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Safe harbours – GAVIL – December 2017 OECD discussion


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This presentation by Andrew Gavil, Professor of Law from Howard University was made during the discussion “Safe harbours and legal presumptions in competition law” held at the 128th meeting of the OECD Competition Committee on 5 December 2017. More papers and presentations on the topic can be found out at

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Safe harbours – GAVIL – December 2017 OECD discussion

  1. 1. OECD Roundtable Discussion: Safe Harbours and Legal Presumptions in Competition Law Presentation by Andrew I. Gavil* Professor of Law, Howard University School of Law Senior Of Counsel, Crowell & Moring LLP December 5, 2017 * Copyright 2017, Andrew I. Gavil
  2. 2. Outline of Remarks • Some Historical Context – The Trend Towards “Effects-Based” Decision-making • Probabilistic Decision-making with Imperfect Information: Why We Need Presumptions • The Utility & Limits of Decision Theory 2
  3. 3. Historical Context – A Generation of Emphasis on Reducing “Error” Costs • What is a “more economic approach”? • The identified “problem”? • Bright line rules of liability & undemanding burdens of proof • Concern about over-deterrence due to unwarranted findings of liability (false positives) • The proscribed “solution”? • More demanding burdens of pleading, production & proof • Greater reliance on economic reasoning and economic evidence • Better integration of law & economics • The result? • More economically-informed and sound decisions overall • Although differences of judgment of course arise, there is shared dialogue and wide consensus about many of the “core concepts” of competition analysis 3
  4. 4. Error Costs (False Positives & False Negatives) Administrative Costs (Information Gathering & Process) Initially, predominant effect of increased information is reduction of false positives. Later, does increased information lead to continued decrease in false positives, or to an increase in false negatives? Error Costs & Economic Evidence Information (Especially Economic Evidence) Is there a point of diminishing returns? 4 Why increased incidence of false negatives? - Excess cost of process? - Overly demanding burdens of proof? Key: marginal increases in accuracy can be outweighed by cost
  5. 5. The Rise of Structured Analysis (The “Meta” Rule of Reason) 5 Using Shifting Burdens Claimant/Plaintiff’s Burden Articulate a Coherent Theory of Competitive Harm & Proffer Evidence to Support It (Direct or Circumstantial) Defending Party’s Burden Rebut Evidence of Harm and/or Articulate Cognizable Theory of Competitive Benefit & Support with Evidence (Direct or Circumstantial) Rehabilitate Evidence of Harm and/or Rebut Evidence of Benefit (Direct or Circumstantial) What then? Some jurisdictions compare or balance quantity of harm and benefit; others compare or balance strength of the evidence of each to determine predominant probability.
  6. 6. Probabilistic Decision-making: Some Assumptions 1. Access to “perfect” information is unlikely for competition decision-makers, both agencies and courts; 2. A “zero” rate of error in any system of human decision-making is therefore unattainable; 3. Collecting information is not costless; 4. Even with access to the same information, reasonable enforcers, including economists, can and do disagree about the probability of competitive harm; and 5. So competition law decision-making, like all legal process, is necessarily probabilistic – we need the devices of legal process. 6
  7. 7. Inferences & Presumptions – Building Blocks of Logic Informed by Economics 7 Reasonable Inferences (Single or Combination of Facts) Presumption Shifts Burden of Production What makes an inference “reasonable”? Can the weight of presumptions vary?
  8. 8. The Core of the Paradigm: Power + Conduct (Using Inferences & Presumptions: An Illustration) 8 Market Power Conduct Having a Tendency to Harm Competition Presumption of Anticompetitive Effect + = Define Market Calculate Share Evaluate Entry ++ Theory of Harm Incentive & Ability + Note the role of predicate facts….
  9. 9. The Impact of Default Presumptions 9 Neutral (Neither pro nor anti- competitive) AnticompetitiveProcompetitive Should we treat all conduct the same? How might the choice of default presumption affect a claimant’s burden of production & proof? Where should we start the process?
  10. 10. Decision Theory – Utility & Limits • How often will we reliably know… • Incidence of error? • Consequences of error? • Cost of administration? • How might prior assumptions influence application of decision theory? • Can application of decision theory be “biased”? • Are courts institutionally capable of reliably and consistently implementing decision theoretic rule selection? • Necessary information? • Expertise? • Risk in using exceptional case to design rule of general application? 10 Are competition agencies better situated to undertake?
  11. 11. The End! 11