Comments On Prof. Giorgio Monti's EC Competition Law - Colin Halard

Colin Halard - August 4, 2014
By Colin HALARD
1

1. EC Competition Law,
2
by Professor Giorgio Monti, from the European University Institute, is a relatively short
(567 pages) but highly valuable book on European antitrust law. Although the publisher affirms that this
book is mostly targeted at law students, I guess that the author also had a more ambitious aim, namely to
check the consistency of fundamental principles of competition law. As such, the book seems to be more
widely addressed to the whole antitrust community.

2. To be sure, examining the consistency of antitrust principles is by no means a new enterprise. Many books
deal with this topic. But I do think that Prof. Montis is one of the sharpest I have had the opportunity to
read. Indeed, whilst most books identify as their core task the ascertainment of antitrust goals (which is
indeed a controversial and crucial issue), EC Competition Law digs more deeply into the antitrust
foundations, and puts under scrutiny the meaning of the most basic notions of competition law.

3. On the downside, I find that this book is better at bringing to light inconsistencies than at fixing them. In
other words, if its pars destruens is very solid, its pars construens (so far as it exists) is, at least in my eyes, far
less convincing. Prof. Monti himself does not seem always persuaded by the alternatives he suggests
adopting. But is it possible, in this field of law, to devise an ironclad pars construens? The weaknesses I
discern in this book seem to be imputable to the whole antitrust enterprise.

4. The following comments are not intended to be a complete review of EC Competition Law. They focus on
some important issues and do not deal with uncontroversial points of law or economics. Likewise, I have
mainly discussed the things I was uneasy with, and so I have not often stopped to highlight the niceties of
the book. However, I would like to stress that my overall appreciation is very positive. This book is
engaging and it was very instructive for me to read it.

5. My comments are divided into four parts, the first three being devoted to Prof. Montis appreciation of
the meaning of three concepts of antitrust law: competition (1.), market power (2.), and barriers to entry
(3.). In the final part (4.), I have put together several less important points I wanted to discuss.

6. A last word of warning before proceeding: as the introduction has probably made it clear, my comments,
particularly in the first three parts, bring up definition issues. As such, they could be criticized for being
excessively academic in the pejorative meaning of the term. Yet, I believe it would be inappropriate to
dismiss them for this reason. As Hayek wrote in a similar connection, from time to time it is probably necessary
to detach ones self from the technicalities of the argument and to ask quite navely what it is all about.
3

1
For questions or comments, I can be contacted at col.halard[at]gmail.com.
2
Giorgio MONTI, EC Competition Law, Law in Context Series, Cambridge University Press, 2007 (hereinafter, EC Competition
Law).
3
Friedrich HAYEK, Individualism and Economic Order, The University of Chicago Press, 1980, p. 56.
Comments on Prof. Giorgio Montis EC Competition Law


2

1. The Notion of Competition
7. The author distinguishes three possible conceptions of competition: competition as rivalry (1.1.), as
economic efficiency (1.2.), and as economic freedom (1.3.). Additionally, other values are sometimes used
as guiding principles (1.4.).
1.1. Competition as Rivalry
8. Professor Monti holds that the understanding of competition as being the rivalry between economic
actors is based on the natural meaning of the word.
4
To illustrate this conception, he quotes Professor
Whish, according to whom [c]ompetition means a struggle or contention for superiority, and in the commercial world
this means a striving for the custom and business of people in the market place.
5

9. Professor Monti believes that this conception, which analyses competition as a means through which a
number of socially desirable ends e.g. economic efficiency, economic freedom or consumer welfare are pursued, is
helpful.
6
Nevertheless, he criticizes it on three grounds.

10. Firstly, he thinks it is more appropriate to look directly if the desired end is attained, because it provides a
more precise method to determine whether there is a market failure.
7
Secondly, he maintains that firms invent new
ways of competing every day, and it would be wrong to presume that we can identify ideal states of rivalry in the market.
8

Thirdly, he considers that rivalry as the benchmark of competition is incomplete, because competition law does not
prevent some forms of cooperation among firms (e.g. mergers).
9

11. I believe the second objection to be extremely persuasive. Competition is an evasive and constantly
changing phenomenon that bureaucrats could hardly presume to have identified once and for all. To
punish firms because they have recourse to methods different from those governing normal competition
10
is absurd,
since it precludes innovation.

12. Regarding the first reason, I do not think it is more precise to look directly if the desired end is achieved.
Indeed, as Prof. Monti makes it clear elsewhere,
11
to measure the final effects is seldom practicable, so it is
necessary instead to use a proxy or an abridged standard; why would rivalry not be this standard?

13. I consider the third reasonthe incompleteness of rivalry as a benchmarkto be both a very good
argument and an understatement. Indeed, rivalry cannot be the key element, because to strike down
every restriction of rivalry would be a disastrous economic policy. In this connection, I find it worth
quoting at some length the late Robert Bork:

Our society is founded upon the elimination of rivalry, since that is necessary to every integration or coordination of
productive economic efforts and to the specialization of effort. No firm, no partnership, no corporation, no economic
unit containing more than a single person could exist without the elimination of some kinds or rivalry between
persons. Taken seriously, Justice Clarks policy would be what Justice Holmes believed to be the policy of Justice
Harlan in Northern Securities, a prescription for the complete atomization of society. That policy is unthinkable, of
course, since it would call not only for general abject poverty but for the death by starvation of millions of people. We
may assume the antitrust laws were not designed to place the United States in worse economic condition than

4
EC Competition Law, p. 22.
5
Id., p. 22.
6
Id., p. 22.
7
Id., p. 22.
8
Id., p. 22.
9
Id., p. 22.
10
Court of Justice, 27 March 2012, case C-209/10, Post Danmark, para. 24. Paradoxically, two paragraphs above, the Court
referred to innovation as a benefit from competition.
11

3

Bangladesh. So long, therefore, as we continue to speak of antitrusts mission as the preservation of competition, we
must be on guard against the easy and analytically disastrous identification of competition with rivalry.
12

14. Rivalry, the right to challenge existing operators, is an essential component of a market economy, but it
must remain a freedom, and not be a duty. Indeed, cooperation is as important as rivalry, and, at least in a
free economy, it is up to the firms, and not to some central planners, to choose the desired balance
between these two opposite ways to further ones goals.
1.2. Competition as Efficiency
Professor Montis criticism (1.2.1.), though mostly valuable, must be commented (1.2.2.) and
supplemented (1.2.3.). The claim that interpreting competition as efficiency could lead to totalitarianism
deserves a specific section (1.2.4). As a provisional conclusion, I report Judge Posners opinion about the
philosophical foundations of the efficiency scheme (1.2.5.).
1.2.1. Prof. Montis Criticism
15. The second possible conception of competition deals with the effects of the behaviour of firms on economic
welfare.
13
More precisely, a market is said to be competitive if the firms set the price of their products at their
marginal cost, i.e., at the additional cost required to make one more product.

16. According to Prof. Monti, this neoclassical conception is preferable for two reasons: first, it provides a realistic
benchmark by which to measure the presence of competition; second, it is more precise, because there can be rivalry but no
competition.
14

17. However, the author thinks that this conception is not compatible with the structure of article 81 (now
article 101) of the Treaty
15
.

18. Indeed, he holds that, if an anticompetitive practice is defined as an agreement which reduces efficiency,
then Article 81(3) is redundant either an agreement restricts economic welfare, or it improves it, or has no effect on it.
The neoclassical economist only needs paragraphs (1) and (2) for the application of competition law according to the standards
of economic welfare.
16

1.2.2. Comments on Prof. Montis Criticism
19. I share Prof. Montis conclusion, but I am not sure I totally accept his main argument.

20. I admit that paragraph (3) would be redundant if competition were bluntly defined as a state of economic
efficiency. If a practice is held to be anticompetitive under paragraph (1) because it reduces economic
efficiency as a whole, it cannot be considered as promoting efficiency under paragraph (3) (and vice versa).

21. But, within the neoclassical framework, it would also be possible to define competition, more narrowly, as
allocative efficiency, and to dedicate paragraph (3) to the integration of productive and dynamic efficiencies.
17

12
Robert BORK, The Antitrust Paradox A Policy at War with Itself, The Free Press, 1993, p. 58.
13
14
Id., p. 22.
15
For the record, paragraph (1) prohibits anticompetitive agreements, paragraph (2) provides that the prohibited agreements
shall be void, and paragraph (3) sets up an exemption mechanism for the agreements which contribute to promoting economic
progress (or efficiency).
16
Id., p. 26. Moreover, Prof. Monti considers that the other conditions set up by paragraph (3) are hardly compatible with the
neoclassical definition.
17
Prof. Monti defines each kind of efficiency as follows: Allocative efficiency: existing goods and services are allocated to those who value
them most, in terms of their willingness to pay []. Productive efficiency: this concept focuses on a particular firm or industry and considers whether
a firm organises its resources in such a way that it exploits all economies of scale, exploits existing technology effectively, and cuts all superfluous costs,
so that production is at minimum cost. Dynamic efficiency: this is a measure of whether firms have the ability and the incentives to increase
productivity and innovate, developing new products or reducing production costs which can yield greater benefits to consumers. (EC Competition
Law, p. 45.)

4

This scheme would be compatible with the structure of article 81, because a practice contrary to paragraph
(1) could be exempted under paragraph (3). The latter would not be redundant.
18

22. For instance, a behavior which restricts competition (and so infringes paragraph (1)) by harming allocative
efficiency can nevertheless produce a gain in productive and dynamic efficiencies big enough to make
possible an economic progress and qualify for an exemption.
19

1.2.3. Other Criticisms
23. Yet, for the reasons which follow (which are based more on economic than on legal considerations), I still
agree that the neoclassical conception is inadequate.

24. First, consumers surplus (as opposed to consumers surplus the place of the s makes the difference),
which is at the basis of the neoclassical conception, is a meaningless concept.

25. Indeed, value (or utility) is a subjective entity which cannot be added, subtracted, compared, or contrasted.
20

Because value is an ordinal and not a cardinal entity (there are no utils or any other unit of
measurement), interpersonal aggregations of value are impossible.

26. Most economists agree with this statement,
21
but think it is still possible to have a proxy of aggregate
utility. Now, to aggregate value is a matter of conceptual, and not practical, impossibility. Consequently, to
obtain a proxy thereof is impossible as well (as impossible as to devise a proxy for squaring the circle).
It is what logicians call a category mistake.
22

27. As Gary Lawson puts it, in a slightly different connection, it is physically possible to add up the dollar amount of
every recorded monetary transaction in an economy, but it is not at all obvious what is thereby measured.
23
More exactly,

18
Actually, Prof. Monti does discuss this hypothesis immediately after, when dealing with another side of the issue, namely the
contradiction between the neoclassical approach and the specific requirement that consumers benefit from a fair share of the
profit (condition 3). He writes Second, the requirement that consumers must gain sits oddly with neoclassical thought: if an agreement
improves productive efficiency (by reducing production costs, for example) but has a modest adverse impact on allocative efficiency (e.g. a slight price
rise) then economic welfare (measured with the KaldorHicks standard) is increased [] (see p. 26).
19
Admittedly, some authors of the neoclassical (and even Chicagoan) school seem to have adopted the approach that Professor
Monti is discussing, and not the one that I am mentioning. For instance, Prof. Monti quotes Robert Bork saying that
Competition, for the purposes of antitrust analysis, must be understood as a term of art signifying any state of affairs in which consumer welfare
cannot be increased by judicial decree (p. 55). Similarly, the author gives a quote by Richard Posner stating that competition is a
state of affairs in which consumer interests are well served rather than as a process of rivalry (Id..). In both cases, competition is clearly
taken as a whole and understood as the sum of allocative, productive, and dynamic efficiencies. However, as Prof. Monti aptly
notes in another place of his book (EC Competition Law, p. 22), the same Judge Posner (also) uses a means/ends analysis (in
Antitrust Law, pp. 28-29). Indeed, Richard Posner writes, on the pages referred to by Prof. Monti, since, in an economic analysis,
we value competition because it promotes efficiencythat is, as a means rather than as an endit would seem that whenever monopoly would
increase efficiency it should be tolerated, indeed encouraged. On this view of antitrust, competition is viewed as a state in which consumer interests are
well served rather than as a process of rivalry that is diminished by the elimination of even a tiny rival. Well, Posners two sentences
contradict each other. Surely competition cannot be at once a means serving an end and the end itself. Yet, Posner does write
that competition is both a state in which consumer interests are well served and a means promot[ing] efficiency. The only way to
reestablish the logic is to consider that Judge Posner employs the term competition in two different senses. In the first
sentence, he thinks of competition as allocative efficiency. In the second sentence (which was absent from the first edition of
the book), he refers to competition as the sum of allocative, productive, and dynamic efficiencies. Now, if one employs the
first conception of competition,competition as allocative efficiencyarticle 81(3) is not redundant.
20
Gary LAWSON, Efficiency and Individualism, Duke Law Journal, Vol. 42, n. 1, Oct., 1992, p. 62.
21
See, for instance, Hal R. VARIAN, Intermediate Microeconomics, W. W. Norton & Company, 2010, chap. 4, pp. 54-55. See also,
Richard POSNER, The Economics of Justice, Harvard University Press, 1983, p. 79 (The 'interpersonal comparison of utilities' is anathema to
the modern economist, and rightly so, because there is no metric for making such a comparison).
22
See Gary LAWSON, Efficiency and Individualism, aforementioned (it is not false or unknowable to say that A's utility is greater than,
less than, or equal to B's utility; rather, it is a category mistake: the application of a predicate to a subject in a manner that is meaningless or
absurd. This view maintains that talking about inter-personal comparisons of utility simply does not make sense, just as it does not make sense to
talk about a happy rock or a greenish shade of cold. Thus, it is not a question of waiting for someone to invent the right tools and units of
measurement and comparison; but rather, the measuring and comparing enterprise is ill-conceived from the outset, p. 63; most of the efforts of law
and economics scholars to devise a useful conception of "economic efficiency" are attempts to accommodate or circumvent, rather than deny, the
subjectivity of economic value, p. 70).
23
Gary LAWSON, Efficiency and Individualism, p. 81.

5

it is obvious that what is measured has nothing to do with value but is rather function of the total
quantity of money in the economy.

28. Besides, and more practically, even if it were possible to measure efficiency by aggregating consumers
surplus, it would not be a workable benchmark. Indeed, calculating consumers surplus requires data that
competition agencies cannot obtain.

29. Moreover, in the reality, every firm has some control over its prices and so could be called a monopolist
and prosecuted accordingly. Surely such an all-embracing definition would be absurd.

30. In addition, most enterprises could not survive if they were forced to practice competitive prices,
because they could not recover their fixed costs. That is problematic enough, if neoclassical efficiency is
to be the norm guiding the enforcement of competition law.

31. Another objection pertains to the fact that a normative system which aims at forcibly allocating goods
to the acquirer whose willingness-to-pay is the greater (as neoclassical antitrust does) is necessarily self-
contradictory as soon as it is used to justify violations of property rights. Indeed, the willingness-to-pay
of each consumer varies according to his ability-to-pay, and the latter in turn hinges on the amount of
money on which the consumer has property rights. Antitrust results in violating the values it rests on.
24

1.2.4. Efficiency and Totalitarianism
32. A further critique is hinted at by Professor Monti, who writes that ordoliberals, i.e. the advocates of
economic freedom, would prefer a state of inefficiency coupled with freedom to a totalitarian, but efficient, state of
affairs
25
; by contrast, it is implied that neoclassical economists would not. In the same vein, he declares
that, taken to its extreme, the Kaldor-Hicks criterion, which is at the basis of the neoclassical reasoning,
means that if slavery is a more efficient way of producing goods, employment contracts should be abandoned.
26

33. Such a comment could be discarded as a mere Godwin point. However, it appears to correctly draw the
implications of the neoclassical creed. Indeed, some neoclassical economists do not hesitate to confirm
this analysis. As a notable example, Richard Posner, who is usually viewed as the leading proponent of the
efficiency conceptionor, as he calls it, the wealth maximization principlewrote, about his own theory
(it would be valueless if it was about someone elses), that

like utilitarianism, which it closely resembles, or nationalism, or Social Darwinism, or racialism, or organic theories
of the state, it treats people as if they were the cells of a single organism; the welfare of the cell is important only
insofar as it promotes the welfare of the organism. Wealth maximization implies that if the prosperity of the society
can be promoted by enslaving its least productive citizens, the sacrifice of their freedom is worthwhile.
27

34. Although he adds that this implication is contrary to the unshakable moral intuitions of Americans, and as I stressed in
the last chapter, conformity to intuition is the ultimate test of a moral (indeed of any) theory,
28
he does not try to claim
that, after further inquiry, the wealth maximization principle may be reinterpreted and made compatible

24
The argument laid down here is very close to the one advanced by several law philosophers during the 1980s. See, for
instance, Ronald DWORKIN, Is wealth a value?, The Journal of Legal Studies, 1980, pp. 207-210, or Anthony KRONMAN,
Wealth Maximization as a Normative Principle, The Journal of Legal Studies, 1980. The only difference is that these
authors focus on the fact the wealth maximization principle is circular because it requires that rights were previously
distributed. Here, I highlight that this principle is self-contradictory, for it relies on property rights, and yet aims at challenging
them. Richard Posner, a leading proponent of the wealth maximization principle, tried to answer these criticisms in The
Economics of Justice, aforementioned, pp. 108-115.
25
26
Id., p.24.
27
Richard POSNER, The Problems of Jurisprudence, Harvard University Press, 1990, p. 376-377 (Quoted by Gary Lawson in the
aforementioned paper).
28
Id.

6

with commonly received moral values. Instead, he appeals to another principle of justiceintuition.
Should I discuss the latter as a fourth conception of competition?
1.2.5. The Philosophical Foundations of the Efficiency Conception
35. More generally, I think it useful to mention that Judge Posner seems to have given up any pretense to
build the efficiency conception on solid philosophical foundations. Indeed, he made it clear that,

It may be impossible to lay solid philosophical foundations under wealth maximization, just as it may be impossible
to say solid philosophical foundations under the natural sciences, but this would be a poor reason for abandoning
wealth maximization, just as the existence of intractable problems in the philosophy of science would be a poor
reason for abandoning science. We have reason to believe that markets work [] and it would be a mistake to
allow philosophy to deflect us from the implications, just as it would be a mistake to allow philosophy to alter our
views of infanticide.
29

36. Likewise, he declared that

I do not want to stake my all on a defense of the Kaldor-Hicks concept of efficiency. For me the ultimate test of cost-
benefit analysis employing that concept is a pragmatic one: whether its use improves the performance of government
in any sense of improvement that the observer thinks appropriate. [i]n my view the ultimate criterion should be
pragmatic; we should not worry whether cost-benefit analysis is well grounded in any theory of value. We should ask
how well it serves whatever goals we have. So if we are particularly interested in the welfare of minority groups, we
should ask whether cost-benefit analysis serves or disserves their interests [].
30

37. I doubt whether many people would dare to endorse Judge Posners indifference regarding the
philosophical foundations of efficiency or his proposal to rely on intuition to correct the possible mischiefs
of an organic theory of the state which could otherwise justify slavery.
1.3. Competition as Economic Freedom
38. Prof. Montis presentation of the conception of competition as economic freedom (1.3.1.) has deep
implications which have to be commented (1.3.2.).
1.3.1. Prof. Montis Presentation
39. What about the last meaning, the economic freedom conception? Prof. Monti writes that

In this view, a restriction of competition is a restraint between the parties to the agreement, and it is irrelevant
whether the market is competitive, or whether the agreements beneficial effects outweigh the harmful ones; such
economic costbenefit analysis is reserved for Article 81(3).
31

40. Thus, a contractual restraint of a firms freedom of action constitutes a restriction of competition.

41. Economic freedom has a second dimension. Following this conception, not being able to enter into a
contractual tie or to find a suitable contractual partner can also be analyzed as a restriction of competition.
Indeed, Prof. Monti reports that:

[T]he Commission has gone further, considering also the restriction of the economic freedom of other market
participants. Here the Commission is concerned about the risk that other market participants might be foreclosed
from a market [].
32

29
Id., p. 384 (quoted by David CAMPBELL in Welfare Economics for Capitalists: The Economic Consequences of Judge
Posner, Cardozo Law Review, p. 2234).
30
Richard POSNER, CostBenefit Analysis: Definition, Justification, and Comment on Conference Papers, The Journal of
Legal Studies, 2000, pp. 1155-1156 (quoted by Martin FRONEK in Contra Law and Economics, Ludwig von Mises Institute,
Mises Daily, 17
th
October 2009).
31

7

42. Now, according to Prof. Monti, the economic freedom conception comes a little closer to explaining Article
81
33
and sheds some light on the significance of Article 81(3).
34
He claims that:

Article 81(3) is also incompatible with the economic freedom model, but for different reasons than under a
neoclassical light: if an agreement has an undesirable effect on economic freedom under Article 81(1), no exemption
should be granted, as economic freedom is the sine qua non of competition policy. The exemption provision in Article
81(3) is a way of reconciling an ordoliberal conception of competition with other values.
35

1.3.2. Comments on Prof. Montis Presentation
43. Whilst there is no imperious textual reason why this paradigm would not fit with article 81 framework
(except, maybe, the requirement of non-elimination of competition), this conception is still seriously
flawed.

(i) Is there any Difference Between Rivalry and Economic Freedom?

44. Earlier, Professor Monti has declared it possible to distinguish three possible conceptions of competition,
36
namely
rivalry, efficiency, and economic freedom. Furthermore, he has held that the efficiency approach is
preferable to the rivalry one, and it is likely that he considers the economic freedom paradigm to be even
better. It implies that rivalry and economic freedom are different concepts.

45. Yet, I struggle to see what the difference might be. At best, rivalry can be defined as economic
freedom considered from the utilitarian standpoint (that is, from the point of view of its effects on
consumer welfare).

46. Actually, in a further chapter, Professor Monti seems inclined to merge these two concepts. Indeed, he
writes the Commission considers that, in the long term, rivalry (and thereby economic freedom) yields greater economic
benefits than efficiencies generated by the elimination of rivalry.
37

47. Generally speaking, under both conceptions, all contractual restraints, i.e., all contracts, are void and
punishable by fines. So Borks criticisms directed against rivalry also hold here. Like the rivalry
conception, the economic freedom criterion appears to be immoderately wide, indeed all-embracing.

(ii) Implications of the Economic Freedom Approach

48. The consequences of this theory must be fully understood. I am afraid Prof. Monti understates them
when he writes that The result of the Commissions interpretation of Article 81(1) using the economic freedom approach
meant that several commercial contracts were potentially void unless exempted by the Commission
38

49. Actually, the economic freedom approach hangs a Damocles sword above every contract, and not just
above several. The requirement that the harm be significant is a weak bulwark. Moreover, as Bork
wrote in a similar context, That the principle has not been taken to [its] logical conclusion does not make it
intellectually more respectable, nor has it prevented the principle from wreaking havoc where it is applied.
39

32
Id., p. 28.
33
Id., p. 26.
34
Id., p. 28.
35
Id., p. 28.
36
Id., p. 22.
37
EC Competition Law, p. 50. Similarly, Prof. Monti writes The value of economic freedom is not altogether eclipsed. Under Article 81(3) the
agreement will not be tolerated if it eliminates competition, even if there are efficiency gains: Ultimately the protection of rivalry and the competitive
process is given priority over potentially pro-competitive efficiency gains which could result from restrictive agreements. (id.).
38
Id., p. 29.
39
Robert BORK, The Antitrust Paradox, aforementioned, p. 165.

8

50. Thus Prof. Monti is indirectly led to admit, some lines further, that with such an interpretation of article
81(1), every contract could in effect be struck down. Indeed, he maintains, about section 1 of the Sherman
Act (the American rough equivalent of Article 81), that

Read literally it suggests that every contract is prohibited, because every contract restrains trade in some way (if I
promise to sell you my apple, I cannot then sell it to someone else, so trade is restricted for that good once the contract
is made). The adoption of the rule of reason was necessary to create a mechanism to differentiate between desirable
and undesirable agreements a literal construction of the statute would lead to absurd results.
40

51. Nevertheless, he concludes that the same legal method [i.e., the rule of reason] is unnecessary in the EC, because
Article 81(3) provides the functional equivalent of the rule of reason.
41
From there we can say that, taken alone,
article 81(1) would lead to absurd results.

(iii) Does Economic Freedom Have Anything to Do with Freedom?

52. What is really economic freedom? In what way is it connected with the classical concept of freedom?
The adjunction of the epithet economic to the noun freedom seems to indicate that economic
freedom is in some way different from, and in some way similar to, the classical meaning of freedom.

53. Yet the latter, when applied to the economic field, consists in the right to use ones property (including the
product of ones labor) as one desires, for instance by concluding contracts (or by refusing to do so),
provided neither the bodily integrity nor the properties of anyone else are injured.
42

54. To the contrary, as stated above, the economic freedom is restricted as soon as a contractual tie is
formed (a restriction of competition is a restraint between the parties to the agreement
43
) or when someone does not
manage to enter into such a tie with a suitable partner (i.e., when a firm is foreclosed from a market).
44

55. So, the economic and classical conceptions of freedom offer not only different, but even perfectly
opposite, understandings of what freedom is. To speak of economic freedom is an Orwellian reversal
of the natural meaning of words (War is peace, freedom is slavery, ignorance is strength, etc.).
45

56. One serious difficulty, even from a purely logical point of view, is that anyones freedom must stop where
the freedom of someone else begins. Thus, if ones gives some economic freedom to A, one must
reduce Bs. To be sure, it is the same with classical freedom. To grant some classical freedom to A
requires to limit Bs.

57. But there is an important difference. Within the classical freedom paradigm, the boundaries of anyones
freedom can be objectively ascertained by looking at the preexisting property rights, as they are evidenced

40
41
Id., p. 31.
42
In accordance with tort law, whose traditional role [] has been to protect people against damage to their person and property (see John
COOKE, Law of Tort, Pearson Education Limited, 9
th
ed., 2009, p. 19.)
43
Id., p. 27.
44
Thus, to conclude a contract and to refuse to conclude a contract can both be viewed as restrictions of competition.
45
As Abraham Lincoln once famously declared, The world has never had a good definition of liberty, and the American people, just now, are
much in need of one. We all declare for liberty; but in using the same word we do not all mean the same thing. With some the word liberty may mean
for each man to do as he pleases with himself, and the product of his labor; while with others the same word may mean for some men to do as they
please with other men, and the product of other mens labor. Here are two, not only different, but incompatible things, called by the same name
liberty. (Abraham LINCOLN, Address at Sanitary Fair, Baltimore, April 18, 1864). Lincoln continued by saying The shepherd
drives the wolf from the sheeps throat, for which the sheep thanks the shepherd as a liberator, while the wolf denounces him for the same act as the
destroyer of liberty, especially as the sheep was a black one. Plainly the sheep and the wolf are not agreed upon a definition of the word liberty; and
precisely the same difference prevails today among us human creatures, even in the North, and all professing to love liberty. Hence we behold the
processes by which thousands are daily passing from under the yoke of bondage, hailed by some as the advance of liberty, and bewailed by others as
the destruction of all liberty.

9

by contracts, documents, possession, homesteading, etc. The role of justice is to restore anyone in its
rights, as they existed before the wrongdoing.

58. To the contrary, within the economic freedom paradigm, no such objective limit exists. The courts or
agencies create the subjective rights they grant; these rights did not exist before the courts or agencies
intervene. The boundaries of anyones rights are drawn by judicial central planners, who are free to
reshape them at will, if it can help to maximize freedom (or efficiency, for that matter).

59. As a consequence, whilst in a classical freedom order individuals can interact and cooperate
autonomously with each other, without the need to appeal systematically to the state, in a pure economic
freedom scheme, they cannot even be thought of as self-governing entities. They are merely pawns which
are endowed by the state and moved by bureaucrats.

60. Here is a second departure from the classical freedom paradigm. The latter is a repressive and not a
preventive system. It means that the individuals or the firms are free to act so long as they do not infringe
on someone elses rights. They do not have to ask permissions to carry out their activities. They do not
need to obtain exemptions from a general prohibition. State intervention is the exception, not the rule.
46

61. Conversely, as mentioned above, in an economic freedom scheme, all contracts are prima facie void. If
firms want to conclude agreements, as soon as they infringe some significant economic threshold, they
have to ask for a special authorization. It is a Kafkaesque system, where bureaucrats are everywhere.
47

62. As a consequence, I beg to doubt whether, as Prof. Monti claims, ordoliberals would prefer a state of inefficiency
coupled with freedom to a totalitarian, but efficient, state of affairs.
48

1.4. Some Other Possible Conceptions
63. Although he formally presents only three different conceptions of competition, Prof. Monti also makes
use of some other concepts which are either kindred with the three main definitions or constitute
overarching values guiding the whole antitrust enterprise. The integration of the market (1.4.1.) and the
preservation of choice and pluralism (1.4.2.) are the main examples.
1.4.1. Market Integration
64. Professor Monti often refers to the integration of the common market as another possible value
governing competition law. He is rather critical of its actual enforcement and speaks of the Communitys
irrational understanding of market integration.
49

65. Indeed, he shows that decisions aiming at promoting or preserving the common market are often counter-
productive (it is arguable that in some cases the concern over practices that may disintegrate the market has been at the
expense of economic efficiency and of market integration itself
50
).

46
Prof. Monti seems to plainly confirm that state intervention is the exception only in the classical freedom order. Indeed, he
writes that Ordoliberal discourse is based on the values of personal liberty and equality; in contrast the neoclassical definition of competition is
embedded in a utilitarian and laissez-faire economic philosophy, where intervention is called for as a second best, when the market fails to deliver
economic efficiency, with no regard for the distributive consequences of the market order (EC Competition Law, pp. 23-24).
47
That is, it is an Orwellian-Kafkaesque scheme. Actually, I am perhaps a bit unfair to Kafka, who seemed not to have imagined
that the State could ever try to struggle against foreclosure. Indeed, in The Castle, the shoemaker, after being spontaneously
deserted by all his clientele because his younger maiden had irritated a bureaucrat, tried to obtain an official forgiveness in
order to have his clientele back. Yet, he was answeredthe story is narrated by the maidenWhat did he want forgiveness for?
When had anyone in the castle raised so much as a finger against him, and if someone had, who was it? He was certainly impoverished, he had lost
his customers, and so on, but those were the accidents of everyday life, the vicissitudes of his trade and the market, was the castle to take care of
everything? It did in fact take care of everything, but it couldnt simply interfere in developments just like that, merely to serve the interests of a single
man. Was it supposed to send its officials running after our fathers customers and bringing them back to him by force? (See The Castle, Oxford
University Press, chapter 19, p. 186, trans. Anthea BELL).
48
49
Id., p. 41.

10

66. He illustrates this ill-conceived policy with the Grundig case, because the reaction of Grundig, when
prevented from concluding exclusive dealerships with Consten, was said to have absorbed the latter.
51

67. I think that, as far as they go, Prof. Montis criticisms are correct. However, I believe they are too lenient,
and I would like to expand them by showing that the integration principle is altogether nonsensical, at
least when applied to the behavior of private enterprises.

68. But first, lets notice that nowhere in the book does Prof. Monti try to define what the common market is.

69. I am afraid the Court of justice did not manage to bring forth a definition either. In effect, the European
institutions constantly refer to the achievement of the common market as the Soviet leaders referred to
the achievement of socialism, i.e. as an undescribed and mythic promised land, to the pursuit of which
they are constantly working, and which is always about to be reached, but is never effectively so
52
.

70. Admittedly, somewhere in the book the reader is told that a harm to the common market can lead to
perpetuate different prices in different Member States and instil a degree of price rigidity which the single market was
designed to remove.
53

71. Likewise, the author reports in another place that The Commission claims that even after five decades of the ECs
existence the single market is still not a reality. One oft-cited piece of evidence for this proposition is that price differences
among Member States remain high.
54

72. So the common market seems to have something to do with price rigidity and uniformity.

73. However, first, there is nothing necessarily wrong with the dissimilarity of prices among member states.
Indeed, it is easily understandable that prices might differ, because demand and supply conditions vary
according to the countries (and in particular according to national cultures and wealth levels).

74. Second, it is hard to know what exactly Prof. Monti means by price rigidity; unless this rigidity is imposed
on the price-makers by state rules, price rigidity seems to be nothing more than a pejorative expression to
designate what is generally favorably described as price stability.

75. Actually article 3 of TEU even provides that The Union shall establish an internal market. It shall work for the
sustainable development of Europe based on balanced economic growth and price stability []. So it is odd enough to
complain about the rigidity of prices.

76. The canonic concern expressed by the Court in Grundig and continually repeated since then, with only
minor alterations, is that private firms may re-create market divisions that were previously put in place by protectionist
measures []devised by the Member States.
55
It is argued that The integration of the market by dismantling state
protectionism under EC law would be frustrated if private practices that have similar effects were not stymied.
56

50
Id., p. 40.
51
Id., p. 41.
52
Article 26(2) of the Treaty on the Functioning of the European Union sets forth a definition. It holds that The internal market shall
comprise an area without internal frontiers in which the free movement of goods, persons, services and capital is ensured in accordance with the
provisions of the Treaties. However, this definition is totally useless for our purpose.
53
54
Id., p. 363.
55
Id., p. 39.
56
Id., p. 39.

11

77. Now, these claims ignore the fact that there exists a difference of a paramount importance between the
states and the private firms: the former (which, according to Max Webers definition, have the monopoly of
the legitimate use of physical force), contrary to the latter, resort to violence to achieve their ends.

78. The problem with the statist restrictions of trade is that, in violation of private property and freedom of
contract, they prevent individuals and firms from moving their goods and capitals to the most profitable
places. Private entities can hardly be accused of the same wrongdoing.

79. The misunderstanding is encapsulated in the slogan free movement of goods. With some exceptions,
goods cannot move by themselves; instead, they need to be displaced by someonetheir owner.

80. Surely, if a cheese is stopped when rolling down from a French Mountain to an Italian valley, it would be
inappropriate to call this action a restriction of the free movement of goods within the common market.

81. Similarly, if a thief driving toward an internal border with a stolen good in his car is arrested, it would be
incorrect to release him under the pretext of avoiding segmenting the common market.

82. So, it appears that the only way to give a reasonable meaning to the free movement of goods or
integration of the common market catchwords is to understand them as the freedom of rightful owners
to move their goods and to conclude agreements as they see fit, without being blocked or hindered by
state barriers, provided they do not damage anyones bodily integrity or property.

83. In conclusion, private firms, by their very nature, lack the ability to re-create market divisions that were
previously put in place by protectionist measures [] devised by the Member States. Only a superficial look could fail
to distinguish private and public market segmentations. Consequently, the common market rationale
cannot be reasonably used as a guide to enforce competition law against private firms.
1.4.2. Choice Preservation and Pluralism
(i) Choice Preservation

84. An oft-cited guiding principle for competition law is choice preservation. For instance, in the Post
Danmark case, the Court held that In order to determine whether a dominant undertaking has abused its dominant
position by its pricing practices, it is necessary to consider all the circumstances and to examine whether those practices tend to
remove or restrict the buyers freedom as regards choice of sources of supply [other factors follow].
57

85. Some authors, notably Profs. Lande and Averitt, whose paper
58
prof. Monti quotes, go so far as to analyze
choice preservation (also referred to as consumer sovereignty) as the unifying rule governing antitrust law.

86. Likewise Prof. Monti writes that In an early treatise on EC competition law, Arved Deringer took the view that
competition is distinguished by two characteristics, namely, freedom of action of the individual enterprises and the possibility
that market participants may make a choice.
59

87. Yet to speak of the possibility for a market participant to make a choice is a pleonasm. Market
participants, by the very nature of the market, always have a choice between buying and not buying a
given good. It is not often true with the services rendered by the state or state-sponsored entities.

57
Court of Justice, 27 March 2012, case C-209/10, Post Danmark, para. 26.
58
N. W. AVERITT and R. H. LANDE, Consumer Sovereignty: A Unified Theory of Antitrust and Consumer Protection Law,
1997, 65 Antitrust Law Journal 713 (Antitrust and consumer protection law share a common purpose in that both are intended to facilitate
the exercise of consumer sovereignty or effective consumer choice).
59

12

88. The attitude of Prof. Monti regarding the choice preservation principle is somehow ambiguous. In the
context of a discussion about the German Football League case, he writes that Choice has an economic rationale
in that greater choice improves consumer welfare [].
60

89. But, in his comment on the Microsoft case, after repeating this analysis (although it is not clear whether he
adopts it), he inserts a kind of caveat:

However, it must be borne in mind that from an EC perspective, the anticompetitive nature of tying is not based
only upon concerns over efficiency. In Tetra Pak 2 for example, tying is characterised as an abuse because it
deprives the customer of the ability to choose its sources of supply and denies other producers access to the market.
It is important to note that this passage embodies two distinct concerns. First, the harm to consumers is associated
with the exploitation of a dominant position. However, the Commission, until Microsoft, never investigated in detail
what the nature of this harm entailed, so that it seems as if consumer choice is beneficial in itself; thus even if it
were shown that prices would be higher with more competitors in the market, the Commission would still find an
abuse.
61

90. Moreover, he critically adds that:

the Commissions consideration of consumer welfare can give it the discretion to attack conduct which is not
harmful to consumers economic interests but which the Commission thinks is harmful (rebates that lower prices but
reduce choice are harmful to consumer welfare because there is less choice).
62

The risk of course is that factors like product choice, product quality and store choice are difficult to measure
objectively, thereby giving the competition authority considerable flexibility.
63

91. This criticism (particularly the first part) is very sensible. Indeed, there is an unavoidable trade-off between
higher diversity and lower prices, in particular because the capacity of large-scale production to deliver low
prices rests on the standardization of the products.

92. Consequently, it is absurd to focus on a single given parameter (choice, in the case in hand) at the expense
of the others (price, quality). Choice must be optimized, not maximized, and central planners have no
means to know how to strike the correct balance.

93. Another objection, which is both simpler and sharper, against the so-called choice preservation
rationale, consists in highlighting that the suppression of a bad option (greater price, lower quality) also
results in the reduction of the range of choices, and should consequently be punished if the choice
preservation rationale were to be taken seriously. It shows that choice cannot be a value per se.

94. Thus, in the paper quoted by Giorgio Monti, Professors Lande and Averitt write that, when a predator
raises its prices after having raised his rivals costs, the consumers lose the option of purchasing better or more
competitively priced product. In short, antitrust law can best be understood as a way of protecting the variety of consumer
options in the marketplace.
64
But what about the availability of worse products? Does it not increase variety?

95. Moreover, Professors Lande and Averitt advance the bold thesis that choice preservation is the governing
principle of antitrust, but they qualify this claim to such an extent that it becomes unsubstantial. Indeed,

60
Id., p. 109.
61
Id., p. 191.
62
Id., p. 212.
63
Id., p. 377.
64
N. W. AVERITT and R. H. LANDE, Consumer Sovereignty, aforementioned, p. 720.

13

they admit that it is not possible to oppose any elimination of option,
65
and they maintain instead that the
range of choice must be meaningful,
66
sufficient,
67
effective,
68
natural
69
(as opposed to artificial), etc.

96. So, they fail to set up any objective criterion which could help spotting the correct range of choice. Their
approach boils down to asking the judge to choose the level of choice he sees fit, or to determinate the
options he wants to be offered, as if he were an administrator managing a state-owned firm.

97. If the previous objections were not sufficient, one could also recall, first, that firms are often accused of
over-diversifying their production in order to acquire market power (i.e., to offer too many options), and,
second, that most European laws aim at establishing rules specifying the features that products must
satisfy, and so reduce the natural range of choice.
70

(ii) Pluralism

98. A closely related value is pluralism. It mainly deals with the field of media. As the author puts it, Choice
has an economic rationale in that greater choice improves consumer welfare, but in the broadcasting sector, choice also implies
a wish to ensure the plurality of broadcasting outlets as a means of safeguarding diversity of expression as a value in itself.
71

99. My point here is to show that pluralism is at best a sham-value designed to be smuggled for the real value
it tries to mimicfreedom.

100. Pluralism is supposed to require that several media exist, and that the existing sources of information not
be legally controlled by the same entities.

101. Now, because people hold various opinions in the cultural and political fields, it is true that most often
liberty will result in pluralism. But it is not necessarily so. For instance, if a particularly good newspaper
appears on the market, and makes the readers give up their previous journals, pluralism could be
threatened, but such a situation would be perfectly compatible with liberty.

102. More insidiously, not every pluralist state results from liberty.

103. For instance, Tocqueville wrote that In America, the majority draws a formidable circle around thought. Within
these limits, the writer is free; but woe to him if he dares to go beyond them.
72

104. Well, for the sake of the argument, imagine that the circle is drawn by the mandatory rules of the state. No
matter how narrow this circle be, it will still be possible to make a pluralityindeed, an infinityof dots
enter into it. Pluralism will be safeguarded. Yet, if going beyond the circle is forbidden, liberty is restricted.

65
Antitrust law does not prevent all conduct or transactions that have the effect of reducing the number of options available to consumers. Nor does
the law affirmatively require the creation of options. Id., p. 716.
66
Id., p. 713.
67
Id., p. 716.
68
Id., p. 716.
69
Id., p. 716.
70
Yet, the Commission paradoxically maintains that standardization may (?) increase consumer choice. Indeed, it writes in the
Guidelines on the applicability of Article 101 of the Treaty on the Functioning of the European Union to horizontal co-
operation agreements (para. 308) that Standardisation agreements frequently give rise to significant efficiency gains. For example, Union
wide standards may facilitate market integration and allow companies to market their goods and services in all Member States, leading to increased
consumer choice and decreasing prices. However, in the very same paragraph, it holds that Standards on, for instance, quality, safety and
environmental aspects of a product may also facilitate consumer choice and can lead to increased product quality. The last view seems more
correct. By limiting the range of options, standardization facilitates consumer choice.
71
72
Alexis de TOCQUEVILLE, Democracy in America, Chapter 7, Liberty Fund, Edited by Eduardo NOLLA, Transl. James T.
SCHLEIFER, p. 418.

14

105. As a further consideration, I would like to add that it is paradoxical for competition agencies to worry
about freedom of press while tracking and punishing mere information exchanges.
1.5. So, What Is the Conception Adopted by Prof. Monti?
106. Now that I have reviewed the conceptions of competition discussed by Professor Monti, along with the
other guiding principles he mentions, it might be in order to ask whether he thinks some of them are
fitted to their purpose.

107. Given that Prof. Monti has written a whole book on competition law, one might guess that, at the end of
the chapters devoted to this question, he has figured out a clear and suitable interpretation of how
competition must be interpreted, a meaning which he then uses in the remainder of the book.
73

108. For the record, Prof. Monti expressly rejected the rivalry conception. He also excluded the economic
efficiency meaning.

109. Regarding economic freedom, he declared that it comes a little closer to explaining Article 81
74
and sheds some
light on the significance of Article 81(3),
75
with which it is yet also incompatible,
76
although he argued that this
article is a way of reconciling an ordoliberal conception of competition with other values.
77

110. So, Prof. Monti seems to have adopted the economic freedom approach, because it is the one he criticizes
the least, and, throughout the book, it looks like as if he deplores that the European case and soft laws
tend to shift from this paradigm towards the economic efficiency one.

111. However, this endorsement is neither clear not enthusiastic.

112. Moreover, around the end of the book, Prof. Monti seems to reject the economic freedom conception
and, in some places, appears to be at least partly converted to the economic efficiency paradigm. For
instance, he writes that:
It seems that the Commission and the Court are too ready to condemn distribution agreements purely upon proof of
foreclosure. This problem is one we have already encountered in the context of the analysis of abuse of dominance.
There too, exclusion of a competitor was the basis of a finding of abuse, based upon the ECs economic freedom
rationale.
78

The relative success of Article 81(3) in considering efficiencies since the 1960s is explained by the fact that the
concept of a restriction of competition in Article 81(1) was read too widely, so that innocuous agreements were
caught. The proxy that the Commission has used to find a restriction of competition (economic freedom) did not
allow it to filter out efficient agreements: there were too many Type 1 errors in the application of Article 81(1)
79

113. More importantly, he declares that:

73
In the introduction, Prof. Monti wrote that it is hard to provide a definition of competition everyone will agree with, or to obtain consensus
about the reasons for having competition law (EC Competition Law, p. 2). This lack of consensus is highly problematic, but my point
here is different and even more basic: has the author identified one definition of competition which, in his personal opinion,
would be suited? In the next paragraph, he declared In entering this battlefield for normative supremacy, this book takes the following
position: it is impossible to identify the soul of competition law; the most that can be done is to show that there are dif ferent, equally legitimate
opinions as to what competition law should achieve. Let us notice that, whilst in the previous statement, he referred to the reasons for
having competition law and to the definition of competition, in the last sentence, he spoke of what competition law should achieve
(a rough equivalent of the reasons for having competition law), but not of the definition. So, if this paragraph is to be read
textually, it appears that there are no equally legitimate opinions as to what competition is.
74
75
Id., p. 28.
76
Id., p. 28.
77
Id., p. 28.
78
Id., p. 368.
79
Id., p. 502.

15

To safeguard economic freedom to such levels is counterproductive because it allows inefficient firms to remain in the
market, excluding more efficient market participants. By attempting to promote economic freedom one might stifle it.
On the contrary, economic freedom would be maximized by penalising dominant firms only when the evidence shows
that the exclusionary tactics may facilitate monopoly pricing.
80

114. The last sentence construes the economic freedom concept in such way that it amounts to an
endorsement of the efficiency approach.

115. Generally speaking, it is puzzling enough for the reader that, although Professor Monti seems to be a very
fervent supporter of competition law, he severely criticizes all of the possible meanings of competition.

116. In this perspective, it is also problematic that the author frankly admits not being able to ascertain what a
restriction of competition is held to be in positive law. For instance, he states that:
While it is easy to say what the Courts have not done, it is less easy to provide an explanation of how they have
interpreted the notion of a restriction on competition, because the case law is very opaque, and recent cases often
restate bland pronouncements from earlier cases without adding any substance to them. The gist of the Courts case
law is to say that not all restrictions of economic freedom are restrictions of competition [].
81

It also reveals that the Commission is still aware that firms find it next to impossible to understand what
constitutes an anticompetitive agreement under Article 81(1), []. Moreover, in this case, presumably decided
while the Commission was busy writing its Guidelines on the interpretation of Article 81(3), the CFI disagreed
with the Commissions own assessment of what is meant by a restriction of competition. So even the principal
enforcer is still struggling to work out what triggers Article 81(1).
82

117. Thus, the remainder of the book, or at least its pars construens, is built on a somehow unsafe footing.
2. The Notion of Market Power
118. Contrary to the notion of competition, the one of market power gets a very precise definition. Yet,
discussions on competition law are plagued by continuous semantic shifts between the scientific (or
neoclassical) meaning of market power and other less clear (and sometimes totally obscure)
conceptions, in particular the structuralist (2.1.) and post-Chicago (2.3.) ones. It results in the strange
claim by Prof. Monti that the scientific conception of market power is a high hurdle (2.2.).
2.1. Neoclassical Market Power and Structuralist Market Power
119. The scientific or neoclassical conception of market power is the theoretical tool according to which
allocative efficiency is defined. It is the benchmark which makes it possible to pass a normative judgment
on the behavior of firms. In this sense, market power corresponds to the size of the spread between price
and marginal cost. The greater the spread, the more allocative efficiency is harmed.

120. Nevertheless, as noted above, outside the imaginary world of perfect competition, every firm has at least
some market power. Thus surprisingly, from a neoclassical point of view, every firm of the real world
harms allocative efficiency. Yet, it is obviously impossible to prosecute every of them. Thus, competition
agencies should be required to bring proceedings only against the firms having the most of market power.

121. The trouble is that in practice market power can rarely be measured, because the required data cannot be
made available (However, Prof. Monti notes, this approach has little practical value because marginal costs are
difficult to calculate
83
). One could have been led to conclude that competition law is not workable and has to
be given up. That would have been the end of the antitrust story.

80
Id., p. 177.
81
Id., p. 31.
82
Id., p. 451.
83
Id., p. 131.

16

122. But competition agencies, supported by economists and legal scholars, have instead decided to rely on the
assumption that the degree of concentration of the market structure can serve as a reasonable proxy of the
neoclassical market power. This assumption is highly controversial. It was the main bone of contention
between the Chicago school and the today much-denigrated Harvard school.

123. Moreover, many competition agencies and law scholars refer to the concentration degree as if it were a
direct measure of market power, and not a mere proxythey call it directly market power. In other
words, they designate the proxy with the name of the magnitude it is supposed to assess (hereinafter, I will
call the proxy structuralist market power, and the underlying entity, neoclassical market power).

124. This habit is a seed of confusion. It is conducive to the belief that the enforcement of competition law
follows the reasoning described in the economics textbooks, whilst it actually depends on highly uncertain
assumptions. It is likely that most economics students think competition agencies really compare prices
and marginal costs, while actually the latter do not even try to do so.

125. Moreover, discussions on competition law usually involve semantic shifts. Thus, Prof. Monti employs the
expression market power to refer to both the structuralist and the neoclassical market powers.

126. For instance, he writes that The standard by which to judge antitrust violations shifts from an inquiry into market
power (the leading work representing the SCP paradigm argued that the chief purpose of antitrust policy was the limitation of
market power) to an inquiry about whether the practice in question is efficient.
84
Now, from a neoclassical
perspective, both inquiries are identical. So, in this sentence the expression market power must be used
in the structuralist meaning.

127. However, two paragraphs below, Professor Monti holds that The 1968 Merger Guidelines were rewritten in the
1980s by a Chicagoan DOJ led by William Baxter. Under his leadership, the Guidelines were designed to reflect a concern
over market power (not market structure, as under the SCP paradigm), which he defined as the ability of a seller or group of
sellers in concert profitably to raise prices above competitive levels, generating allocative inefficiencies.
85
Here, as the author
opportunely indicates, market power is employed in the neoclassical meaning.
2.2. Is Neoclassical Market Power a High Hurdle?
128. As mentioned above, almost every firm has some degree of neoclassical market power. Prof. Monti
often emphasizes this fact. For instance, he writes that:
- most firms hold a degree of market power because price is set at marginal cost only where there is perfect
competition,
86

- Every firm has enough market power to price above marginal cost,
87

- even non-dominant firms are able to price above cost.
88

129. Consequently, if competition law were entirely faithful to the neoclassical foundations, any firm would fall
in its ambit. As already noted, the economic approach is as embracing as the economic freedom paradigm.

130. But, very curiously, Prof. Monti repeatedly affirms that neoclassical market power constitutes a high
hurdle. Indeed, he states that:
- the high market shares deployed in the US signal a commitment to a neoclassical definition of market power,
89

84
Id., p. 65.
85
Id., p. 65. This sentence is odd because it seems to imply that the true market power is the structuralist one.
86
Id., p. 69.
87
Id., p. 218.
88
Id., p. 219.
89
Id., p. 144.

17

- If the market power of the parties defined in neoclassical terms was used as a threshold question in the application of
Article 81, very few agreements [] would be caught,
90

- If dominance instead meant the power to reduce output and increase price, then the scope of Article 82 would be
reduced significantly.
91

131. Obviously, these two sets of statements are incompatible.

132. Perhaps there is a way to explain (if not to reconcile) these contradictory claims. It is to observe that the
Chicago school theorists, who much vilify the structuralist approach, cannot help relying on it in practice,
because market power is not directly measurable and there is no other proxy available.
92
Now, it is likely
that these theorists are prone to apply the structuralist market power proxy less aggressively than old-
structuralist or neo-structuralist writers would do.
2.3. Post-Chicago Market Power
133. A related topic of criticism is Prof. Montis treatment of post-Chicago market power. The latter,
according to the author, provides that a firm has market power when it is able to devise strategies that can harm
rivals and so give it, in the future, the power to raise prices and reduce output
93
(i.e., to achieve neoclassical market
power).

134. Professor Monti writes that This approach is wider than the neoclassical definition.
94
Yet, this analysis sounds
illogical. First, it is hard to conceive of an approach wider than the neoclassical definition (except the
economic freedom paradigm, which can be considered to be as wide as the neoclassical one).

135. Moreover, the scope of to do Y in order to achieve Z is obviously narrower, and not wider, than the
field of to achieve Z. Or else, if to do Y is the only possible way to achieve Z, both statements are
identical (and, in such a case, one could wonder what the point of the post-Chicago approach is).

136. However, I dare to think that the promoters of the post-Chicago brand of market power have included
the second limb because it was required by the economic reasoning, but secretly hoped that enforcers
would concentrate their attention and action on the first limb. In such a hypothesis, it would not be self-
contradictory to argue that the post-Chicago approach is wider than (or at least as wide as) Chicagos.

137. And, actually, it does appear that, whilst the second limb is far more important than the first one from an
economic perspective (Professor Monti writes that The real harm is the dominant firm exploiting its market
power once the rival is gone
95
) the post-Chicago definition focuses
96
(Prof. Montis word) on the power to harm
competitors, that is, on the first limb.

138. Similarly, in the actual enforcement, agencies do not seem to care a lot about the second part of the test.
As the author puts it,

Following the post-Chicago theories explored in chapter 6, an evaluation of foreclosure requires first a determination
that the rivals costs have been raised by the practice in question and secondly a determination that foreclosure harms
consumers. Consumers can be hurt by foreclosure because it raises the costs of certain market players, and this

90
Id., p. 156.
91
Id., p. 215.
92
As Prof. Monti notes, [E]nforcement still begins by an analysis of the market structure, as the SCP paradigm would recommend. In spite of the
Chicago School revolution, it is still convenient to begin an analysis of mergers by calculating the degree of concentration as a means of filtering
unimportant transactions (EC Competition Law, p. 74); Judging market power by market shares is an approach closely associated with the
SCP paradigm, which was challenged by the Chicago School. Nonetheless, market share analysis remains at the heart of competition law inquiry
because it provides a relatively simple rule of thumb to identify markets where competition is at risk (Id., p. 158).
93
Id., p. 126.
94
Id., p. 126.
95
Id., p. 166.
96
Id., p. 181.

18

permits the excluding firms to raise their prices. Accordingly, the foreclosure of some competitors does not necessarily
mean that anticompetitive effects follow automatically there may be sufficient numbers of highly motivated
competitors that consumers will not suffer. It is not clear from the Commissions Guidelines whether this approach is
followed or whether proof of foreclosure is sufficient. The Commission provides much guidance on measuring
foreclosure but nothing on how to measure its effects.
97

3. The Notion of Barrier to Entry
Prof. Monti criticizes the Stiglerian conception of barrier to entry (3.1.) and yet considers the debate
over the meaning of this notion to be pointless (3.2.).
3.1. Prof. Montis Criticism of the Stiglerian Conception
139. The author discusses the classical distinction between the Bainian and the Stiglerian understandings of
what barriers to entry are. He criticizes Stigler for trying to embody a value-laden element in the
definition. Indeed, according to Prof. Monti, Stiglers approach is based on the premise that one should worry
only about factors that deter efficient entry, and not about factors that merely deter entry by anyone.
98

140. The author comments that such a premise
confuses the question of determining market power with the question of whether the person holding that market
power should be penalised. Whether a monopoly should be condemned is a secondary question, depending for
example upon whether its behaviour lowers economic efficiency, so the criticism that Bain classifies certain efficiencies
as entry barriers misses the mark.
99

141. Prof. Montis objection seems valuable. The two questions he distinguishes must not be confused. Indeed,
from a theoretical point of view, the answer to a scientific enquiry (here, how to explain that in the long
run, established firms can elevate their selling prices above the minimal average costs . . . without inducing potential entrants
to enter the industry
100
) should not be made dependent on legal and ideological considerations.

142. However, Prof. Monti still reports Prof. Hovenkamps observation that if there was a rule of no-fault monopoly
whereby liability would be imposed purely based on dominance, then the Stiglerian approach would make sense, for one would
not want to punish efficient monopolies.
101
By contrast, one is led to conclude that, in the present state of the
case law, where it is said that monopolies are not per se punishable, such a logic is misplaced.

143. Nevertheless, one could object to the last criticism that the Commission itself forcibly muddles these
different questions. Indeed, the case law does not set up a rule of no-fault monopoly, but, by imposing an
undefined special responsibility on dominant undertakings, it gets close to that. If to be dominant entails
legal risks, it could be better to avoid characterizing efficient firms as dominant.

144. What is more, even Bain seems to make an ideological component enter the discussion. Indeed, as Prof.
Monti puts it, Bain classifies certain efficiencies as entry barriers.
102
But why just certain? Why not every? Prof.
Hovenkamp aptly remarked that Superior efficiency
103
is the worlds greatest entry barrier, except perhaps for
government entry restrictions.
104

97
Id., p. 368.
98
Id., p. 145.
99
Id., p. 145.
100
Id., p. 64.
101
Id., p. 146.
102
Id., p. 146.
103
Because Bains definition assumes that the incumbent is allocatively inefficient (its prices are above its costs), only productive
and dynamic efficiencies are concerned. (I neglect here the fact that Bain writes about average and not marginal costs).
104
Herbert HOVENKAMP, Federal Antitrust Policy, West Group, 1999, p. 524.

19

145. So, if Bain did not dwell upon this worlds greatest entry barrier, one can suppose that it was because he saw
barriers to entry as an intrinsically negative element that could not be directly likened to pure
efficiency.

146. Prof. Monti himself seems to adopt a value-laden approach. Following Professor Carlton,
105
he regrets
that neither the Bainian nor the Stiglerian definition (which both adopt the long-run point of view) makes
room for any speed of adjustment requirement.

147. Now, the fact that adjustment takes time is not a scientific paradox; it is easily explained by pointing out
that information is limited, production processes are not instantaneous, etc. So, by trying to incorporate a
temporal dimension in the barrier to entry notion, Prof. Monti departs from the purely scientific
analysis.

148. Moreover, he declares that the approach he discusses (the one adopted by an American Court of appeal in
the Microsoft case) considers matters from the perspective of incentives.
106
But the Stiglerian approach did take into
consideration the incentives (the incentives to be efficient) and it was precisely the reason why Prof. Monti
criticized it.

149. Besides, it makes no sense for competition law to adopt a short-term perspective. Indeed, although some
economists are accustomed to think of the economy as if it were in equilibrium, one has to remember
that, in our uncertain and constantly changing world, it never is. It only tends to be. The economy is like a
dog chasing a mechanical rabbit.
107
The equilibrium it pursues is continuously moving.

150. Thus at any moment non-monopolistic short-run misallocations are omnipresent. Now, it is likely that the
amount of monopoly-induced misallocation is tiny when compared to these short-run but perpetually
renewed misallocations.

151. Moreover, to try to eliminate short-run monopoly profits would be all the more dangerous since, if
competition agencies incorrectly target monopoly profits and punish entrepreneurial profits instead (that
is, profits which do not result from the spread between price and marginal cost), they will prevent the
adjustments the economy needs and thus will perpetuate misallocations.
3.2. Does the Bain-Stigler Debate Matter?
152. Another problem is that Prof. Monti seems to agree with the opinion of most competition agencies
108
that
to bring about a correct definition of barriers to entry is actually superfluous.

153. Thus, he maintains that the economic debate between Stigler and Bain over what is an entry barrier is not particularly
helpful in the application of competition law.
109
He also notes that, in both US and EC competition laws, less

105
Dennis CARLTON, Why Barriers to Entry are Barriers to Understanding, 94 American Economic Review 466, 2004, quoted
by Prof. Monti.
106
107
I borrow this comparison from Murray ROTHBARD, Man, Economy, and State, Ludwig von Mises Institute, 2009, p. 322.
108
See, in particular, OECD, Policy roundtables, Barriers to Entry, 2005, p. 9: There is no consensus on whether a precise definition of
entry barriers is necessary. While most competition enforcement agencies indicated that they do not need a fixed definition of barriers to entry, several
others have one and have found it to be valuable. - In recent years, several competition scholars have concluded that the debate about entry barriers
should be considered irrelevant to competition policy. What matters in actual cases, they argue, is not whether an impediment satisfies this or that
definition of an entry barrier, but rather the more practical questions of whether, when, and to what extent entry is likely to occur. Most, but not all,
competition agencies in OECD countries agree with that view. Some, however, have found that having a precise definition of entry barriers is helpful.
In New Zealand, for example, lower court decisions would have posed problems for the competition agency if higher courts had not adopted a clear
definition of entry barriers.
109
EC Competition Law, p., 145. Curiously, the author writes (p. 146) In the US Microsoft litigation the Court of Appeals used a definition
close to the Bainian model: factors (such as certain regulatory requirements) that prevent new rivals from timely responding to an increase in price
above the competitive level. This legal standard takes into account the important issue that the speed and degree of entry is relevant for competition
law and the Stigler/Bain debate is unhelpful in the context of this kind of inquiry. This approach avoids defining entry barriers and considers

20

effort is spent defining entry barriers and more is devoted to asking whether new entry is timely, likely and sufficient,
110

insinuating that the definition issue is a purely academic and an idle one.

154. It is no wonder that such a position is promoted by competition agencies. Indeed, one cannot dream of a
more complete freedom than to be authorized to employ a word without having to account for its
meaning. But it is also a totally irrational stance. Depending on the sense in which this expression is
employed, the logical and the legal consequences differ. Thus, its meaning cannot be left unspecified.

155. Competition agencies can choose one of the suggested meanings (or still another) and stick to it. Or, if
neither of the suggested definitions fits (for instance, because none incorporates a time element), they may
entirely give up the barrier-to-entry concept. But they cannot hold that the meaning of this notion is
immaterial and nevertheless continue to use it. Otherwise, their decisions would be mere babbling.

156. As the author still notes,
111
if the meaning of this word is not specified, new senses will emerge. For
instance, the competition law glossary released by DG competition offers a strange variation on the
Bainian definition. It merely holds that Barriers to entry are factors that prevent or hinder companies from entering a
specific market.
112
One could not conceive a vaguer and more open-ended definition.

157. Indeed, contrary to the Bainian conception (which refers to the situation where the established firm
elevate[s its] selling prices above the minimal average costs), the DG competition definition does not give any
reason why new firms should in the first place be expected to enter. It does not postulate that the
incumbent has set its prices above its costs. With this definition, the fact that prices are equal to costs
the fact that allocative efficiency is maximizedcould paradoxically be analysed as a barrier to entry.
113

158. Prof. Monti opportunely mentions Viscusi, Harrington, and Vernons discussion of this topic.
114
But the
latter precisely hold that:
If you were paying attention, you should be quite confused about entry barriers. Join the crowd! The concept of
barriers to entry lacks clarity, and one is never sure what to do with it. It is certainly not clear what are the welfare
implications of any particular thing called a barrier to entry. The most unfortunate part is that some economists and
antitrust lawyers throw the term entry barrier around like there is one accepted and meaningful definition when
there is not.
115

159. An illustration of this confusion can be found in Prof. Montis book. Indeed, the author writes that the
proponents of the structuralist paradigm make the prediction that if entry barriers are high the price-cost margin
of the leading firms increases.
116
But it is a tautology rather than a prediction. High (Bainian) entry barriers
mean that price-cost margin are high.

matters from the perspective of incentives. As the first sentence indicates and contrary to what the last sentence maintains, in the
case in hand the authority did define entry barriers.
110
Id., p. 146.
111
However, the approach taken by competition authorities is risky because it can lead to a slippery slope whereby any factor making entry more risky
or difficult becomes an entry barrier without detailed scrutiny, an approach that exaggerates market power. In the EC for example, factors like a big
technological lead over others, an effective sales network, or a successful advertising campaign that brings customer loyalty are entry barriers because
they give the firm technical and commercial advantages over rivals. (EC Competition Law, p., 146.) Here, Prof. Monti writes about the
elements which enter the definitions and not about the definitions themselves.
112
Glossary of Terms Used in EU Competition Policy Antitrust and Control of Concentrations, Directorate-General for
Competition, Brussels, July 2002, see Entry Barriers.
113
By contrast, with the Bainian definition, only productive and dynamic efficiencies can be analyzed as barriers. See, above,
footnote 103.
114
115
W. Kip. VISCUSI, John M. VERNON, and Joseph E. HARRINGTON, Economics of Regulation and Antitrust, MIT Press, fourth
edition, p. 172.
116

21

160. Another paradox is that, after writing that the Bainian-Stiglerian debate is useless, Prof. Monti holds that
the Bain approach is preferable.
117
It is a contradictory stance. If the debate is useless, none of the proposed
alternatives should be preferable. Conversely, if an alternative is preferable, the debate may be
imperfect, but not useless. So, it appears that, eventually, the definition issue does matter.

161. However, it is not all that matters. Once the definition is settled, one has to determine what real life events
enter into it. Such knowledge is not directly provided by the definition; it requires an economic reasoning.
For instance, according to many authors, Bains definition is correct. The source of disagreement comes
from the fact that it is not obvious why two of the three main factors cited by Bainproduct
diversification and high capital requirementswould achieve the result referred to in the definition.
4. Miscellaneous Observations
162. To close these comments, I would like to make some observations about an odd fallacy (4.1.) in Prof.
Montis book, about the latters treatment of the notions of scarcity (4.2.) and economic welfare (4.3.),
and, eventually, about the measurement problems which affect competition law (4.4.).
4.1. About an Odd Fallacy
163. After describing the various shortcomings and uncertainties affecting the process of decision-making in
competition law, Professor Monti writes:
Taken to its extreme, the analytical structure proposed above can lead to the conclusion that competition law is
indeterminate and that the exercise of discretion by those in power determines the results. This is not the thesis which
is advanced here, because the competition authority enforcing the law is aware that absolute indeterminacy would
make for unworkable policy as firms would not know what is lawful and unlawful and such unpredictability would
in itself be counterproductive firms would not try to compete too aggressively, lest their actions be struck down as
illegal. Thus the market system (which competition law is supposed to maintain) would break down if the
competition rules were too open-ended. A degree of predictability is necessary, and this puts a limit upon the ways in
which competition law can be designed. Moreover, unless particular political and economic conceptions of competition
law can be translated into laws which allow markets to work, then those ideas, however well intentioned, cannot be
accepted, because a well-functioning market is the reason for having competition law. The market places limits as to
the kind of competition policy that can be implemented.
118

164. I am glad that Professor Monti introduces and discusses so plainly this delicate yet important issue.

165. Now, I am afraid that, when discussing it, Prof. Monti is falling in the fallacy popularly known as wishful
thinking. His reasoning boils down to saying that competition law is not indeterminate and discretionary
because bad consequences would happen if it were. Surely, the risks he states imply that competition law
should not be indeterminate and discretionary, but he does not say anything on what the law actually is.

166. At best, if Prof. Monti had previously held that the bad consequences he is afraid of (the impossibility of
knowing what is unlawful, the reluctance to compete too aggressively) had not happened, he could have
argued that he was in a position to deduce that competition is not indeterminate and discretionary. But he
has not affirmed such a thing; and it would be risky to do so.
119

117
Id., p. 146. More exactly, he writes that From this perspective, the Bain approach is preferable because it suits the purposes of competition law
inquiries: examining the probability of fast, effective entry that would deter anticompetitive behaviour. Yet, to the contrary, Bains definition
refers to the long run. Both Bainian and Stiglerian definitions share the same shortcoming. Thus, two sentences later,
Prof. Monti rightly holds that This legal standard takes into account the important issue that the speed and degree of entry is relevant for
competition law and the Stigler/Bain debate is unhelpful in the context of this kind of inquiry. Conversely, one page earlier, the author
wrote that the economic debate between Stigler and Bain over what is an entry barrier is not particularly helpful in the application of competition
law. First, it confuses the question of determining market power with the question of whether the person holding that market power should be
penalised. But only Stigler made this mistake, so it was not possible to argue on this ground that the debate was useless.
118
Id., p. 15.
119
On the contrary, he admits later on that it is almost impossible to know what is unlawful (It also reveals that the Commission is still
aware that firms find it next to impossible to understand what constitutes an anticompetitive agreement under Article 81(1), []., EC
Competition Law, p. 411).

22

4.2. Scarcity and Efficiency
167. In the introduction to his book, Professor Monti writes that:

In a market economy, the consumer, not the state, dictates what goods and services are provided. Consumer demand
drives production. Even if consumers are truly sovereign, however, a market economy will not eliminate all
inefficiencies: scarcity means that society is unable to satisfy everyones demand.
120

168. I think it is a very laudable step to begin a competition law book by emphasizing that any economy is
characterized by scarcity, and that, consequently, there are always needs which remain unsatisfied. Too
often, it is simply assumed that a truly competitive economy is a land of plenty, so that a monopolistic
plot must have happened every time the real economy falls short of perfection.

169. Unfortunately, Professor Montis emphasis on scarcity is inconveniently framed. Indeed, in the above-
quoted sentences, the persistence of scarcity seems to be perceived as an inefficiency. But, because to be
efficient is to make the best use of scarce resources,
121
the very concept of efficiency assumes the
existence of scarcity. Thus, the fact that a market economy has not eliminated all scarcities does not
amount to saying that it has not eliminated all inefficiencies.

170. Similarly, in the remainder of the book, when he deals with foreclosure, Prof. Monti often seems to
consider that scarcity is an artificial feature. Indeed, because of scarcity, every industry demand curve is
decreasing. That means that any market is prone to be saturated, and thus, that they are always firms
which are foreclosed. Consequently, speaking of foreclosure without qualification (as Prof. Monti
often does) is meaningless. At best, one can rationally talk about the foreclosure of as-efficient firms.
4.3. Economic welfare
171. Prof. Monti draws an unusual distinction between maximizing welfare and abstaining from harming it
(4.3.3.). Contrary to what is generally taught, he holds that the consumer who is priced out of the market
because of the monopoly price is more harmed that the consumer who accepts to pay the surcharge
(4.3.1.). His discussion of the impact of cost savings on consumers welfare is interesting but does not
seem to go to its logical conclusion (4.3.2.).
4.3.1. Surplus Loss and Surplus Transfer
172. Professor Monti explains the difference between surplus loss and surplus transfer by imagining a situation
where, after the price increase induced by a monopolistic distortion, consumer B stops purchasing the
monopolized good (earphones), whilst consumer A prefers to pay the higher price, and consumer C was
already priced out at the competitive price.

173. Prof. Monti comments that Scarcity means every market has persons in Cs position.
122
So far, so good. But then
he declares that:
A and B suffer in different ways. B suffers the most because she cannot buy the earphones at the inflated price. The
resources she would have used to buy the goods will be spent on something else that gives her less utility. Consumer
A can still buy the earphones, in fact he would have been willing to pay more than 8, so to him the price increase
is not as painful.
123

174. It is true that the pure economic approach cares about B and not about Ai.e., it considers the surplus
loss, but not the surplus transfer. However, it is incorrect to maintain that B suffers the most. Neoclassical
economics does not claim such a thing. Its only concern regarding Bs purchase abstention is that it
creates a social loss, because (supposedly) nobody profits from the pain she suffers.

120
Id., p. 2.
121
As Prof. Monti puts it, When answering the political question, two extreme answers might be offered: either competition law is solely about
promoting economic welfare by ensuring that firms behave in such a way as to minimise costs and maximize the benefits that consumers can obtain
from the scarce resources that are available [] (EC Competition Law, p. 4).
122
Id., p. 84.
123
Id., p. 84.

23

4.3.2. Consumers Welfare and Costs Savings
175. Continuing on this topic, Professor Monti brings up the issue of cost savings. While doing so, he makes a
very interesting observation but, unfortunately, does not go to its logical conclusion. He writes:
Having explained the difference between a consumer welfare and a total welfare approach, does it make any
difference that EC competition policy has opted for the consumer standard? It seems that there are two differences.
The first is that in certain circumstances the consumer welfare standard is stricter than the total welfare standard.
Consider if after the joint venture between the two earphones manufacturers, the joint venture is able to produce
earphones more cheaply, because by sharing technical know-how the firm reduces production costs: the merger
generates productive efficiencies. But because they have market power, they do not use the cost savings to cut prices.
However, the benefit of productive efficiencies remains: economic resources are saved and the savings
can be injected into society to generate welfare in other ways (e.g. the companies can use the
savings to develop new, better earphones). Economists trade off the loss of consumer utility to consumers like B with
the savings due to the productive efficiency and consider whether, overall, resources were saved or lost: if the gain in
productive efficiency outweighed the welfare loss (the small, darkly shaded triangle), then the joint venture is efficient
overall. Plus consumers as shareholders or as subscribers to pension funds that invest in firms have an interest in the
productive efficiencies of firms. In contrast, a focus only on consumer welfare will not tolerate this
kind of costbenefit analysis: the price increase is sufficient to condemn the joint venture. In sum, a total
welfare standard tolerates practices which the consumer welfare standard would not allow.
124

176. What I find interesting is the accent put on the fact that, even if the cost savings are not used to cut prices,
the benefit of productive efficiencies remains, because economic resources are saved and the savings can be injected into
society to generate welfare in other ways.

177. As an illustration, Professor Monti writes that the companies can use the savings to develop new, better earphones.
This example deals with the reinjection of the savings into the monopolized market. The idea is that, even
if consumers do not have cheaper earphones, they can have new and better ones.

178. Yet, the monopolist is not forced to re-invest the saved resources into the same industry. He can also
deploy them in another market, or, more simply, he can abstain from buying these resources and let them
to another firm, which will employ them in still another branch of the economy. There, thanks to these
new resources, production will be augmented, prices will be cut, and consumers will benefit.

179. Consequently, the clash between the consumers and the producers interests is to a very large extent
illusory. It rests on the mercantilist and Marxist credence that anyones gain necessarily results in
somebody elses loss. But, in reality, any cost saving benefits the consumers. There is no need for
consumers to be shareholders [or] subscribers to pension funds to profit from it.
125

180. The only way to hold that consumers are harmed is to adopt a very narrow understanding of who are the
consumers who are entitled to benefit from competition law. If the consumers the competition
agencies take care of are only those who are on the monopolized market, it can be argued that, unless the
savings are reinvested in the same market,
126
consumers do not benefit from the cost reductions.

181. However, it would be a totally artificial view. Moreover, if we were to accept such a hypothesis, it would
be deceitful for the competition agencies to claim to worry about consumers welfare. They would only
be concerned with the welfare of some privileged (and at best randomly designated) classes of consumers.
4.3.3. Does Competition Law Tries to Maximize Welfare or Just to Prevent it from Being Harmed?
182. In the introduction to the book, Professor Monti holds that:

124
Id., p. 84.
125
On this topic, see in particular Alan J. MEESE, Reframing the (False?) Choice between Purchaser Welfare and Total
Welfare, Fordham Law Review, Vol. 81, No. 5, 2013, pp. 2197-2251.
126
Or unless the relevant consumers are shareholders of the monopoly or subscribers to pension funds which have invested in it.

24

competition law is not designed as a highly interventionist policy to guarantee the welfare of every segment of the
economy, nor is it designed to compel or create incentives for firms to behave to promote economic welfare. Its aim is
more modest: to condemn anticompetitive behaviour.
127

183. Further, he writes that:
Since the brief of a competition authority is not to create perfect competition but to deter certain forms of behaviour
that harm economic welfare, only significant manifestations of market power fall within the ambit of competition
law.
128

184. I think the distinction between the promotion of economic welfare and the deterrence of harmful
practices is of interest, but cannot be used inside the competition law framework. It can only be employed
to compare the competition law paradigm with, let us say, the property rights order.

185. Indeed, the very logic of antitrust law, as far as it deals with economic welfare, is to maximize it, because it
takes as a reference a state of (alleged) perfection, namely the ideal equalization of price and marginal cost.

186. As Professor Monti emphasizes, almost no firm complies with this norm in the real world. That is why
only significant manifestations of market power fall within the ambit of competition law. However, even if this
qualification is taken into account, the norm remains defined by reference to a state of perfection.

187. On the contrary, a property rights order does not aim at maximizing economic welfare. It does have a very
positive influence on welfare. Indeed, it is a basic theorem of economics that each party to a voluntary
contract expects a profit from the agreement (i.e., obtains some surplus).
129
Yet, some may think that the
surplus is seldom maximized, and that, with the help of a benevolent state, it could be even greater.

188. However, in a genuine market economy, where the main goal of the law, in the economic field, is to
protect private property, the state does not try to go beyond the amount of economic efficiency that the
property rights order delivers. It does not give incentives to work harder, to save (or to consume) more,
etc. Its only task is to prevent consequential economic losses, not pure economic ones.

189. If property rights could be analyzed as a quantitative norm (actually, they are rather of a qualitative
nature), they could be described as a bottom-line rule: as long as firms respect a minimal requirement (let
us say, 10% from the bottom), they are free to act as they like. They can do more (offer good prices,
take clever entrepreneurial decisions, work hard, etc.) but the law does not force them to do so.

190. Conversely, Posners wealth maximization principle, which is quantitative by nature, can be analyzed as a
top-line norm. For instance, if there is a significant or appreciable requirement of 10 %, firms are
presumed to harm the economy and are punishable as soon as they fall below this 10 % from the top
boundary. They must not depart too much from the state of perfection.

191. Consequently, the distinction between the promotion of, and the prevention of harm to, economic
welfare could be used to contrast a competition law scheme and a property rights order, but it makes no
sense to say, regarding a set of competition laws which deals with economic welfare, that its goal is merely
the prevention of harm.

192. Besides, throughout his book, Professor Monti moves sometimes from the previous statements and holds
somehow contradictory claims. For instance, he declares that:

127
Id., p. 2.
128
Id., p. 125.
129
That is true even if the purchaser pays a monopoly price; at worst, his surplus has diminished, but it still obtains some
surplus. What competition law assumes to be a harm should not be analysed as such by tort law, because it is only the loss
of an additional gain that the alleged victim would have obtained from the so-called wrongdoer if this latter had behaved
competitively. Thus, the victim benefits from his interaction with the alleged wrongdoer, although he would like to benefit
even more from it. This bargain loss should be damnum absque injuria: loss without injury. The term surplus loss is
perfectly appropriate to designate it.

25

When answering the political question, two extreme answers might be offered: either competition law is solely about
promoting economic welfare by ensuring that firms behave in such a way as to minimise costs and maximize the
benefits that consumers can obtain from the scarce resources that are available (in economic terms, the pursuit of
productive, dynamic and allocative efficiency), or competition law can be used to pursue a variety of other public
interest goals [].
130

193. The first answer that Professor Monti characterizes as extreme is actually perfectly mainstream, at least
in America. Well, anyway, we see that Prof. Monti analyzes it as being about promoting economic
welfare, and not merely about preventing it from being harmed. What is more, even the other extreme
is generally thought as being also (though not single-mindedly) about promoting welfare.

194. Similarly, the author writes that:
In this chapter we suggest that, from a political perspective, competition policy in the EC originally promoted
three core values: competition (understood as the maintenance of economic freedom), the integration of the internal
market and economic efficiency (as a means of enhancing consumer welfare).
131

195. Here again, Professor Monti shows that, as far as competition law deals with economic welfare, its goal is
to promote or enhance it.
4.4. Understatement of Uncertainties
196. I am afraid that Professor Monti understates several difficulties, even regarding the approaches he
criticizes. In particular, he seems to neglect practical (4.4.1.) and conceptual (4.4.2.) difficulties pertaining
to the issue of measurement.
4.4.1. Practical Difficulties in Measurement
197. Let us examine Prof. Montis discussion on the respective appropriateness of rules and standards:
One route to legal certainty would be to express all competition law in the form of rules. Rules have what has been
called formal realisability: a determinate set of facts triggers the application of a law. For example, the rule that a
minor is not entitled to vote, or a rule that states that all mergers where the combined market share exceeds 50 per
cent shall be blocked, is easily applicable because one fact is needed to trigger the rule. Rules maximise certainty by
constraining discretion.
132

198. I believe that the comparison between age and market shares considerably overstates the objectivity and
the ease of enforcement of merger law.

199. To determine whether someone is a minor and thus entitled to vote is a very objective task, because
generally the date of birth is clearly reported on identity cards or other documents, and the computation
process is extremely simple. Even if possibilities of mistake or fraud cannot be ruled out, they are very
limited and deprived of practical significance.

200. To the contrary, identifying a relevant market is a highly uncertain and even subjective task. It is
guesswork, not science. Market shares are not facts. It is well known that competition agencies can first
decide what decision they want to make, and then design the market accordingly. Moreover, even if firms
have correctly identified the relevant market, they may be unable to compute the market shares with a
reasonable certainty, because they are not supposed to exchange the relevant data with their competitors.

201. Consequently, it is hardly useful to quantify the market share percentage as from which a firm can (or
cannot) be prosecuted, because such a numerical threshold rests on grossly indeterminate foundations. As
Keynes put it in another context, Our precision will be a mock precision if we try to use such partly vague and non-
quantitative concepts as the basis of a quantitative analysis.
133

130
131
Id., p. 20.
132
Id., p. 20.
133
John Maynard KEYNES, The General Theory of Employment, Interest and Money, chapter 4, II.

26

202. So, I do not know why Professor Monti maintains that a 50 % percentage threshold is easily applicable
and maximise certainty by constraining discretion.
134

203. Conversely, Professor Monti declares,

This discussion suggests that a workable system of competition law must operate with a mixture of rules and
standards, opting for rules whenever the error costs can be tolerated, and setting out standards when the cost of
implementing the standard is less than the error cost of a rule. One element that can lead to standards that are
cheaper to apply and less prey to the whims of the decision-maker will be an express identification of the policies
being pursued by the application of the laws. However, a tradeoff must often be made between cheap-to-enforce, rigid
rules that risk producing error, and costly-to-enforce standards that can yield more precise results according to the
goals of competition law.
135

204. I struggle to see how a standard could be said to minimize the costs of errors. This cost can be
minimized only if errors can theoretically occur. Now, it is often hard to speak of errors in
competition law, because the very concept of error, in order to be meaningful, must be contrasted with an
objective benchmark of truth. In competition law, this benchmark is generally quite simply lacking.
136

205. Besides, Prof. Monti writes:
Thus, while a rule might make the law workable, there may be certain instances where the enforcement of the rule
makes the market function poorly.
137

206. And,
In the context of competition law, this means that rules do not allow the market to develop in the most effective way
possible. Accordingly, when rules fail, law is best administered by standards, which require the decision-maker to
discover all relevant facts and to assess them in terms of the purposes or social values embodied in the standard.
138

207. It seems as though he had to choose between a workable criterion which makes the market function
poorly and an unworkable criterion which improves the functioning of the market. Yet, in principle, a law
should be both workable and apt to achieve a desirable goal. If a suitable rule cannot be figured out, it is
better to have no law at all, except if it is not possible to dispense of it.
4.4.2. Conceptual Impossibility of Measurement
208. Most issues in competition law rest on the hypothesis that the magnitudes involved might be measured.
For instance, Professor Monti writes that:
In some cases the Court takes the view that a restriction of the economic freedom of market players is a necessary
element in the identification of a restriction of competition but is not sufficient: the degree to which economic freedom
is restricted must be measured.
139

Under this approach one measures the degree to which economic freedom is limited by agreements, and assesses the
consequences of the agreement (in the two cases above by considering the degree of market foreclosure or the degree of

134
Moreover, contrary to what Professor Monti says, the application of (repressive) law must as a rule be triggered by a
determinate set of acts, not of facts.
135
EC Competition Law, pp. 17-18. Curiously, p. 81, Prof. Monti holds the opposite claim, namely that standards increase the risk
of errors: Economic standards require the decision-maker to investigate often ambiguous welfare consequences of industrial behaviour, while rules
allow judges to determine, based on a few easily observable facts, whether a practice is lawful or not. A young and inexperienced Commission would
have been attracted to a rule-based approach, rather than risk making errors by misapplying economic theories.
136
The enforcement of standards is akin to a value judgment, as opposed to an existential proposition. See, Ludwig von
MISES, Theory and History An Interpretation of Social and Economic Evolution, Ludwig von Mises Institute, 2007, Chap. 1, p. 19
(Propositions asserting existence (affirmative existential propositions) or nonexistence (negative existential propositions) are descriptive. They assert
something about the state of the whole universe or of parts of the universe. With regard to them questions of truth and falsity are significant. They
must not be confounded with judgments of value. Judgments of value are voluntaristic. They express feelings, tastes, or preferences of the individual
who utters them. With regard to them there cannot be any question of truth and falsity. They are ultimate and not subject to any proof or evidence.).
137
EC Competition Law, pp. 16-17.
138
Id., p. 17.
139
Id., p. 31.

27

price competition). The question is whether the market operates with sufficient freedom, or whether the agreement
restricts the free play of competition to an appreciable extent.
140

209. So it appears that Prof. Monti thinks that economic freedom and the degree of price competition (and also the
degree of market foreclosure) are measurable magnitudes.

210. The neoclassical school of economics, as it is well known, believes that the consequences of an action can
be measured by computing the surplus obtained by the relevant persons (that is, through the use of the
Kaldor-Hicks criterion). I do not think that this tool is meaningful; yet, hereinafter, I will assume it is.

211. It is theoretically possible, from the neoclassical point of view, to assess the economic meaning of actions
generally perceived as non-economic. For instance, if a prisoner longs for liberty and is willing to pay
100 000 in order to be released, his freeing would increase wealth by the said amount of money.
141

212. Nevertheless, it is clear that Prof. Monti, in the quotations given above, does not claim that economic
freedom and the degree of price competition have to be measured with the surplus tool. Indeed, he
maintains that the KaldorHicks measure of economic efficiency, so fundamental to neoclassical thought, is incompatible
with ordoliberal philosophy.
142

213. It is logical enough, because, in order to apply this criterion, the examiner is supposed to take into account
the willingness to pay of the relevant persons. He is not supposed to substitute his own value judgment.
Yet, here, it is not easy to determine who are the relevant persons whose willingness to pay has to be
measured. Moreover, it is not clear where any deadweight could be found.

214. The problem is that, if the surplus tool is not used, I do not see what other metric could be employed.
However, to carry out a measurement without a metric is a conceptual impossibility. At best, competition
agencies could say that economic liberty is or is not appreciably, extremely, or significantly
restrained, but it would be a totally subjective judgment.

140
Id., p. 33.
141
Of course, I consider here only the positive side of the balance. Besides, Nicholas KALDOR had foreseen the possibility of
taking freedom into account. See Welfare Propositions of Economics and Interpersonal Comparisons of Utility, The
Economic Journal, Vol. 49, No. 195 (Sep., 1939), p. 551, note 1. Yet, in the reality, the freedom side is never considered. If
it were, the result of the trade-offs illustrated by the Harberger triangle would be dramatically changed.
142

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