The relationship between Competition and Regulation through two apparently different approaches: US Trinko case and EU Deutsche Telecom


Antitrust analysis must sensitively recognize and reflect the distinctive economic and legal setting of the regulated industry to which it applies. One factor of particular importance is the existence of a regulatory structure designed to deter and remedy anti-competitive harm. Where such a structure exists, the additional benefit to competition provided by antitrust enforcement will tend to be small, and it will be less plausible that the antitrust laws contemplate such additional scrutiny. Where, by contrast, there is nothing built into the regulatory scheme which performs the antitrust function, the benefits of antitrust are worth its sometimes considerable disadvantages.”

Verizon Communications v Law Offices of Curtis V Trinko, LLP, 540 U.S. 398 (2004)


The US Trinko case approach above mentioned has provided – at least for European standards – a (relatively) unusual view about the relationship between competition and regulation, calling into question the long-established supremacy of the former over the latter. In other words, the US Supreme Court held that when the regulatory framework is well-structured and enough targeted to grant a competition protection, the antitrust function can be effectively performed by the regulation system, avoiding a duplication of ex ante and ex post enforcement. In this paper, I will address the issue under EU and US perspective, taking in account two law cases apparently placed at opposite ends, namely Trinko and Deutsche Telecom cases and I will explain why Trinko case finding could be considerate an equilibrate formula to manage the boundaries between regulation and competition. Nevertheless, I will point out also the reasons why this pattern might find some difficulties in its practical application in the EU framework.

The starting point of this work is the US Trinko case. In this decision, indeed, the Supreme Court took a quite firm and resolute stance in reshaping the relationship between competition and regulation, restricting the scope of action of the antitrust law based on a useless duplication of costs due to competition enforcement. In the Court’s opinion, actually, given the detailed and effective regulatory pattern in force as of 1996, the antitrust enforcement would have not resulted in a benefit. In this connection, the Supreme Court held that antitrust breaches are difficult for court to judge because of their technical complexity and continuous occurrence of violations. For these reasons, according to the Supreme Court, the continuing supervision can be better performed by regulatory agencies on daily basis rather than by an antitrust court. Furthermore, the antitrust scrutiny can be highly costly. In this respect, the Court held that a cost-benefit assessment must be performed in order to allow antitrust enforcement to be carried out. Not surprisingly, this approach has drawn several criticisms, especially because the Telecommunications Act of 1996 expressly included an antitrust saving clause, but nevertheless the Supreme Court closed the doors for a simultaneous application of antitrust and regulation scrutiny. The main critical views on Trinko case hinges on: i) the alleged higher cost of ex post enforcement, a statement which is deemed by many scholars not accurate and questionable; ii) the Supreme Court failure to state which are the legal standards that a regulatory programme must meet to block antitrust claims; iii) the lack of any reference in the 1996 Act to the analysis of costs-benefits of antitrust enforcement as a key criterion in order to allow antitrust lawsuit[1].

Under this latter views, therefore, the Supreme Court failed to estimate the full potential of antitrust enforcement and its competence in complementing regulation or bridging the gap where the latter fails in its aims, resulting in a reduction of the scope of competition scrutiny against regulated firms. Notwithstanding all these – to a certain  embraceable – considerations, in my opinion the J Scalia stance has been courageous and well-grounded, in view of the fact that the 1996 Act provided a number of detailed statutory requirements upon incumbent local telephone company, the US regulatory apparatus has already proved successful and effectively imposing orders and fines to Verizon and finally, the antitrust claim at issue looked quite vague and weak. For these reasons, therefore, the Trinko case can be considered as first step towards the emancipating of regulatory pattern from antitrust surveillance, which might lead to a better use of public resources, avoiding the duplication of costs due to the double intervention of ex ante and ex post enforcement and banning antitrust claims which appear to be not adequately grounded.

On the other side of Atlantic, instead, the European approach is still highly tied to a supremacy of EU Competition law over regulation authorities. In this respect, the paradigm case addressing a margin squeeze issue is Deutsche Telekom AG v. Commission, which offers a clear example of overlap of EU Competition law and national regulation. In this case, the German national regulatory authority responsible for the regulation of the telecommunication sector had cleared the price practice adopted by the incumbent Deutsche Telekom AG which led to the margin squeeze. Nevertheless, the Commission didn’t hold the RegTP’ s authorization could exempt the undertaking from the application of Article 82 EC. Therefore, the Commission found the German incumbent responsible for the violation of Article 82 EC also because the anti-competitive conduct could be avoided by  the undertaking by the means of autonomous action of Deutsche Telecom by increasing retail charges. According to the Commission’s reasoning it is completely immaterial for the application of EU competition law that the undertaking was compliant with national legislation. The strong Commission’s stance shows all the difficulties EU still has to face in the process of shifting from monopoly to competitive markets. The EU action, indeed, has been facing the fierce resistance opposed by many national governments in its action of promoting efficiency and competition in the EU internal market. In this respect, there is another chief argument behind the interventionist position taken by EU Commission, namely the weakness of many national regulatory authorities. In other words, unless the NRA’s will show a certain degree of autonomy and independence from the national governments the Commission will play a supervisory role in order to ensure the liberalisation of the national markets and to avoid special privileges and protections to incumbents.

In this connection, therefore, it can be argued that US Trinko case is not a useful point of comparison because in the latter US Regulators had already sanctioned defendant company, the 1996 Act expressly enabled the simultaneous operation of ex ante and ex post enforcements. However, also Deutsche Telecom case has risen many criticisms with regard to the dogma of the supremacy of EU competition law as guiding principle and the proportionality of its action. Under this view, indeed, a “case by case” approach might be able to realize competitive effects by means of regulation, or when legislator wants to pursue policies other than competition and efficiency of market[2]. In this perspective, the more flexible approach above mentioned might grant that Competition law serve as temporary measure, waiting for the NRA’s reach level of independence that make them trustable.

In conclusion, Trinko case findings, notwithstanding all the grounded criticisms, seems to be a balanced and brave answer to the question at stake, taking in account the issues tied to the overlap of regulation and antitrust enforcement in terms of costs analysis, fear of false positives, wasteful litigation and optimisation and distribution of tasks between regulatory agencies and courts. Although Supreme Court doesn’t indicate the conditions a regulatory system must have in order to preclude antitrust claims (but – in my opinion – if it had done so, it would have drawn even harder criticisms), Trinko case can be seen as a significant effort to re-design the relationship between regulation and competition, without taking for granted the supremacy of the latter over the former. For these reasons, I tend to agree with the J Scalia’s statement. Nevertheless, it seems to me that the Supreme Court approach suits better in a more unitary regulatory framework like the US one, while its application within the European boundaries might rise problems because of the weakness of national regulatory agencies and the resistance opposed by state members to the Commission efforts to liberalise utilities and create an internal market. In this regard, however, Trinko case findings could serve as an incentive for the European national governments to enhance and develop their regulatory systems in a more effective and competitive fashion, trying to avoid that kind of political interference that triggered the EU Commission’s interventionist approach just mentioned above.

[1] Howard A. Shelanski, The Case for Rebalancing Antitrust Regulation, 109 Mich. L. Rev. 683 (2011).

[2] Monti Giorgio, Managing the Intersection of Utilities Regulation and EC Competition Law (April 2008). LSE Legal Studies Working Paper No. 8/2008.

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