006, p. 132-133.
179 See also the aforementioned cited Joined Cases C-501, 513, 515 and 519/06P, GlaxoSmithKline Service Unlimited
v. Commission [2009] ECR I-9291, para. 63.
30
Third, why does consumer protection play such an important role in EU competition law? While
comparing the consumer welfare standard to consumer protection laws, Cseres concludes both
advocate that ‘market failures have to be corrected in order to assist the weaker party in their
transactions’.180 The focus on protecting this weaker party often comes to the fore when
stressing that competition law is not designed to protect the position of competitors.181 Instead,
in its multiple statements the European Commission stresses that the consumer welfare
standard aims to ensure ‘a good quality of life’.182 The protection of consumers is, however, not
always recognised as an inherent goal of European competition law. For example, a 2008
rapport by the European Commission on the definition of over-indebtness in relation to usury
states that
‘[t]he debate around legislation setting interest rate ceilings tends to be emotive. On the one hand
there is a strong moral argument for protecting consumers against excessive charges; on the
other it can be argued that they distort markets and can contribute to financial exclusion. Both
points of view have validity but are almost impossible to reconcile.’ 183
Fourth, how does the consumer welfare standard in EU competition law unfold in (national)
practice? This view is shared on a global scale: an International Competition Network (‘ICN’)
questionnaire from 2011 shows that the majority of national competition authorities worldwide
have either formally or informally adopted consumer welfare as a yardstick in their
investigations. Despite this shared desire to promote consumer welfare, in their enforcement of
competition rules ‘there appears to be a lack of uniformity in how they do so’.184 Moreover, it
deserves mentioning that unlike the total welfare standard the consumer welfare standard lacks
solid basis in welfare economics.185 Therefore, generally economists favour total welfare as
yardstick for successful EU competition to the consumer welfare standard. In their view, by
allowing the allocation of resources to those who most need it and value them most the total
welfare standard generates maximum efficiencies for society as a whole.186 This leads to the
presumption that, apart from the political saleability of competition law to the general public
(i.e. ‘we are here to protect your economic interests’), the rationale behind the application of the
consumer welfare standard as it stands bears an indistinct nature. This adds to the difficulty of
identifying a shared rationale and thus an ultimate application of the consumer welfare
standard by the Court of Justice, the Commission and the NCAs.187
With regard to the hierarchy of the consumer welfare standard, it is noteworthy that in the
aforementioned GlaxoSmithKline case the Court aligned the protection of (final) consumers and
the ensuring of market integration and competition as such.188
180 Cseres 2006, p. 130.
181 See e.g. AG Jacobs in Case C-7/97, Oscar Brunner v. Mediaprint [1998] ECR I-7791, para. 231.
182 See, e.g. Kroes 2005 and Lowe 2006, p. 1: ‘Competition is not an end in itself, but an instrument designed to
achieve a certain public interest objective, consumer welfare.’
183 European Commission 2008, p. 70. The rapport provides no further explanation on this statement.
184 ICN 2011, p. 7.
185 Cseres 2006, p. 122.
186 Idem, pp. 126-127.
187 ICN 2011, p. 7.
188Drexl, Kerber&Podszun 2011, p. 3. The strong formulation by the Court raises questions on the practical
consequences this case might carry. In this scenario some argue the improbability of situations where competition
would actually harm consumer welfare, see e.g. Baarsma 2010, p. 18.
31
4.5 E CONOMIC
4.5.1 A N INTRODUCTION TO
EFFICIENCY
ECONOMIC EFFICIENCY
Both lawyers and economists often present economic efficiency as the primary goal of
competition law and policy. Yet, the concept is not traceable in the European Treaties nor does
case law or academic literature provide a clear-cut description of its role in EU competition
law.189 Therefore, before exploring its role in EU competition law practice, the notion itself
deserves further examination.190
The economic efficiency objective finds its roots in the US Chicago School.191 Roughly since the
election of Ronald Reagan in 1980, the public was acquainted with a particularly strong
neoclassical vision expressed by leading professors of the University of Chicago. Rejecting
Keynesianism192, the so-called ‘Chicago school’ held – and in many adapted forms still holds –
that people and businesses act rationally and that markets are self-correcting in nature.193 The
only goal of competition is held to be to promote economic welfare, which in turn is understood
in ‘the economist’s concept of efficiency’.194 This solid trust in the market was undermined by
the 2007-2008 financial crisis, which led many highly esteemed economists to acknowledge the
deficiencies of the system in its current form. Nevertheless, partially due to the adoption by both
US and UK past conservative administrations, Chicago theory still has profound influence on
competition policy worldwide.195
Neo-classical economic theory argues that in a perfectly competitive environment, economic
efficiency maximises the welfare of society as a whole.196Although academics that publicise this
theory also speak of consumer welfare, this should be interpreted as ‘merely another term for
the wealth of the nation’.197 Economic theory aims for material prosperity, but does not measure
the distribution of this wealth and hence does not identify what segment of society benefits
most. Put metaphorically, economic theory considers ‘the size of the economic pie and not how
the slices of that pie are distributed’.198 In the words of Robert Bork, a Chicago School
prominent, ‘those are matters for other laws’.199 More explicitly, especially with regard to the
ethical component of this research,
‘consumer welfare [i.e. total welfare], as the term is used in antitrust, has no sumptuary or ethical
component, but permits consumers to define by their expression of wants in the marketplace
what things they regard as wealth. Antitrust litigation is not a process for deciding who should be
rich or poor, nor can it decide how much wealth should be expended to reduce pollution or
189 See Geradin 2006, p 313.
190 The following succinct introduction of economic efficiency does not aim to provide anything more than a basic
understanding of the mathematical and rational elements of the concept. For a more accessible introduction, see
Whish & Bailey 2012, pp. 4-6, Jones &Sufrin 2011, pp. 4-9.
191 See also Jones &Sufrin 2011, pp. 23-32; Geradin, Layne-Farrar & Petit 2012, pp. 62-77.
192 This economic school of thought, called after John Maynard Keynes, argues in favour of investments and
interference by governments and economic institutions in order to prevent, avert or cure economic crises.
193 Jones & Sufrin 2011, pp. 23-30.
194 Posner 2001, at ix.
195 See Jones &Sufrin 2011, p. 23.
196 Whish & Bailey 2012, p.4.
197 Bork 1978, p. 90, see also Foer 2007, p. 568.
198 Geradin, Layne-Farrar & Petit 2012, p. 22. See for a more detailed account also Odudu 2007, pp. 605-621.
199 Bork 1978, p. 90.
32
undertake to mitigate the anguish of the cross-country skier at the desecration wrought by
snowmobiles. It can only increase collective wealth by requiring that any lawful product, whether
skis or snowmobiles, be produced and sold under conditions most favourable to consumers.’ 200
In economic theory, society’s welfare is seen as the final product of economic efficiency. Hence,
economic efficiency should not be seen as the ultimate goal but rather as an instrument
indispensible in achieving social goals.201 The concept of ‘efficiency’ is generally characterised as
comprising the notion of allocative efficiency, productive efficiency and dynamic efficiency,
either on their own or in relation to each other.202 Allocative efficiency is achieved when
producers only produce goods or services in the quantities desired by society, resulting in
efficient allocation of economic resources. In this scenario, a producer will continue to expand
his production until a certain optimum is reached. This optimum is reached when the costs of
producing an additional product are equal to the price society is willing to pay for the product,
so-called marginal costs. Producing even more products from that point onward would lead to a
surplus of his products in society. Consequently, as society is already satisfied, the producer will
obtain a lower price than the costs of producing another product. Hence his profits would
drop.203 Productive efficiency refers to the minimisation of costs involved with the production of
goods or services. When costs of production are minimised, the amount of society’s wealth
expended in the production is also minimised.204 As a result, when a firm’s competitors are
more successful in minimising their costs of production, rational choice will lead the firm’s
customers to switch supplier. In this scenario the firm would be forced to leave the market.205
In addition to allocative and productive efficiency, so-called dynamic efficiency is achieved
when producers act on the incentive to innovate and design new products aiming to gain
market share.206 The effects of competition on the often gradual, multi-layered and complex
fruits of innovation are difficult if not impossible to measure. Nonetheless, Joaquín Almunia
recently stressed that ‘protecting innovative firms from the harm done by anti-competitive
practices is one of the most important aims of competition-law enforcement’.207
4.5.2 E CONOMIC
EFFICIENCY I N
EU
COMPETITION LAW PRACTICE
The Treaties do not explicitly support the promotion of economic efficiency and the NCAs are
not engrossed in the output versus input-ratio at the behest of total welfare.208 The promotion of
economic efficiency does not seem to be at odds with the goal of market integration; the
efficient functioning of markets lies at the heart of the integration efforts in the first place. 209
With regard to the relationship between economic efficiency and the consumer welfare
standard the Commission’s practice is complex at best. For example, the Commission’s
200 Bork 1978, pp. 90-91.
201Cseres 2006, p. 127.
202 Bork 1978, p. 91; Whish & Bailey 2012, p. 4.
203 Whilst not a synonym to allocative efficiency, the closely related Pareto efficiency defines the ultimate scenario
where it is impossible to have a person enjoy more or more valued economic benefits without depriving another
individual. See also Barr 2012, Whish & Bailey 2012, p.5 and Jones &Sufrin 2011, although the latter authors do refer
to allocative efficiency as Pareto optimal.
204Whish& Bailey 2012, p. 5.
205 Jones &Sufrin 2011, pp. 8-9.
206 Whish & Bailey 2012, pp. 5-6, Geradin 2006, p. 315.
207 Almunia 2013.
208Geradin, Layne-Farrar&Petit 2012, p. 22.
209Geradin 2006, p. 318.
33
Guidelines on Article 101(3) TFEU reveal that the Commission considers the protection of
consumer welfare and the efficient allocation of resources as two separate goals of
competition.210 In addition, the Commission stated that
‘competitive and open markets offer the best guarantee of European undertakings boosting their
efficiency and their potential for innovation’. 211
The Guidance Paper on Article 102 however drops the distinction between efficiencies and
consumer welfare, leading to the conclusion that, according consumer welfare encompasses the
efficient allocation of resources.212 This is line with the general tenure in legal academics where
scholars seem to agree that
‘the economic goal of [EU] competition law appears to be concerned with improving allocative
efficiency in ways that do not impair productive efficiency so greatly as to produce no increase
(or even net reduction) in total consumer welfare’.213
Despite the occasional uncertainty on the role of economic efficiency in EU competition law and
the disagreement on its definition among economists, it is safe to say that it does play a key role
in the concept of competition.214Nevertheless, multiple cases have shown that some tension can
appear between the three efficiencies and hence that an efficiency-based approach does not
necessarily amount to a consistent practice.215 As a result, it this research tends to conclude that
in EU competition law, the consumer welfare standard bears relatively more weight than an
approach focussed on economic efficiency.216
4.6 N ON - ECONOMIC
4.6.1 S OCIO - POLITICAL
GOALS AND
GOALS PLAC ED OUTSIDE
EU
COMPETITION LAW
EU COMPETITION
LAW
When socio-political interests are intertwined with economic interests the Court of Justice has
shown in multiple cases that the competition law regime only applies when certain criteria are
met. For instance, for EU competition provisions to apply in a certain case the organisation in
question will have to qualify as an undertaking. Well-known case law established that this
concept encompasses every entity engaged in an economic activity, regardless of the legal status
of the entity, the way in which it is financed, the not-for-profit nature or the lack of direct
exchange of services.217 This broad definition was limited by the Court in the Poucet and Pistre
210 In the Communication from the Commission, ‘Guidelines on the application of Article 101(3)’, OJ C101, 27.4.2004,
pp. 97–118, in paragraph 33 the Commission states the following: ‘The aim of the Community competition rules is to
protect competition on the market as a means of enhancing consumer welfare and of ensuring an efficient allocation
of resources’ (emphasis added, AM).
211 Communication from the Commission of 20 April 2004, ‘A proactive Competition Policy for a Competitive
Europe’ COM (2004) 293, not published in the OJ.
212 Jones &Sufrin 2011, p. 47; see also Lowe 2007.
213 Bishop& Walker 2010, p. 32; Jones &Sufrin 2011, pp. 47-48.
214 Geradin 2006, pp. 313-356.
215 See also Geradin 2006, p. 316, where he gives the following example: ‘For instance, mergers may contribute to
the realization of economies of scale and scope, thereby allowing greater productive efficiency. […] On the other hand,
the merged entity might have increased marker power and thus a growing ability to impose supracompetitive prices,
which runs counter to allocative efficiency’.
216 See also Geradin 2006, pp. 316-317.
217 See Case C-41/90, Höfner and Elser v Macrotron [1991] ECR I-1979, para. 21; Eilmansberger & Herzig 2008, p.8.
34
case, which concerned the monopoly rights of two social security schemes situated in France. 218
Ruling against the plaintiffs who challenged these rights, the Court excluded sickness funds and
organisations involved in the management of the public social security system from the grasp of
EU competition law. In its judgment the Court underlined the exclusively social objective of
these organisations in addition to their activities based on the principle of national solidarity
and their non-profit-making aims. Therefore, as the activities carried out by the organisations
involved did not qualify as an economic activity the organisations were not undertakings within
the meaning of Article 101 TFEU.219 It follows from this and similar cases that only those entities
engaged in economic activities fall under the reach of EU competition law.220
4.6.2 S OCIO - POLITICAL
GOALS WITHIN
EU
COMPETITION LAW
There has been ample discussion on whether also non-economic goals have a place within EU
competition law once a case does fall within its legal ambit.221 Not only academics but also the
Court of Justice and the European institutions have issued contradictory statements on the
inclusion of, mainly other European-wide, socio-political factors such as environmental policy.
In practice the EU and its member states are inclined to pursue other objectives than the
effective functioning of the market or enhancing consumer welfare, but it is generally accepted
that this should not come in the way of the interpretation and application of the competition
rules.222 In addition, the 2004 reform, which among others empowered national competition
authorities of the member states, although it is argued that national authorities and judges are
hesitant with balancing competition considerations against other Union policies and
objectives.223
Within the sphere of one of the competition law provisions, Article 101 TFEU, academics do
seem to agree that the Court of Justice in should its analysis restrict itself to competition
considerations. Craig and De Búrca draw this conclusion based on the debate on the application
of the rule of reason in EU competition law.224 In Métropole Télévisionv Commission the General
Court reiterated that the European Courts ‘have been at pains to indicate that the existence of a
rule of reason in […] competition law is doubtful’ and that the Commission was therefore ‘not
obliged to weigh the pro and anti-competitive aspects of those agreements outside the specific
framework of Article [101(3) TFEU]’.225 This firm stance by the General Court does not mean
that it has abjured all flexibility in the interpretation of Article 101(1). Rather, when assessing
anti-competitive effects of agreements the focus should lie on the economic context and the
structure and composition of the relevant market targeted by the agreement.
Craig and De Búrca infer from the reluctance of the General Court to apply a balancing act that
‘there will be even greater opposition to the inclusion of non-competition considerations in that
218 Joined Cases C-159/91 and C-160/91, Poucetv Assurances Generales de France and Pistre[1993] ECR I-637.
219 Idem, paras. 18-19.
220 See e.g. Case C-218/00, INAIL [2002] ECR I-691.
221 By non-economic goals, this research means all public policy objectives apart from the traditional economic
efficiency objective of EU competition law. See also Townley 2009, p. 1.
222 Jones &Sufrin 2011, pp. 51-52.
223 Ibid.
224 Craig & De Búrca 2008, pp. 980-981.
225 Case T-112/99, Métropole Télévision v Commission [2001] ECR II-2459, paras. 72-78.
35
context’.226 The Wouters case227 and Meca-Medina case228 seem to form exceptions in this regard.
In these cases, Court of Justice found that restrictive effects on competition, inherent in the
pursuit of objectives in the general interest, were warranted for.229 Nevertheless, instead of
acknowledging the existence of a European rule of reason, legal academics have attributed the
outcome of these cases mainly to the regulatory ancillarity doctrine, which balances anticompetitive restraints that are ancillary to other rules not adopted for competition purposes.230
Another line of thought is that these decisions by the General Court are parallel to free
movement cases in which the Court weighted the impact of national rules limiting competition
against mandatory national public policy.231
Christopher Townley argues in his insightful 2009 contribution that a legal system in which
only an economic goal is represented hardly reflects the needs and wishes of society.232In the
current EU competition law system protecting efficiency of the market may conflict with the
protection of other, non-economic ideals. Instead of accepting this current economic focus
Townley promotes the vision where economic entities are, under EU competition law, invited to
promote various public policy objectives as principles of Union law. Okeoghene Odudu tempers
Townley’s high hopes on using competition law to ensure European citizens’ general well-being
and undertakings’ role as moral agents. In particular, Odudu stresses the European Union’s
limited competence as it is restricted from acting outside the limits member states have
conferred.233 In addition, he emphasises that competition law is about competition and hence
should not be used as a route to coerce virtues other than efficiency, which draws the debate
back to what competition law should aim to achieve. Ultimately, Odudu places the decision on
whether efficiency should be set aside to promote socio-political goals as a matter for the
legislature to solve.234
To conclude this section, the following (slightly facetious) paragraph by Alison Jones and
Brenda Sufrin underlines the complexity of non-economic goals in EU competition law:
‘The role of competition policy in advancing the Lisbon agenda shows how the argument goes
round in a (virtuous) circle: the application of competition law serves the ‘economic’ goal of
consumer welfare/efficiency and does not take account of ‘socio-political’ concerns; the goal of
consumer welfare/efficiency is to ensure that ‘citizens enjoy the benefits of a competitive,
dynamic economy’; and that economy will deliver to them ‘sustainable growth with more and
better jobs and greater social cohesion’ – surely a socio-political goal par excellence.’235
226 Craig & De Búrca 2008, p. 980.
227 Case C-309/99, Wouters v. Algemene Raad van de Nederlandse Orde van Advocaten [2002] ECR I-1577.
228 Case C-519/04P, Meca-Medina and Majcen v. Commission [2006] ECR I-6991.
229 In the Wouters case, the Court concluded that Article 101 TFEU was not infringed because the rules accepted by
the Netherlands Lawyers Bar were aimed ‘to ensure that the ultimate consumers of legal services and the sound
administration of justice are provided with the necessary guarantees in relation to integrity and experience’, para. 97.
In the Meca-Medina case the Court ruled that ‘to combat doping in order for competitive sport to be conducted fairly
and that it included the need to safeguard equal chances for athletes, athletes’ health, the integrity and objectivity of
competitive sport and ethical values in sport’, para. 43.
230 Whish & Bailey 2012, p. 136; Craig & De Búrca 2008, p. 980.
231 Craig & De Búrca 2008, p. 980.
232 See on this topic Townley 2009.
233 Odudu 2010, p. 608.
234 Ibid. For a US perspective on political goals see also Foer 2006, pp. 577-579.
235 Jones & Sufrin 2011, p. 54, referring to Kroes 2005.
36
4.7 C ONCLUSION
This chapter is written in light of the Court of Justice’s judgment in Continental Can, in which it
held that the competition rules must be read in the light of the broader goals of the European
Union. The three most prevalent goals that are at the basic of what EU competition law aims to
protect, are the ensuring of market integration, the maximising of consumer welfare and the
promotion of economic efficiency. Although this chapter provides evidence for the existence of
either of these objectives, it is important to realise that the Court of Justice remains ambiguous
as to whether any hierarchy exists.
The internal market objective promotes the eliminations of obstacles to trade. The result is
obvious: a levelling of the European playing field which confronts large domestic firms with an
increased competitive pressure and enables them to achieve economies of scale. The Coup de
Sarkozy, which resulted in the reallocation of the goal of competition to Protocol 27, is unlikely
to have major consequences for role of market integration in EU competition law as the current
regime still emphasises the indissoluble link between competition and the internal market and
stresses their two-way relationship. Moreover, the Court of Justice recently ruled that the
protection of competition laws, apart from the protection of the interests of competitors or of
consumers, also the structure of the market and, in so doing, competition as such.
In recent years the consumer welfare standard has become the central point of attention of
competition authorities worldwide. The aim to ensure consumers a fair share of the benefits of
competitive markets is rooted in a wide definition of welfare; a standard which includes also
social aspects of the market and, according to the Commission, aims to promote a good quality
of life. The consumer welfare is supported by the Commission’s general practice to protect all
users of products and services, only occasionally focussing on the economic benefits for final
consumers. The fact that this approach lacks solid basis in welfare economics (which prefers
‘total welfare’ as its yardstick) adds to the variations in NCAs competition enforcement. This
leads to the presumption that, apart from the political saleability of competition law to the
general public, the rationale behind the application of the consumer welfare standard is
ambiguous at best.
With regard to economic efficiency, many factors have contributed to its rise as goal for
competition law. Among others, in the early days of competition law enforcement at member
state level the effects-based approach seemed to ensure a consistent enforcement. Moreover, as
the efficient functioning of markets lies at the heart of the integration efforts the promotion of
economic efficiency does not seem to be at odds with the goal of market integration. Although
economic efficiency continues to play a key role in EU competition law and its enforcement, case
law has shown that today an efficiency-based approach does not necessarily amount to a
consistent practice. In addition to the widening context of EU competition law enforcement, it is
therefore safe to conclude that the consumer welfare standard bears relatively more weight
than an approach solely focussed on economic efficiency.
Lastly, interpretation of EU competition law is increasingly affected by non-economic goals
which, in turn, are under the influence of society’s institutional and political context. It appears
that competition law assessment today has the potential to be more holistic than it was ever
before. However, with a hierarchy of goals still missing it is up to the European or, with an eye
37
on the member states’ sovereignty, national legislative institutions to decide upon the coexistence of these goals alongside the traditional objectives of EU competition law.
38
V. THE
GOALS OF EU COMPETITION LAW
FROM A MORAL POINT OF VIEW
5.1 I NTRODUCTION
This research aims to explore the goals of competition against the backdrop of moral philosophy
theory. The three elements in this research on the left side of the equation i.e. the exploration of
different moral yardsticks in a marketplace environment (chapter 2), the relationship between
European law and moral values (chapter 3) and the identification of the goals of EU competition
law (chapter 4), are brought together in this chapter. In addition, a case by the recently
established Netherlands Authority for Consumers and Markets (‘ACM’) is used as a topical
example to make the answer to the research question more insightful.
5.2 T HE E NERGY A GREEMENT :
SUSTAINABILITY V . COMPETITION LAW
Chapter 3 shows us that the Court of Justice generally leaves it up to national governments to
decide on what they deem categorically right and wrong. That is, as long as any restrictions do
not constitute arbitrary discrimination or a disguised restriction on trade between member
states. However, more recent case law suggests that fundamental human rights and the
underlying moral values start to carry more weight in the Court’s assessment. Underlying line of
thought is that the European Union and its member states are required to respect fundamental
rights. Hence, the protection of those rights is a legitimate interest which, in principle, justifies a
restriction of the obligations imposed by EU law. When recognising the enshrinement in
European law and the legal obligation to meet a certain moral benchmark, one would expect
that the same holds true for EU competition law.
On 16 November 2012 the Netherlands Social and Economic Council (‘SER’) commenced a halfyear negotiation process with ‘dozens of scientists, business people, politicians and other Dutch
stakeholders’ to come to a widely accepted Energy Agreement for Sustainable Growth.236Purpose
of the agreement is to voice the general consensus on the indispensability of sustainable energy
supply, which is based on the awareness that
‘a long-term perspective means placing the common good far above the separate interests of
either individuals or organisations and that it also means a growth path defined by energy and
climate objectives as well as by feasible and necessary gains in competitiveness, employment,
and exports.237
On 6 September 2013 over 40 organisations signed the agreement. Also the Dutch government
was among the signatories, represented by the Minister of Economic Affairs Henk Kamp.238 One
of the points embedded in the agreement concerned the closing of five old 1980s coal power
236 See http://www.energieakkoordser.nl (NL) (accessed on 13 November 2013).
237http://www.ser.nl/~/media/files/internet/talen/engels/2013/energy-agreement-sustainable-growthsummary.ashx (ENG) (accessed on 13 November 2013).
238 See http://www.rijksoverheid.nl/nieuws/2013/09/06/energieakkoord-schonere-energie-meer-banen.html
(accessed on 13 November 2013). The ACM is a non-departmental public body, but legally still falls under the legal
personhood of the Secretary of Economic Affairs.
39
plants, which was made conditional upon the ACM’s approval. 20 days after the signing of the
agreement the ACM indicated that the agreement to close the polluting coal power plants
constituted a violation of the cartel prohibition as laid down in Article 6 Mw239 and Article 101
TFEU. First and foremost, the competition authority made clear that sustainability initiatives are
not to be treated differently than other agreements between undertakings, decisions by
associations of undertakings and concerted practices. When assessing the benefits of the
agreement, the ACM concluded that the environmental gains of the closure would not
counterbalance the competition concerns. More specifically, the ACM stated that it had not
chosen to apply a societal cost-benefits analysis but instead relied in its assessment on the
increase of costs for final consumers, among others caused by a 10% decrease of Dutch
electricity production.240 Moreover the ACM considered that while the emission of carbon
dioxide in the Netherlands would decrease, this effect would be neutralised because to the trade
in carbon credit (also called Cap and Trade). Therefore, according to the ACM, environmental
issues were not solved but simply transferred to another country.
This decision by the ACM comes just over a year after the ACM published a concept Position
Paper on Competition and Sustainability, in which the competition authority identifies that
sustainable production can enhance welfare.241 But also on a more fundamental level this case
raises multitudinous questions. The Minister of Economic Affairs called for the ACM to have
more regard to the substantial environmental impact if the coal power plants are to remain
open. In addition, the Minister announced talks with the Commission on this topic and intends
to come with new guidelines that would shift the focus from competition for competition’s sake
to sustainable welfare.242 Moreover, one might ask what the decision of the ACM should have
been if ultimately the consumer is willing to pay more for green sustainable produced energy.243
Would competition law shift focus to enhance the broad definition of welfare or would
competition law stick to its narrower paradigm?
Regardless of the final outcome, this case is a prime example of the dynamic and complex
societal environment today’s competition law has to cope with. With this illustrative case in
mind, the next section provides an answer to the research question on the moral basis of the
goals of EU competition law.
5.3 M ARKET
INTEGRATION AN D MORALIT Y
The integration of European national markets eliminates barriers to trade and thereby enables
undertakings to compete on the merits with their European counterparts. The original
underlying moral foundation of market integration, i.e. the prevention of war by encouraging
economic cooperation, has been dignified with the Nobel Peace Prize. Market integration
remains important in EU competition law: the Court of Justice is assiduous in protecting the
structure of the market and, in so doing, competition as such. What is left of market integration
239 Dutch Competition Act; ‘Mededingingswet’.
240https://www.acm.nl/nl/publicaties/publicatie/12032/Afspraak-sluiting-kolencentrales-is-nadelig-voorconsument/ (accessed on 13 November 2013).
241https://www.acm.nl/nl/publicaties/publicatie/11634/Consultatie-ACM-position-paper-Mededinging-enDuurzaamheid/ (NL), p. 12 (accessed on 13 November 2013).
242 See among others http://www.energieactueel.nl/wp-content/uploads/kranten/Energie-Actueel-Jaargang-16Editie-8.pdf (accessed on 13 November 2013).
243 See Tieben 2013.
40
from a moral perspective, however, particularly shows in case law in which member states’
moral values clash with European-wide fundamental notions such as the freedom to provide
goods and services. The morality with regard to competition law is only found when a
consequential yardstick of morality is used combined with a narrow definition of welfare
(‘competition brings welfare which is good’).244
The specific, case-oriented application of moral issues in fundamental freedoms-cases makes it
difficult to put the finger on the role of morality in a non-specific context. Generally the decision
on what constitutes a morally blocked exchange is for the member state to take, but only as long
as this does not constitute a discriminatory or arbitrary restriction of a European fundamental
freedom. But also this balancing act (i.e. market integration versus the protection of human and
moral values) has in more recent case law approximated the point where the Court determines
the limits of the markets. The outcome of the Omega case could have been different if Germany
had not constitutionally protected human dignity and national undertakings were able to legally
offer similar services. Nevertheless, against the backdrop of the Union’s accession to the
European Convention of Human Rights, the Courts lucid protection of fundamental human
values purports a clear message.
5.4 C ONSUMER
WELFARE AND MORALITY
The enforcement of EU competition law today is adamant on consumers attaining a fair share of
the benefits of competitive markets. The moral foundations of this objective can be traced back
to both categorical and a consequential moral reasoning.
If a consequential yardstick is used, morality is located in the achievement of a conception of
welfare. This notion is commonly defined as the maximisation of consumer surplus which, in
turn, can be defined as the monetary gain when consumers can purchase a product or service
for less than the highest monetary price they were willing to pay. However, this conception of
welfare is (no longer) omnipotent. The standard is slowly but surely evolving into a wider
definition of welfare; a standard which includes all inherent aspects of the market such as
health, safety and sometimes even culture and environmental protection. With the inclusion of
these social aspects the welfare standard – in the words of the Commission – aims to promote a
good quality of life. In that scenario the benchmark of fulfilling the consequential moral
standard would be raised accordingly. In practice, however, the enforceability of this standard is
prone to inconsistent application caused by the absence of a basis in firmly-established welfare
economics. As was shown in the Energy Agreement example above, it remains to be seen
whether the NCAs (and the Commission for that matter) dare to unilaterally widen the
definition of welfare or whether momentarily the ball is in the legislature’s court.
A categorical moral basis of the consumer welfare standard can be found in the conviction that
market failures have to be corrected in order to assist the weaker party (i.e. the consumer) in
their transactions. This focus on protecting this weaker party also comes to the fore in multiple
aforementioned Commission statements and case law which emphasise that competition law is
not designed to protect the position of competitors. The ‘consumer’, however, does not only
244
See below in section 5.4.
41
comprise end-users but instead encompasses all users of the products including wholesalers,
retailers and final consumers. Although the interests of corporate intermediate buyers can differ
from – or even conflict with – natural persons who do not act for professional purposes, the
Commission and NCAs national competition authorities argue that competitive harm anywhere
in the user chain ultimately results in harm to the end-user. Therefore, not differentiating
between the interests of intermediate buyers and final consumers not necessarily weakens the
moral foundation of protecting the weaker party.
5.5 E CONOMIC
EFFICIENCY A ND MORALITY
For many libertarian economists the obvious consequential morality of EU competition law lies
in market efficiency reaching the optimal point. Neo-liberal thought advocates that as long as
the free market contributes to allocative and productive efficiency maximisation, utility is
maximised which, in turn, increases the social welfare of society. All that counts is the
attainment of efficiency, and hence failure, losses, benefits and success are all defined in a
utilitarian manner. However, reliance on this standard is morally sound only if the
consequential principle of utility is the proper standard in this respect. With regard to human
and social rights of individuals, rooted in western democracies’ constitutions, certain actions are
classified as categorically wrong. Therefore, while efficient mobility of goods and services
allows wealth maximisation, it does not qualify as a means to attribute any moral value to the
transaction. Categorically speaking, the quest for economic efficiency is a goal rid of all moral
value.
Although the consequential economic efficiency-approach favoured in welfare economics might
be incomplete and flawed it appears that this system has not yet met an all-round successor. In
the meantime, the democratically-elected representation in western makes it likely that politics
will not attribute too much weight to economic efficiency to the detriment of social and moral
values. From a pragmatic point of view, the question therefore remains whether categorical
moral market behaviour is competitive and desirable enough to heavily impact and help evolve
markets in the long term.
42
VI. CONCLUSION
6.1 T HE
RESEARCH QUESTION
This research aims to answer the question to what extent the goals of today’s EU competition
law are based on moral foundations.
6.2 T HE
MARKETPLACE IN RE LATION TO MORALITY
Recent empirical studies seem to suggest the decay of moral values when these are exposed to
marketplace interaction. However, academic debate commonly emphasises the ambiguity and
uncertainty inherent in moral values. Whether moral values are actually eroded or undermined
depends on the moral yardstick. Therefore, this research first addressed how to determine the
morality of an act or omission. The trolley car paradox shows how seemingly similar situations
can carry different moral qualifications. It showed that locating morality in the consequences of
an act (consequential moral reasoning) can conflict with morality derived from the action itself
regardless of the consequences (categorical moral reasoning). Consequential moral reasoning is
associated with utilitarianism and in a marketplace environment addresses the maximisation
utility and thereby the greatest good for the greatest number. Reliance on this standard can,
however, conflict with categorical normative values embedded in societies worldwide, such as
the prohibition to trade in human organs or the importance of protecting the environment.
These moral standards are used to evaluate the moral foundations of the goals of EU
competition law.
6.3 E UROPEAN
LAW AND MORA LIT Y
The relationship between law and morality is a complex one. In order for laws to be socially
acceptable legislators – and to some extent also law enforcers – are bound to provide some
moral justification for the laws’ existence. With an eye on the complexities brought about by
conflicting moral rationales, it seems overly ambitious to expect from judges that they explicitly
rely on and apply these moral standards, especially when this application is to the detriment of
the law as it stands. In a European context, over half a century ago the moral rationale behind
keeping the peace proved to be a good starting point in ensuring the Union’s success. With the
expansion of its geographical scope and increased competences of the European Union comes
the responsibility to design morally acceptable legislation and to render morally just decisions.
With regard to the latter, since several decades morality has taken its place in case law by the
Court of Justice. Nevertheless, its decisions are limited to separate instances in which domestic
moral values clash with European-wide economic notions such as the freedom to provide goods
and services. This specific, case-oriented application of moral issues makes it difficult to put the
finger on the role of morality in a case transcending context. Nevertheless, with the accession of
the European Union to the European Convention of Human Rights under the Treaty of Lisbon
and with regard to recent case law, the Court of Justice is more likely to face and rule on moral
dilemmas than it has ever been.
43
6.4 T HE
GOALS OF
EU
COMPETITION LAW
The three most prevalent goals that are at the basis of what EU competition law aims to protect
are the ensuring of market integration, the maximising of consumer welfare and the promotion
of economic efficiency. Already in the 1950s the European internal market objective promoted
the eliminations of obstacles to trade, which has substantially widened and levelled the
European playing field. As a result, large domestic firms were confronted with an increase of
competitive pressure and were enabled to achieve economies of scale. The current legal regime
continues to emphasise the indissoluble link between the protection of competition as such and
the internal market ideal and stresses their two-way relationship. In recent years, however, the
consumer welfare standard has become the central point of attention of competition authorities
worldwide. Consumers should attain a fair share of the benefits of competitive markets, which is
rooted in a wide definition of welfare. While it is impossible to separate the goal of economic
efficiency from the goals of market integration and the enhancement of consumer welfare, the
demise of the economic efficiency approach is apparent. In addition, case law has shown that
today an efficiency-based approach does not necessarily amount to a consistent practice.
Despite the good intentions of the Commission and NCAs regarding the involvement of noneconomic considerations in EU competition law, these are still required to fit within the current
competition law regime and rarely allow for an exception to the competition law regime.
Nevertheless, it appears that competition law assessment today has the potential to be more
holistic than it was ever before.
6.5 M ORALITY
AND THE GOALS OF
EU
COMPETITION LAW
Finally, the moral yardsticks were applied to the goals of EU competition law. With regard to
market integration, the original underlying moral foundation, i.e. the prevention of war by
encouraging economic cooperation hardly plays a role in competition enforcement today.
Instead, in a case by case analysis the realisation of this internal market is weighed against
potential conflict with member states’ moral values. This tells us little of the moral foundations
of market integration, and any legal opinion on member states’ moral values falls outside the
scope of EU competition law. Therefore, the current moral foundation underlying the goal of
market integration can no longer be found when categorical moral reasoning is chosen as
yardstick. Instead, from a consequentialist point of view the achievement of competition for
competition’s sake could morally justify the protection of the internal market in competition
law.
The moral foundations of the goal of consumer welfare can be traced back to both categorical
and a consequential moral reasoning. When viewed from a consequential angle, morality is
located in the achievement of a wide conception of welfare which aims to ensure a good quality
of life. In that scenario the benchmark of fulfilling the consequential moral standard would be
raised accordingly. However, it remains to be seen whether competition authorities dare to
unilaterally widen the definition of welfare or whether momentarily the ball is in the
legislature’s court. A categorical moral basis of the consumer welfare standard can be found in
the conviction that market failures have to be corrected in order to assist the weaker party (i.e.
the consumer) in their transactions. In addition, one could argue that the protection of certain
values, such as social security and the prevention of environmental damage, are proof of a
categorical line of reasoning warranting consumer welfare standard. It remains to be seen
44
whether politicians and competition authorities agree on the existence of such values and
whether these can actually be applied within the sphere of protecting consumer welfare in a
market environment.
For many libertarian economists the obvious consequential morality of EU competition law lies
in market efficiency reaching an optimal point. Societal welfare is made dependent on the
attainment of this efficiency, and hence failure, losses, benefits and success are all defined in a
consequential manner. Reliance on this standard is morally sound only if the consequential
principle of utility is the proper standard in this respect. With regard to human and social rights
of individuals, rooted in western democracies’ constitutions, certain actions are classified as
categorically wrong. Therefore, while efficient mobility of goods and services allows wealth
maximisation, this does not qualify as a means to attribute any moral value to the transaction.
Categorically speaking, the quest for economic efficiency is a goal rid of all moral value.
45
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