#5764 - Competition I - GDL EU Law

Competition Commission = Watchdog

Aims:

1) Competitive market economy

2) Prevent barriers to the integration of the single, internal market

• Free movement of goods/competition law are two sides of the same coin

REGULATION 1/2003 – THE MODERNISATION REGULATION

• Changes to competition law – authority to apply A101 TFEU is devolved from the Commission to the National Competition Authorities (NCAs) – e.g. Office of Fair Trading in UK

  • Together the Commission and NCAs create the Competition Network

• Regulation: parties to agreements/decisions must themselves decide if it infringes 101/102

  • Power to apply 101/102 in hands of the Competition network

  • National courts may also apply 101/102 directly and deal with appeals

• Fines have been revised upwards:

  • Multiplier system and increased fines for companies who refuse to supply info (SGL v Commission)

• Elevators and Escalators Cartel: record fine imposed for bid rigging, price fixing, market sharing and exchange of info

  • Dutch company Otis received 100% immunity as a whistle-blower

  • ThyssenKrupp received a 50% increased fine as a repeat offender

• Synthetic Rubber Cartel: Bayer got 100% immunity despite being a repeat offender, Dow received 40% reduction for cooperation and Shell received 50% increase as repeat offender

• Alternatives to fines being investigated: allowing out of court settlement in return for immediate cartel cessation; encouraging private actions by cartel victims (Escalator), criminal sanctions as in US

ARTICLE 101 TFEU

• To protect the normal, competitive working of the single market by prohibiting all agreements btw undertakings, decisions by associations of undertakings and concerted practices which may affect trade btw MSs and which have as their object or effect the prevention, restriction or distortion of competition

• ‘Undertakings’: broadly defined: includes any natural/legal person engaged in some form of economic/commercial activity – any entity regardless of the legal status/how it is financed (Hofner & Else) – even without profit motive

• Distribution of Package Tours During the 1990 World Cup : FIFA/Italian FA were undertakings under A101

• MOTOE V Elliniko Domosio (A102): ELPA amounted to undertaking as engaged in economic activity despite not for profit and irrespective of its legal form

General Structure of Article: divided into 3 paragraphs:

1. Article 101(1): rule vs. anti-competitive agreements, decisions and concerted practices

   • Drafted so widely that it could capture almost all contracts – need to balance the article with 101(3)

   • Key distinction is btw non-collusive (lawful) and collusive (unlawful) behaviour – doesn’t really matter what type of collusion: Commission v ANIC – unlawful agreement and concerted practice

   • Width of interpretation – AC Treuhand AG v Commission: enough that there was a sufficiently definite causal link btw activity and restriction of competition

1. Agreements

   • Wide interpretation of ‘agreement’ – Tepea – interpreted to include informal agreements/expressions of intention (Hercules Chemicals)

   • Usually has to be btw at least two undertakings – not just one (Bayer AG)

2. Decisions by associations of undertakings

   • Mainly concerns trade associations – includes non-binding recommendations – Verenining - necessary to consider whether members tend to comply with recommendations

   • Some recommendations relate to pricing, market strategies or market-related information

   • ANSEAU/NAVEWA: trade association involved with supply of washing machines – association provided that such goods could only be distributed under common label = breach

3. Concerted Practices

   • Designed to catch forms of co-op which aren’t formal oral/written agreement or decision

   • Co-ordinated/parallel behaviour

   • Defined in Dyestuffs – ‘a form of coordination’ before agreement concluded – will look for evidence of meetings btw companies/identical or similar actions: parallel pricing strategies – CJ – not automatically concerted practices –but may be evidence of them – in this case there was

   • E.g. of conduct not amounting to concerted practices – Ahlstron – ‘Wood Pulp Cartel’ Case – parallel pricing found to be normal feature of the market

2. Article 101(2): legal effect of the prohibition – any agreement in breach of A101(1) is automatically void – this article has retroactive effect

3. Article 101(3): provides that A101(1) can be declared inapplicable if the agreement has pro-competitive effects – e.g. Societe Technique Miniere

Effect on trade btw MS

• Set out in STM case – ‘possible to foresee a sufficient degree of probability’ that there will be an influence – mere potential to affect trade sufficient and even if undertaking operates in only one MS

• Effect may be increase or decrease in trade (Consten SARL) or a franchise agreement (Pronuptia) or a trade association (Vereninging)

• ‘trade’ – wide meaning

• Agreements include the effect of a number of smaller agreements

• Brasserie de Haecht SA v Wilkin Janssen – agreement btw Belgian brewery and a small no. of pubs in Belgium – provided that the pubs would obtain supplied from the brewery exclusively – could affect MS even though just in Belgium – cumulative effect would close Belgium market to foreign importers – since this decision – Notice on Agreements of Minor Importance – principle stays the same but if parties have less than 10-15% sharewould be de minimis

• Consten – deal to be exclusive dealer in Grundig’s products in France if it agreed not to handle competing products – protection of French market from imports – in breach – reintroducing national partitioning

A101(1) Prohibits Agreements which have Object or effect of prevention, restriction or distortion of competition

• Non-exhaustive list of prohibited restrictions (“the black list”) – ‘hardcore’ items

Applicable to horizontal and vertical agreements

Horizontal: e.g. ICI Polypropylene cases – prices rises agreed by producers all at same level of industry

Vertical: United Brands Co – network of vertical agreements controlling each stage of banana importation

‘Object’: Look at agreement’s objective meaning/purpose – not at subjective intention of the parties

‘Effect’: If object isn’t to restrict competition – necessary to prove that it would have the effect of restricting competition – full analysis of an agreement and the market in which it operates

• European Night Services v Commission: ‘account taken of the actual conditions in which it functions, in particular the economic context’

• Brasserie de Haecht: CJ stated that agreement must be examined in context of the market in which it operates

• Will look both at present impact and future – will consider the ‘relevant temporal market’

‘Preventing, restricting or distorting competition’ – paras (a) – (e) A101(1) – non-exhaustive: don’t need to prove all 3 elements – one is sufficient

The Rule of Reason and the role of the Commission, the NCAs and the EU courts in applying A101(1) and (3) after the introduction of Regulation 1/2003

• Before commission had power to grant individual exemptions – whereas CJ couldn’t grant individual exemptions – but used rule of reason to similar effect (if on balance an agreement promotes competition then it will be allowed to operate) – e.g. STM – pro-competitive elements in the contract outweighed anti-comp

• Pronuptia de Paris – similar balancing – recognised franchising as a business method that promoted comp – without certain anti-competitive clauses the franchisor would not be willing to enter into agreement

• In above 2 cases – rule of reason applied under 101(1) – but more logical for it to be used under 101(3) – Metropole Television – denial that there was ever a Rule of Reason – weighing up should be under 101(3)

• Yet the CJ has still continued to use rule of reason under 101(1) e.g. Meca-Medina and Wouters and others – in Wouters CJ found that restriction vs. accountants/lawyers partnerships was anti-competitive but didn’t trigger 101(1) as in the public interest – seems balancing of criteria cannot be limited entirely to A101(3)

Defences: De minimis and application of A101(3)

• De Minimis Defence: if doesn’t have appreciable effect on either competition or inter-state trade – first introduced in Volk v Vervaecke – share in the market was negligible – ‘insignificant effect on the markets, taking into account the weak position which the persons concerned have’: applies to object/effect and horizontal/vertical

  • Notice on Agreements of Minor Importance: sets out level of activity below which there is no appreciable effect -agreements btw undertakings with aggregate market share of <10% (horizontal) and <15% vertical do not appreciably affect competition – notices by the commission not legally binding (‘soft law’)

  • Very small firms – Commission Recommendation concerning the definition of micro, small and medium sized enterprises

  • De minimis is applicable to all anti-compeititve agreements – means that technical breach of A101(1) won’t be pursued by the commission

  • Regulation 330/2010: relates to vertical agreements

• Article 101(3)

  • Agreement automatically void (101(2)) unless protected by A101(3) – 4 conditions – 2 positive/2 negative

1. Improve production or distribution of goods, or promote technical or economic progress

2. The agreement must also allow consumers a fair share of the resulting benefit (e.g. wider choice of goods)

3. Must not contain dispensable restrictions (only restrict to achieve pro-competition aims)

4. Must not substantially eliminate competition in the relevant market

   • Both sets must be satisfied: if Commission/CJ are dealing with a matter – may...