On

 A  Novel  Three  -­  Part  Method  For  Combating  Anti  -­  Competitive  Practices  

                                                               By:  Efthimios  G.  Latsoudis,  LL.B,  LL.M    

Prolegomena  

Anti   competitive   behaviours   are   stalling   the   development   of   the   economy   and  
the   society   as   a   whole,   by   hindering   innovation   and   the   expansion   and  
distribution  of  wealth  evenly,  among  all  its  economic  units.  

The  current  approach  for  combating  anti  competitive  behaviour  has  been  a  mix  
of  good  and  bad  strategies.  

A  good  strategy  is  one  that  utilises  minimum  sources  and  brings  a  near-­‐optimum  
result  –  a  bad  strategy  is  the  opposite.  

With   the   present   proposal   we   shall   outline   three   novel   methods   for   combating  
anti-­‐competitive  behaviour.  

1. Blue  Dot  Incentive  Scheme  

In   order   to   decide,   in   the   first   place,   on   how   to   combat   anti-­‐competitive  

behaviour,  one  needs  to  firstly  understand  the  raison  d  etre  of  such  tactics.  

Asking  a  company  not  to  apply  anti-­‐competitive  practices,  is  like  asking  a  person  
to  cut  his  own  leg.  

 
From   the   beginning   of   time,   traders   and   companies   engaged   in   cutthroat  
“competition”  and  tried  to  cannibalise  each  others’  market  share  by  using  every  
dirty  trick  in  the  book.  
 
 
From   the   Roman   times   to   the   Middle   Ages,   the   authorities   imposed   some   kind   of  
competition  law  in  one  way  or  another  in  business  practices  (example  gratia,  in  
Julius   Caesar's   time   according   to   Babled   in  De   La   Cure   Annone   chez   le   Romains,  
also  Wilberforce  (1966)  p.20,  21.  22).  
 
 
The   concept   of   “cornering   the   market”   was   the   epitome   of   a   good,   not   a   bad  
trading  tactic  –  dumping,  exclusive  dealing,  barrier  to  entry,  price  fixing,  refusal  
to   deal,   dividing   territories,   limit   pricing,   were   considered   quite   valid   tactics   in  
order  to  gain  market  share,  raise  prices  and  eliminate  competition.  

In   recent   times,   the   inception   of   the   basis   of   competition,   or   anti-­‐trust   law,   arose  
in  the  United  States  with  the  Sherman  Act  in  1890s,  where  the  need  to  break  up  
monopolists  such  as  AT&T  and  Standard  Oil  was  readily  apparent.  

Through  the  development  of  the  regulatory  framework,  matters  have  reached  an  
equilibrium   whereby   the   position   is   NOT   that   companies   happily   and   pro-­‐
actively   exercise   pro-­‐competitive   practices,   but   that   they   will   try   to   distort   the  
market  whenever  possible.  

As  such,  engaging  in  anti  competitive  behaviour  is  simply  a  matter  of  survival  –  if  
there  are  three  competing  entities  and  one  uses  ACP  (anti  competitive  practices)  
and  the  others  do  not,  it  will  gain  market  share  –  if  two  use  ACP,  the  third  one  
will  cease  to  exist.  

 
Anti   competitive   behaviour   is,   prima   facie   and   if   not   regulated   properly,   a  
powerful  weapon  in  the  hands  of  companies  –  they  do  have  a  big  incentive  to  use  
it   because   it   increases   their   profits   and   survivability   –   for   the   companies   it   is   not  
therefore  evil  per  se,  but  a  positive  reaction.  

The  above,  is  a  valuable  intuition  and  conclusion,  which  provides  a  guideline  on  
how  to  deal  with  this  problem  

The   only   disincentive   for   companies,   under   the   current   regulatory   framework,   is  
that   if   they   are   caught   practicing   ACP,   they   may   be   fined   or   restricted   –   under  
these   rules   however,   unfortunately,   this   game   becomes   a   game   of   cat   and   mouse  
chase.  

Alvin   Toffler   very   correctly   points   out   in   his   latest   book   written   in   2006,   “The  
Revolutionary  Wealth”,  that  private  entities,  as  an  institution,  will  always  utilize  
the   latest   technology   and   human   and   natural   resources   in   order   to   stay   ahead   of  
the  game.  

For   that   reason,   private   (companies),   vis   a   vis   the   public   sector   (regulatory   &  
competition  authorities)  will  always  be  faster  and  smarter.  

Evidence   that   the   above   conclusion   is   true,   is   provided   by   the   fact   that   we  
witness   an   increase   of   ACP   with   the   current   system,   therefore   pointing   to   its  
ineffectiveness   due   to   the   big   discrepancy   in   the   capabilities   of   each   player  
(public-­‐private  sector).  

The  aim  therefore  of  the  regulator,  should  be  to  devise  such  a  system  and  rules  in  
order   to   incentivise   (bribe)   the   potential   perpetrator   companies   to   self-­‐regulate,  
rather  that  chase  after  them,  an  impossible  mission.  
Our  proposal  for  such  a  system  could  be  as  follows:  

when   recycling   became   the   philosophy   du   jour,   and   not   unjustly,   due   to  
widespread   pollution   and   waste   dumps,   after   a   few   years   it   also   became   E.C.   law  
and   effective   by   the   "Packaging   and   Packaging   Waste   Directive   -­‐   94/62/EC",  
which  is  binding  on  all  companies  if  their  products  use  packaging  and  requires  
manufacturers  to  recover  their  own  packaging.    

According  to  the  directive,  if  a  company  does  not  join  the  Green  Dot  scheme,  they  
must   collect   recyclable   packaging   themselves,   although   this   is   almost   always  
impossible  for  mass  products  and  only  viable  for  low-­‐volume  producers.    

Regulatory  authorities  in  individual  countries  are  empowered  to  fine  companies  
for  non-­‐compliance,  although  enforcement  varies  by  country  (source,  wikipedia:  
http://en.wikipedia.org/wiki/Green_Dot_(symbol))  

Essentially   that   meant   that   companies   had   to   pay   up   an   amount   of   money,  

depending  on  their  recyclable  stock,  in  order  to  comply  with  the  law.  

Naturally,  the  companies  had  no  other  motive  to  do  so,  other  than  the  fact  that  
the   participating   countries   could   enforce   the   law   and   set   fines   for   non-­‐
compliance.  

At  some  point  however  in  Germany,  the  idea  of  the  Grune  Punkt  (The  Green  Dot  
Scheme)  was  originally  introduced  by  Duales  System  Deutschland  GmbH  (DSD)  
in   1991,   following   the   introduction   of   a   Packaging   Ordinance   under   the   Waste  
Act.  

 
The  Green  Dot  was  a  distinct  recycling  logo,  in  schema  1,  below;  

 
 

Schema  1:  Der  Grune  Punkt  

On  a  conceptual  level,  the  Green  Dot  Scheme  (GDS),  as  it  came  about  to  be  known  
in  English,  constituted  a  different,  albeit  more  subtle,  attack  vector  on  potential  
infringers  of  the  recycling  law.  

This  was  the  fact  that,  as  the  Japanese  say,  “the  nail  that  protrudes,  will  be  hit  by  
the  hammer”;  

that   is,   early   adopters   would   gain   wide   and   valuable   “Green   Recognition”   and  
would  capture  the  consumers’  ,  the  authorities’  and  the  general  public’s  heart  as  
being  on  the  right  side  of  morality.  

The  ones  that  did  not  adopt  the  scheme,  would  be  captured  in  the  minds  of  the  
public  as  being  “evil”  polluters.  

For   a   company’s   profitability   and   ultimate   survivability,   the   most   important  

aspect  is  to  capture  the  public’s  heart.  

 
 For  that  reason,  being  part  of  the  “new  scheme”  becomes  a  matter  of  survival  and  
not  a  matter  of  choice.  

If  a  company  chooses  to  adopt  an  anti-­‐competitive  stance  it  will  win  x  but  it  will  
ultimately  lose  2x  and  also  tarnish  its  brand  name  which  is  a  lethal  outcome  in  
the  long  term.  

Mathematically,  this  can  be  portrayed  by  a  decision  tree,  as  in  schema  2,  below;  

 
 
Compliance             Non  Compliance  

Improvement  Of  Brand  Name                              Tarnishment  Of  Brand  Name    

Turnover  Increase  If  Adopted  Early                            Marginalisation  Of  Market    

              Share  If  Not  Adopted  

                           ECONOMIC    

                               ENTITY  

Schema  2:  

Economic  Entity  Decision  Tree  Dichotomy  

In  View  Of  Incentive  Scheme  Introduction    

 
 The   method   through   which   the   companies   can   be   rated   and   allocated   in   the  
spectrum   of   competitiveness,   so   as   to   gain   the   according   categorical   based  
golden/silver/bronze   blue   dot,   is   dependent   on   the   methods   of   evaluation   and  
monitoring  of  an  entity’s  competitiveness.  

Some   of   these   methods   already   exist   and   can   be   applied   the   competition  
authorities,   for   example,   could   award   a   competition   practices   grade   based   on   the  
breaches,  borderline  breaches  or  simply,  absence  of  breaches.  

In   any   case,   the   Blue   Dot   Incentive   Scheme,   more   or   less,   aims   to   achieve   exactly  
what  an  old  mafia  saying  states,  namely;    

“when   you   wish   someone   to   do   something   for   you,     you   first   bribe   him,   then  
threaten  him  and  then  exterminate  him,  in  this  order”  

With  the  Blue  Dot  Scheme,  the  aim  is  to  bribe  them  to  legality.  

   

   
 
 
 

 
 
 
 
 
“ANTI TRUST – POWER TO THE Schema  3:  Concept  
  Blue  Dot  Scheme  
CONSUMER”
Logo  
 

 
  
2. Algorithm  Based  Monitoring  

A   large   part   the   potential   anti-­‐competitive   practices,   aim   for   one   particular  
result;  the  increase  of  prices  and  ultimately,  profit.  

If  society  is  simply  left  to  market  forces,  the  strong  entities  will  eventually  form  
cartels   and   monopolies   and   will   attempt   to   siphon   off   the   society’s   resources   for  
their  own  benefit  in  a  classic  “winner  takes  all”  scheme.  

Such  balance  of  the  market  is  sub-­‐optimal  because;  

a. It  creates  barriers  to  entry  for  new  players  

b. It  slows  down  the  rate  of  innovation  

c. It  slows  down  the  creation  of  wealth  

d. It   directs   resources   to   major   economic   entities   only   –   establishes  

unbalanced  distribution  of  wealth  

In   view   of   the   above,   a   method   for   monitoring   and   combating   unjust   price  
increases   (or   decreases,   in   the   cases   of   predatory   pricing   schemes)   must   be  
devised.  

The  level  of  prices,  whilst  not  the  only  indication  of  anti-­‐competitive  practices,  is  
still   a   very   important   indicator,   as   it   is   the   logical   progression   of   ACP   and   the  
only  parametrical  data  that  can  be  quantified.  

 
So   far   the   methods   used   have   been   reactive   rather   than   proactive   –   the  
authorities   utlilise   either   fines,   cartel   participator   betrayals,   whistleblowers   or  
simply  observe  price  hikes/increases  long  after  they  have  changed.  

Ab   initio,   the   corpus   of   data   that   needs   to   be   monitored   is   huge;   there   are  
millions   of   entities   operating   in   the   market   and   a   multitude   of   methods   in   which  
they  may  engage  in  anti  competitive  behaviour.  

Ergo,  there  is  a  huge  corpus  of  data  that  must  be  monitored,  optimally,  on  a  real  
time  basis,  and  solid  conclusions  must  be  reached,  again  real  time.  

The   correct   method   would   be   a   proactive   method   –   this   would   automatically  

track   down   all   pricing   transactions   and   according   to   certain   standards   and  
parameters,  would  raise  red  flags  for  potential  undue  changes  in  prices.  

Such  systems  do  exist  in  a  sector  of  computer  science  and  mathematics  which  is  
called   data   mining;   the   subject-­‐matter   techniques   are   Bayesian   network   &  
statistics  and  neural  networks,  already  used  by  private  companies  as  the  current  
standard   in   order   to   delve   through   piles   of   data   and   reach   early   conclusions  
(http://www.springerlink.com/content/hj76101328205810/   and  
http://www.nd.com/welcome/whatisnn.htm,   also  
http://en.wikipedia.org/wiki/Artificial_neural_network,  
http://en.wikipedia.org/wiki/Bayesian_network).  

As   a   good   example,   credit   card   companies   regularly   skim   through   the  

transactions  of  their  customers  in  order  to  combat  fraud  –  if  a  said  transaction  
does  not  conform  to  the  customary  activity  of  the  consumer,  it  is  being  flagged  
and   investigated   further,   by   human   intelligence   (see   3,   whistleblower   &   head  
hunter  involvement,  below).    
The   underwriter   in   fact   had   such   an   experience;   while   staying   in   Milan   on  
business  in  2008,  I  tried  to  buy  a  lady’s  bag  for  a  friend  with  my  VISA  card  from  a  
Tod’s  shop  in  Via  Del  Spiga  –  immediately  I  got  a  call  from  the  card  company  in  
my  cellphone,  aiming  to  verify  whether  the  transaction  was  genuine  or  whether  
my  card  had  been  stolen  –  the  algorithm  used,  naturally  wondered  why  a  male  
such  as  myself,  used  only  to  buying  gadgets  off  the  internet  from  Greece,  would  
suddenly  purchase  a  ladie’s  bag  in  Italy!  

In  this  particular  case,  this  was  a  false  positive  detected  by  the  system,  but  it  hurt  
nobody  that  the  transaction  was  verified.  

In  fact,  in  my  mind,  it  made  me  use  VISA  more  often,  safe  in  the  knowledge  that  a  
smart   algorithm   will   detect   any   transaction   that   may   be   committed   by   a   thief,  
with  my  card.  

The  benefits  of  such  system  are  that  it  is  a  natural  Panoptikon  –  companies  will  
supply   their   pricing   in   real   time   to   a   central   data   repository   maintained   by   the  
competition  authorities  and  the  prices  will  be  monitored  for  undue  fluctuations,  
again   in   real-­‐time   –   no   need   to   target   specific   entities,   all   are   targeted  
automatically  and  more  importantly,  they  know  it.  

Knowledge   of   being   monitored   100%   of   the   time   is   the   main   concept   of   the  
Panoptikon  and  is  a  great,  a  priori,  deterrent.  

A   good   parallel   tactic   would   be   for   the   data   mining   algorithm   to   be   open   and  
known   to   companies   supplying   the   data,   so   that   they   may   self-­‐regulate,   also   a  
priori,  and  not  attempt  to  raise  any  red  flags.  

Any  red  flag  raised  can  be  investigated  further  by  human  intelligence.  
  

Automation   –   real   time   monitoring   –   monitoring   of   ALL   data   –   speed   –   cost   –  

surgical  intervention  when  required,  are,  by  far,  the  biggest  advantages  of  such  a  
system.  

Starting  from  a  primitive  base,  such  system  could  connect  all  world  competition  
authorities  in  a  central  data  repository,  compare  data  between  all  the  companies  
in  the  world  and  provide  a  very  reliable  indication  of  anti-­‐competitive  practices  –  
the  more  data,  the  analytics  results  will  be  closer  to  the  optimum.  

Compared   to   the   current   system,   whereby   authorities   intervene   after   receiving  

ex   post   facto   information   or   by   using   their   intuition,   such   system   would   monitor  
all  companies  at  all  times,  most  would  self  regulate  and  the  few  ones  that  do  not,  
would  be  hit  hard  with  all  the  competition  authority  resources.  

In  any  case,  with  the  use  of  this  system,  the  net  outcome  will  be  positive.  

3. Enhanced  Whistleblower/Head  Hunter  Incentives  

Society   in   general,   has   many   institutions;   the   public   institutions   (authorities,  

universities,  courts,  etc),  the  private  companies,  the  individuals,  the  NGOs,  etc.  

So   far   the   attack   vectors   against   anti   competitive   practices   derived   from   the  
public   sector   institutions   and   namely   the   competition   authority   and   the  
regulators.  

Needless   to   say,   such   attack   vector   is   very   costly   in   resources   as   it   necessitates  

expert   human   resources   (competition   lawyers,   economists,   regulators,   judges,  
courts,   general   administrative   support,   offices,     enactments   of   laws   by   the  
legislative  branch  of  governments,  etc).  

A  most  excellent  attack  vector,  which  has  been  devised  by  the  regulators,  is  the  
provision  of  incentives  to  betrayers  in  cartels.  

These   are,   in   turn,   exonerated,   after   their   betrayal   of   the   cartel   to   the   authorities  
–   this   practically   means   that   the   infringing   entities   themselves   are   involved   in  
combating  such  practices  –  again,  self  –  regulation,  an  optimum  tactic  because  it  
uses  minimum  resources  and  gives  a  priori  disincentive  to  form  a  cartel.    

Anti  competitive  combating  techniques,  would  however  be  further  enhanced  by  
utilizing  as  many  as  possible  institutions  in  society.  

It  follows  that  in  order  for  the  other  institutions  to  be  motivated,  incentives  must  
be  provided.  

Third   party   and   not   intra   party   whistleblowers   and   anti   –   competition   head  
hunters  can  be  given  cash  rewards  and  could  be  honoured  and  ranked  according  
to   their   effectiveness   in   a   Pro-­‐Competition   Wall   Of   Fame   in   the   Competition  
Authority’s  central  website.  

A   corresponding   Wall   Of   Shame   employed   under   the   aegis   of   the   Blue   Dot  
Scheme,  as  in  (1),  above,  could  also  be  utilized,  for  maximum  effectiveness.  

Companies  take  great  pride  and  advertise  their  “green  practices”,  why  should  not  
advertise  and  take  pride  in  their  “blue  practices”?  

 
Law,  Economic,  Mathematics,  Computer  Science  and  other  University,  School  and  
College  departments  could  potentially  compete  with  each  other  and  also  assign  
projects  with  the  aim  of  “hunting  the  anti-­competitor  who  distorts  the  market  and  
steals  from  the  people”.  

In  this  manner,  the  metaphorical  society’s  hounds  would  be  unleashed,  chasing  
the  dirty  players  in  the  market  –  no  company  would  be  able  to  hide  for  long,  or  
survive  such  onslaught  of  societal  forces  chasing  after  them.  

Again,  crucial  in  this  regard  is  the  opening  up  of  information  to  all  entities.  

As   in   algorithm   -­‐   based   monitoring   in   (2),   above,   there   is   absolutely   no   reason  

for   the   companies   to   keep   their   eventual   market   prices   or   market   agreements  
secret   –   on   the   contrary,   there   is   an   obligation   to   inform   the   society,   of  
agreements  that  may  distort  the  market.  

If  the  above  principle  becomes  a  blanket  principle,  it  levels  out  the  playing  field  
for  every  economic  entity  involved  and  also  renders  the  market  transparent.  

Transparency   achieved   through   the   opening   up   of   information   is   key   and   of  

paramount  importance  in  combating  anti  competitive  behaviours.  

Once  the  data  is  open  to  the  public,  automatic  analytics  can  be  run  through  the  
system   and   anyone   can   review   them   for   deviations   from   the   normal   (human  
analytics).  

 
 4. Schematics   :   Combining   Human   &   Artificial   Intelligence   To   Combat  
ACP  –  Proposals  3  &  4  
     
 

Schema  4   STEP  TWO:  

AUTOMATIC  
  ALGORITHMIC  
ANALYSIS  OF  DATA    
  ARTIFICIAL  
INTELLIGENCE  

STEP  ONE:  
 
SENDING  
DATA  TO  CDD  
COMPANY  1       CENTRAL  
DATA  
    REPOSITORY  

 
 
STEP  ONE:   STEP  THREE:   THIRD  PARTY  
  SENDING  DATA   ANALYSIS  OF  DATA   REVIEW  
TO  CDD   BY  THIRD  PARTIES  
   
 
COMPANY  2    
 
 
  STEP  FOUR:  
COMPETITION   ANALYSIS  OF  ALL  DATA  BY  
  AUTHORITIES   COMPETITION  AUTHORITY  
STEP  FIVE:  

INTERVENTION    
OF  COMPETITION  
AUTHORITY    

 
Conclusion  

Anti   competitive   behaviours   must   be   dealt   through,   swiftly,   effectively   and   in   a  

cost  efficient  manner.  

This  combating  must  become  a  matter  of  priority  for  societies  because  societies  
have   reached   a   point   whereby   globalization   has   brought   about   further  
integrations,   consolidations,   mergers   and   acquisitions   in   the   market,   with  
market  power  slowly  being  directed  into  few  entities.  

This   fact   poses   a   great   risk,   namely   that   global   wealth   expansion,   distribution  
and   the   rate   of   innovation   will   be   significantly   hindered   by   anti   –   competitive  
practices.  

One   needs   to   merely   look   at   how   Microsoft   managed   to   keep   innovation   and  
competition   at   bay   in   the   field   of   personal   computers   for   more   than   ten   years,  
quashing   in   the   process   amazing   innovating   companies   such   as   Netscape   who  
was   a   pioneer   in   1998-­‐2002,   Real   Media   and   the   Open   Source   community  
(^  Case  T-­‐201/04  Microsoft  v.  Commission  Order,  22  December  2004).  
 
 
The   fact   that   Microsoft   received   punishment   by   the   competition   authorities   for  
its   practices   only   ten   years   after   a   continuous   breach,   points   out   to   the  
inefficiencies  of  the  current  system.  

For   this   reason,   the   underwriter   believes,   that   three   important   elements   will  
enable  societies  to  render  anti-­‐competitive  practices  more  efficient  in  the  future:  

 
  
 
1. Opening  Up  Of  Corporate  Data  To  All  
 
 
2. Running   Automatic   (Algorithms   &   Other   Artificial   Intelligence  
Analytics)   &   Human   Intelligence   Analytics   (Competition   &  
Regulatory   Authorities,   Universities   &   Other   Head   Hunters)   On   the  
Open  Data  
 
 
3. Incentivising   &   Penalising   Potential   Infringers   In   Order   To   Enable  
Self   Regulation   (Blue   Dot   Incentive   Scheme   –   Wall   Of   Fame/Wall   of  
Shame)  

The   world   Gross   Product   and   wealth   system   is   suffering   from   anti-­‐competitive  
behaviours.  

As   a   society   we   regularly   demonise   penal   criminals   who   may   commit   a   crime;   in  

most  instances  however  these  affect  matters  at  the  local  level.  

The   white   collar   crime   however   of   anti   competitive   behaviours,   because   by   its  
nature,  involves  institutions  that  have  gathered  the  most  resources  in  society,  is    
crime   committed   on   a   massive,   grand   and   global   scale   –   that   is,   the  
embezzlement  of  societies’  resources.  

Such   crimes   therefore   must   be   dealt   with   effectively   and   conclusively   with  avant  
guarde  methods,  such  as  the  ones  suggested  above.  

 
Global   society   has   been   motivated   recently,   with   the   Green   Initiative,   because   its  
survival  has  been  threatened.  

The   optimal   distribution   of   wealth,   which   can   be   achieved   by   removing   anti   -­‐
competitive  anomalies  in  the  markets,  is  a  cause  which  is  on  par  with  the  green  
initiative  –  and  this  is  because  it  ultimately  enhances  society’s  survivability  and  
welfare.  

For   that   reason   ACP   practices   must   be   combated   –   the   results   will   increase  
welfare  for  all  humanity  and  also  make  humanity,  as  whole,  progress  faster.  

By:  Efthimios  G.  Latsoudis,  LL.B.,  LL.M    

Monterosso  Al  mare,  Cinque  Terre,  Italy  Sunday,  08.08.10,  16:11  hours