Introduction

The regulation of mergers and acquisitions is the principal instrument by which competition authorities control the structure of an industry. In this chapter we are concerned with mergers that increase the market power of a single firm. It might be argued that since dominant firms can be regulated under Article 82, there is no need for a merger policy: one can allow mergers creating a dominant firm and regulate that firm's behaviour ex post. Furthermore, there is evidence that most mergers do not reduce competition, so that merger policy is a disproportionate response. However, merger law is necessary for the following reasons First, once the market is dominated by one or a few strong firms, the competition authorities may not have the resources or the information to pursue every anticompetitive action so that preventing the merger is a more cost-effective way of maintaining competition. Second, merger policy may be to the benefit of the merging firms – it might be problematic if two firms are allowed to merge and become dominant only to be assiduously regulated after the merger, or even broken up by the competition authorities some years after the two businesses have been integrated. Third, even if fully resourced, the competition authorities might not be able to remedy all the anticompetitive effects of a change in market structure (e.g. mergers in oligopoly markets considered in chapter 9).

Introduction

Dominance is not unlawful, but ‘where an undertaking is in a dominant position it is in consequence obliged, where appropriate, to modify its conduct so as not to impair effective competition on the market regardless of whether the Commission has adopted a decision to that effect’. This dual obligation on dominant firms, to avoid acts that harm competition and to modify their practices if they are likely to harm competition, forces them to observe the markets they operate in and to monitor the effects of their commercial practices, which may become illegal if market circumstances change. Every act of a dominant firm is laden with risk, in particular when even commercial behaviour regarded as normal may constitute abuse within the meaning of Article 82.

Article 82

Any abuse by one or more undertakings of a dominant position within the common market or in a substantial part of it shall be prohibited as incompatible with the common market insofar as it may affect trade between Member States.

Such abuse may, in particular, consist in:

1. (a) directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions;

2. (b) limiting production, markets or technical development to the prejudice of consumers;

3. (c) applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage;

4. (d) making the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts.

Anatomically, Article 82 contains a general section, which prohibits the abuse of a dominant position, followed by a non-exhaustive list of examples of behaviour that may constitute abuse.

Introduction

In the 1980s, states began to relinquish control in a number of economic sectors that had been under their ownership since at least the post-war era (e.g. telecommunications, energy, transport, postal services). For economic reasons (the industries were considered natural monopolies) and/or political considerations (the industries provided public services that all should have a right to as citizens, not as consumers) competition was excluded and in many countries the industries operated as a single, vertically integrated, state-owned monopoly. However, state monopolies were called into question by three considerations: economic (increasing dissatisfaction with the performance of these sectors under state management and an understanding that competition could inject greater efficiency), technological (innovations weakened the natural monopoly argument) and political (a shift in the conception of the role of the state, perhaps best encapsulated by the catchphrase ‘rolling back the state’). Today, the provision of public services does not allow one to make a prima facie case for excluding competition. Instead ‘[t]he traditional approach to public life, based on stewardship and public duty, has been replaced by a market-oriented approach to the delivery of public goods and services’. One useful way to describe the changed relationship between the state and newly liberalised industries is to deploy the concept of the regulatory state.

A book about environmental law fits remarkably well in the Law in Context series. Understanding environmental problems, even at a simple level, requires some appreciation of the concepts and methods employed by disciplines other than law. In turn, the law is shaped by the results of research in these different fields, with legal regulation and legal activities (for example standard setting, enforcement, prosecution) supported and legitimated by the work of biologists, chemists, economists, engineers, geneticists and physicists. As Dan Farber states, ‘it has long been a cliché that environmental regulation operates on the frontier of science’. But, importantly, environmental law is also underpinned by cultural assumptions, the sources of which – philosophies, popular culture, ecological theories – are diverse and sometimes obscure, but arguably no less influential than those from the more traditional scientific domains. A contextual approach to environmental law is therefore less a choice of research methodology, and more an imperative arising from the subject itself. The title of this book, Environmental Protection, Law and Policy, is a deliberate reflection of this, emphasising the political context, or policy world, from which environmental law is drawn and nourished, and also making clear that law is but one aspect of ‘environmental protection’. Philip Selznick has highlighted these and other aspects of a law in context approach – not specifically with regard to environmental law, but many of his observations are highly pertinent to the approach that we have adopted in writing this book.

In this Part of the book we embed environmental law and policy in a European context. This context is made up of a complex of European law and policy-making institutions and adjudication and enforcement bodies. The relationship between European Union (EU) law and policy in this context is highly intricate and politically charged (both at the EU and Member State levels) such that the line between non-binding legal instruments and areas of policy ‘hardened’ up over time to create firm obligations is at times difficult to draw. Key principles (for example precaution) also appear to straddle the law–policy divide: although their legal nature is somewhat uncertain, they do feature in the European Community (EC) Treaty's Title on the Environment, and the Court of First Instance (CFI) and the European Court of Justice (ECJ) have been prepared to assess the actions of both the EU institutions and the Member States by reference to them. The status of ‘principles’, and the absence of a hard definition, both makes them important policy guidance and suggests that they are not likely to play a very strong role in judicial review. A sense of the complexity of the institutional arrangements, and the relationship between law and policy, is provided by Damian Chalmers.

Introduction: the international trading system

Environmental law is often described as a still ‘young’ discipline, and the law of sustainable development is barely in its infancy. Trade law has deeper foundations. The General Agreement on Tariffs and Trade (GATT) came into effect in 1947, when ‘environment’ simply did not exist as a policy issue. As environment and sustainable development entered the political radar screen in the 1970s, the United Nations (UN) was seen as a more appropriate forum for their international development than the GATT. The societal and environmental relevance of trade rules has only slowly become clear, and environmental concern is being accommodated within those rules even more slowly.

Environmental lawyers often approach trade as a threat to environmental protection. Trade rules can constrain the autonomy of states (or the European Union (EU)) to set standards pursuing social objectives such as public health or environmental protection; and even when states join together in treaties promoting environmental protection, the relationship between core trade law and those ‘multi-lateral environmental agreements’ (MEAs) is uncertain. And the effects of trade liberalisation go beyond regulatory effects: transport of goods around the world has obvious environmental implications. And ‘free trade’ promises greater production and consumption – all things being equal, increasing pollution and resource use.

Introduction

In this chapter we examine the most traditional and prevalent tool through which environmental regulators exercise ongoing control over regulated parties, that is the licence (or authorisation or permit – the terms seem to be used indiscriminately in legislation). We consider elsewhere other areas of environmental law that have licensing at their centre (e.g. water in Chapter 10, waste in Chapter 11, planning in Chapter 13). Here though, we examine in detail the permitting scheme under the Integrated Pollution Prevention and Control (IPPC) Directive, using it as an opportunity to study in detail one particular system of licensing. Direct regulation by licensing is at the core of the regime: Art. 4 requires Member States to ‘take the necessary measures to ensure that no new installation is operated without a permit issued in accordance with this Directive’. The study of the IPPC Directive allows us to examine a number of features of licensing regimes more generally, including for example, in section 4, the use of a variety of ‘standards’. As well as being a good example of a permitting system, the IPPC Directive is also much more, simultaneously responding to certain concerns about direct environmental regulation (and indeed about European Community (EC) environmental regulation), as we will see; in part this is about flexibility, but we will also discuss the IPPC Directive's use of procedure to control flexibility, including procedures that encourage learning and reflection and participatory procedures, as discussed in Chapter 3.

Introduction

The regulation of genetically modified organisms (GMOs) has a rather fraught history in the European Union (EU), becoming embroiled in the profound political, ethical and social choices implied by the technology. As discussed in Chapter 2, the regulation of GMOs at EU level fell into disarray in 1998. Intense public concern about GMOs, coupled with an inappropriately technical and ultimately centralised decision making process, led to a moratorium on authorisations from 1998. Rather than seeking either to enforce the existing legislation, or to regularise the moratorium, the EU institutions put intensive efforts into negotiating a new legislative framework for the regulation of GMOs. The ideal sought was the creation of a system that would respond more effectively to public concern, whilst simultaneously allowing in principle the possibility of widespread GM agriculture in the EU. The effort to compromise between ‘pro’ and ‘anti’ GM sentiments (and the success of this compromise is still to be seen) led to the negotiation of politically contentious and legally complex legislation – the subject of this chapter.

The regulation of GMOs in the EU involves, in most cases, and certainly the most controversial cases, a centralised, Community-level decision on whether particular GMOs should be marketed in the EU. Once the decision has been taken, it applies throughout the EU: free movement of goods applies. In many respects the centralised authorisation procedure is rather unusual in EC environmental law.

This is not a book about international law. However, to ignore the global dimension to contemporary environmental law would be almost wilfully misleading. In this Part, rather than attempting to describe and analyse international environmental law and international decision making processes, we focus on two issues in the international arena that are of particular salience for domestic and European environmental lawyers: the evolution of the concept of ‘sustainable development’ and the relationship between international trade rules and environmental protection.

International action to protect the environment rests on the commonplace reality that environmental problems respect no borders: pollution travels, and the degradation of certain environmental resources, such as the rainforests or atmospheric ozone, have immediate and more indirect global impacts. And just as environmental problems are increasingly global, so is a global solution increasingly necessary: one state's response to climate change, for example, is meaningless in isolation.

Introduction

The EU is currently engaged in far-reaching regulatory activity over a broad range of areas relating to environmental protection, many of which are not confined to the borders of Europe – pollution control, nature conservation and biodiversity, town and country planning, waste (including the ‘end of life’ of some products), ozone depletion, regulation of genetically modified organisms (GMOs), protection of endangered species and rainforests, and climate change. This accretion of environmental law has been a key trend in the European Community (EC) since the early 1970s, when the (then) European Economic Community (EEC) pledged in its First Environmental Action Programme (1973) primarily to enact legislation to combat existing pollution. This was a significant goal, but of only marginal importance when compared to the over-riding aims of the European body politic at that time, which was concerned with fostering economic growth and competition in the Community by the establishment of a common market. Nevertheless, during its relatively short history, the environmental law of the EC has deployed the full scope of available legal instruments and regulatory techniques over a wide range of policy areas. Importantly, EC environmental law has also operated as a testing ground for principles (particularly subsidiarity and integration) and regulatory techniques (most notably environmental impact assessment (EIA)) before they have been applied to the core areas of Community policy.

Introduction

In this chapter we consider a different technique of environmental protection from those discussed so far: environmental assessment. As a procedural requirement that the likely effects of policies, plans and projects be taken into account before authorisation is granted, environmental assessment is strikingly different from substantive and prescriptive measures, which have until recently made up the bulk of modern environmental law. A type of assessment now pervades most environmental decision making. The form of environmental assessment has also been appropriated for use in areas which are not usually defined as ‘environmental’, for example in determining the likely impact (in social and economic terms) of a piece of proposed legislation, or the possible effects of changes to family structures.

The remarkable evolution of environmental assessment as a foundation for decision making reflects many of the developments in environmental law that we have discussed throughout this book – the development of integrated and preventive methods of control, the fostering of responsibility (or stewardship) for the environment, and the growing acceptance of the validity of pre-emptive or even precautionary measures. Environmental assessment also increasingly provides a vehicle for enhancing public participation in environmental decision making. The hopeful expectation is that this encourages some qualitative comment on the suitability of particular projects or policies capable of supporting, balancing or even countering scientific information about possible effects on the environment which has traditionally made up the bulk of information fed into decision making procedures as we discuss in Chapter 1, pp. 12–34.

Introduction

‘Sustainable development’ has been an enormously influential concept in environmental law since at least the early 1980s. The World Commission on Environment and Development published the seminal work on sustainable development, Our Common Future (more commonly known as the ‘Brundtland Report’, after its chair) in 1987. The Brundtland Report has been built on at an international level, most prominently by the United Nations Convention on Environment and Development (the famous Rio Earth Conference) in 1992, and more recently by the 2002 World Summit on Sustainable Development in Johannesburg. Sustainable development is now extraordinarily widely accepted and supported across the world. We begin this chapter by discussing the evolution of sustainable development through international law. The most widely quoted ‘definition’ of sustainable development comes from the Brundtland Report, according to which sustainable development is development that ‘meets the needs of the present without compromising the ability of future generations to meet their own needs’ (pp. 8 and 43). The Johannesburg Declaration on Sustainable Development provides an alternative in its reference to ‘the interdependent and mutually reinforcing pillars of sustainable development – economic development, social development and environmental protection’ (para. 5), although this three-pillared approach is an evolution of earlier approaches, rather than a break with the past.

Sustainable development has clearly entered the political and academic mainstream, and those interested in environmental law cannot afford to ignore questions of sustainable development.

Introduction

Pollution has long been a concern of government, property owners and citizens, and law has been laid down in response for centuries. But Britain was the first country to industrialise, and, by the mid nineteenth century, the effects of pollution were no longer limited by the scale of polluting activities and the size of cities. Cities began to swell, London becoming ‘the murky, modern Babylon’, Manchester ‘a Babel built of brick’, its warehouses ‘Babylonian monuments’. In the next section of this chapter we outline the development of a legal response to polluting activities in the nineteenth century.

If the nineteenth century can be usefully identified as marking the beginning of a focussed response to pollution control, the late 1960s are generally identified as the beginning of a focussed and conscious environmental awareness, moving (at least in principle) beyond the Victorian concern with private property and public health. The modern era of environmental law is usually dated from the early 1970s. ‘Environmental’ law, however, is part of a slow historical process, not a sudden development. The early measures of pollution control reflected the ad hoc nature of the public pressures that stimulated their development, which were primarily focussed on the protection of property and public health. Towards the end of the 1960s, a more self-consciously and recognisably ‘environmental’ awareness developed among the public, and that demanded a more focussed government response.

Introduction

The last chapter focussed on the ‘cores’ of nature conservation – the areas of land designated for their special characteristics, and protected (up to a point) by law and policy. Now of equal concern is the conservation state of the land in-between the protected sites. The main influence moving law and policy away from the demarcation of areas of land for protection because of their special features is the concept of biological diversity, or biodiversity. The value of biodiversity in general is now better understood than when the legal regime for the designation of land for special protection was first developed, and there is also greater recognition of the deterioration in biodiversity in undesignated areas, from agricultural intensification, house and road building, and other factors such as tourism. There is also a more general concern about the effects of climate change, in particular the ability of isolated areas to adapt, which has made the connections between designated areas more important.

‘Biodiversity Action Plans’ ((BAPs) – pp. 671–3) are now an important, proactive, feature of nature conservation, looking beyond protected areas. The trend of integrating previously separate land use controls, influenced by the general concern with biodiversity, has been directed by European Community (EC) law, particularly the Habitats Directive. The integration of planning and nature conservation decisions (pp. 673–80) parallels that seen in the context of pollution controls (Chapter 9) and in planning with the onset of an integrated form of spatial planning (Chapter 13, pp. 622–30).

Introduction: ‘Command and control’?

As we have discussed in earlier chapters, ‘command and control’ regulation is subject to very considerable pressure from a number of directions. Gunther Teubner refers to this as the ‘crisis of the interventionist state’. In an environmental context, John Dryzek discusses a ‘crisis of administrative rationalism’.