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The Treatment of Regulated Networks in European and U.S. Antitrust Law, having special regard to the energy sector

Research Project

Investigator:
Nicole Daniel

Abstract:
Industries in the utility sector, e.g. energy, transport, communications and water, are often described as regulated networks or network industries because of their dependence on some kind of physical distribution network. In both the European Union and the United States, the organisation of network industries has undergone significant changes in the past three decades. Most of these network industries have moved from vertically integrated monopolies to liberalisation. With the liberalisation of these formerly monopolistic markets, competition has become an issue. However, these networks are still regulated to a certain extent due to their importance. Therefore it is important to determine the role of antitrust law in these industries.

In the U.S., the Supreme Court in Verizon Communications Inc. v. Law Offices of Curtis V. Trinko LLP held that there was no room for antitrust remedies when sector-specific regulation was in place. The recent judgment of the U.S. Supreme Court in Pacific Bell Telephone Co. DBA AT&T California v. LinkLine Communications Inc. takes that thinking one step further. It held that an obligation to deal, if imposed by an instrument other than an antitrust order, rules out the role of an antitrust review of that obligation.

In the European Union, on the other hand, antitrust law operates side by side with regulation. The General Court (previously known as the "Court of First Instance") held in its decision in Deutsche Telekom AG v. Commission that ex post competition rules will continue to apply despite the existence of ex ante regulation, unless sector-specific regulation confers no margin of freedom upon the dominant firm to pursue an independent pricing policy. This approach was followed in Telefonica and Wanadoo, i.e. other telecommunications cases.

This research will analyse and compare the legal situation in the European Union and the United States regarding the relationship between regulated networks and antitrust law.  Account will be taken of the different legal systems and the respective histories of regulated networks in the European Union and the U.S. This involves a fundamental analysis of regulated networks and the economic theories behind them, as well as the relevant public policy issues.

The extensive case law for the telecommunications sector will lay the foundation for this comparative analysis. However, this research project will especially refer to the energy sector as well due to the number of recent decisions in this sector in the European Union.

This research project aims to stimulate the discussion as to whether one approach is preferable to the other and/or whether the European Union and the U.S. should aim to develop a global approach on the issue of the antitrust treatment of regulated network industries, taking account their different legal systems.

Abstract - PDF Version