Can a Competition Law Violation be Legally Insignificant? A U.S.

PerspectiveRussell W. Damtoft

Associate DirectorOffice of International Affairs

United States Federal Trade CommissionMoscow

July 9, 2010

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Fundamental Principle

• Business conduct will be judged illegal under the American antitrust laws only if it is likely to injure the competitive process and thus deprive consumers of the benefits of competition.

• Otherwise, there is a risk of deterring conduct that benefits consumers because of the superficial similarity between:– procompetitive conduct through which rivals try to displace

competitors through better products and service and lower prices, and

– anticompetitive conduct where rivals try to displace competitors through tactics other than competition on the merits.

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Determination of Anticompetitive Effects

• The determination of whether conduct is likely to injure competition takes place in one of two ways:

• Certain classes of conduct have been judicially determined by the Supreme Court to be inherently injurious to competition.– Examples: horizontal price fixing, horizontal allocation of markets,

bid rigging– Per se illegal– Injury to competition inferred from proof of such conduct and need

not be proved separately.

• In all other cases, injury to competition must be established– Examples: vertical price fixing, non-price restraints.– Rule of Reason applies– Injury to competition must be proved by plaintiff and may be

rebutted by defendant.

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Can Conduct be Illegal but Insignificant?

• Because:– the Per Se Rule applies only to conduct that inherently

injures competition, and– Proof of injury to competition is required in all other cases

under the Rule of Reason,

there is no class of conduct within the coverage of the United States antitrust laws that is legally insignificant.

• Some conduct may be so trivial as not to justify enforcement:– No economic incentive to bring them privately;– Prosecutorial discretion applied in public cases.

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Russian Law Compared

• Russian antimonopoly law appears to have three categories of prohibited agreements:

• First, agreements that inherently injure competition, and as to which no proof of lack of injury to competition may be admitted. – Art. 11.1 on fixing prices, market division, etc; not exemptible

under Article 13.– Similar to American Per Se rule.

• Second, agreements as to which injury to competition is relevant.– Agreements covered by Article 11.2 or 11.3 that can be

exempted under Article 13.– Similar to American Rule of Reason.

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Russian Law Compared

• Third, agreements that may or may not injure competition, but as to which proof concerning injury to competition may not be presented.– Certain transactions under Art. 11.1 address agreements

that may, but do not necessarily, injure competition (e.g., reducing production of goods, price discrimination, establishing criteria for professional associations).

– It is not clear whether these are exemptible under Article 13. – In these cases, a mechanism to ensure that agreements that

do not inherently injure competition are deterred by the law.