#5310 - Article 101 - Competition Law

Article 101

Competition Law LLM

Article 101(1) TFEU 3

Requirements for Article 101(1) TFEU 3

The Concept of an Undertaking 3

Why a Functional Approach? 3

Solidarity 4

Public Power 4

Territorial Scope 4

Single Economic Entity Doctrine 4

The Structure of Article 101 TFEU 6

Agreement 6

Concerted Practice 6

Decisions of Associations of Undertaking 8

Complex Breaches 8

Boundary between 101 and 102 8

Apparently Unilateral 9

Single Economic Entity Doctrine 9

“Object or effect the prevention, restriction or distortion of competition within the internal market” 10

Restrictions by Object 10

Restrictions by effect 13

Agreements that have neither the object nor the effect of restricting competition 14

Appreciability 15

“May affect trade between Member States” 15

Cartels 16

Justifying Restrictive Coordination 18

Rule of Reason within Article 101(1) TFEU? 18

Evidence that we do have a Rule of Reason 18

Problem Cases for the Orthodox View 19

Art 101(3) TFEU 20

The Elements of Art 101(3) TFEU 20

Criterion 1 20

Criterion 3 22

Criterion 2 22

Criterion 4 23

Article 101(2) 23

Article 101(1) TFEU

1. Undertakings

2. Collusion

3. With object or effect to prevent, restrict or distort competition

4. Appreciable effect on competition (de facto – Völk v Vervaecke)

5. Appreciable effect on inter state trade (de facto – Völk v Vervaecke)

What is an undertaking? Article 101 only applies where there are 2 or more ‘undertakings’. What does that mean? We need to distinguish between cases where there are two undertakings, and where there is only one undertaking. Fines are capped at the turnover of the entire undertaking, so the definition of undertaking is very important. If a subsidiary company breaches competition law, then the entire multinational is hit.

Need a narrow concept for the purposes of jurisdiction, but then a wide concept for enforcement.

Broad concept is different to a formalistic definition, which is better for the 27 different legal systems we are looking at. We don’t look at the form of the actor; we look at the substance and/or function of the actor. An undertaking is any entity engaged in an economic activity, where this is defined as offering goods and services on a given market. This means that there does not need to be profit, or private ownership. It could be a publically owned company, particularly if it is carrying out public service (Ambulanz Glockner), and all it needs is the potential to make profit.

The public body could itself be an undertaking even if no private body can enter the market, as long as there is no factual requirement that a public body govern the market.

Höfner and Elser

The German Federal Office for Employment possessed a statutory monopoly on placing employees with employers. German law also allowed the Bundesanstalt to entrust other institutions or people with employment procurement services under its supervision. Höfner and Elser were recruitment consultants & placed a candidate as a sales director with a company called Macrotron, who had decided that they did not want the candidate so argued that any contract was void. Höfner and Elser therefore challenged the provision declaring the contract void under the EC competition law provision, Article [102].

As a preliminary question, the European Court of Justice held that the Bundesanstalt, even though it was a public body, could be subject to competition laws. It was an "undertaking", and therefore fell within the scope of the Treaty. Furthermore, by failing to satisfy demand for a good or service, the exclusive right of the German government to regulate employment services could amount to the abuse of a dominant position.

Where a subsidiary company has no economic independence, where the subsidiary forms an economic unit with the parent, wherein the subsidiary has no real freedom to determine its course of action on the market, then the subsidiary and parent may be treated as a single economic entity for the purpose of Art 101 TFEU. The question is whether they behave together as a single unit on the market (Daimler Chrysler). See below.

Could be about the 27 different legal systems, could be about the public / private divide (Odudu). This is the idea that we want to distinguish between private activities and public activities. We want to capture the market in private activities, regardless of who is controlling the behaviour. Member states are using private companies to do public services, and we are concerned about the interaction between this and competition law.

Competition law doesn’t apply to undertakings that are engaged in the (inherently uncommercial act of) involuntary subsidisation of one social group by another.

E.g. Compulsory participation, or no-fault element.

If the entity can act to a certain extent independent of state control, this doesn’t mean no solidarity, but the cases are not clear on the boundary between state control and no state control

Need redistribution of income between those who are better off and those who, in view of their resources and state of health, would be deprived of the necessary social cover.

If a private company is exercising public power, it’s not subject to competition rules. This requires a company to exercise public authority.

Cali & Figli

SEPG granted a contract over port to provide environmental services.

Even though it was charging for its goods and services, not an undertaking, for public power reason

Competition law did apply in the Airport de Paris case for some areas.

Assessed from the perspective of the entity itself, don’t just look at the overall transaction; you look at the entity you’re trying to apply competition law to. For example,

FENIN

The 26 different entities that made up the Spanish Health Service were thought to be abusing their Monopsony.

Competition law didn’t apply – don’t look at the transaction, also look at what the Spanish Health System is doing – it is a public service – universal access, so fell outside competition law.

Contrast with BetterCare – the NHS was found to be an economic entity, but after FENIN, this is probably wrong.

If we have a parent company located outside EU, with a subsidiary inside, enforcement jurisdiction can be founded on the basis of the subsidiary. More controversially, is there an effects doctrine (where jurisdiction can be found on the basis that conduct occurring outside the territory has an effect on the territory)? In Wood Pulp, it was found that, despite what the Commission said, no jurisdiction could be found. The CJEU rejected the effects jurisdiction, but they said that implementation could give jurisdiction. This is all about territoriality.

More complex is jurisdiction for purposes of the merger regulation. Here, the turnover threshold leads to a finding of a ‘community dimension’.

Gencor

Merger between two South African companies approved by the SA government.

The general court rejected the effects analysis and went for the implementation analysis instead, and then goes on to look at comity analysis – would any principle of public international law prevent jurisdiction? Answer no, but that’s the CJEU looking at its own jurisdiction.

Three Pronged Structure:

• Article 101(1)

  • Most important bit is the sentence at the beginning, not the examples.

• Article 101(2)

  • Any agreement that violates Article 101(1) and can’t be saved by Art 101(3) is null, particularly contracts.

• Article 101(3)

  • This is an exemption to Article 101(1), and is meant to be exhaustive, so no other way to get around Article 101(1)

  • Used to require notification to the Commission for this to apply (not any more)

Need to show: agreement, anti-competitive and affects trade between member states. Horizontal and Vertical agreements are both covered. Horizontal – competitors. Vertical – agreement between wholesaler and retailer, for example. EU is very sceptical of vertical, more so than US, which sees them as benign. Standard of proof same for vertical and horizontal.

Can be just a gentleman’s agreement.

Chemiefarmer

Document to cartel the sale of quinine outside of the European Union, agreed to do it inside the EU too.

CJEU found that both the written agreement and the gentleman's agreement contradicted Art 101

Activision Blizzard

Formal distribution agreement allowed passive sale into other countries, but not active sales. Then secret side agreement that said that they wouldn’t engage in either.

Side agreement, contradicting the agreement is caught by art 101. Further, cheating doesn’t negate the existence of the agreement.

Tepea

D entered into series of oral distribution agreements in breach of Art 101.

As long as you can show a concurrence of wills, this constitutes an agreement for the purposes of Article 101(1) TFEU.

E.ON

Agreement in the 1970s between E.ON and GDF Suez that they wouldn’t sell into each other’s markets after the construction of the MEGAL (Mittel-Europäische-Gasleitung) gas pipeline across Germany to deliver Russian gas to Germany and France. In 2004, the parties signed a new agreement that contradicted this, but the arrangement informally continued into 2005.

Commission found that the competition laws had been breached. It’s all about the economic consequences rather than the legal form. Concurrence of wills not...