Competition Law

Sources:

Arts 101 and 102 TFEU Treaty on Functioning of European Union have direct effect in UK

S.2 (Art 101) and s.18 (Art 102) Competition Act

Horizontal = between two competitors

Vertical = between two non-competitors eg. Supplier and distributer

Art 101(1) and 101(2) horizontal and abuse of dominance

Does Art 101(1) apply?

agreement/decision/concerted practice?
Has an object Prevention/restriction/distortion of competition
Effect on trade between MS if there is an inter-state effect

Does s.2 apply?

agreement/decision/concerted practice?
Has as object Prevention/restriction/distortion of competition
Effect on trade on UK trade if implemented in UK

Examples of infringement in art. 101(1) (a-e)

price fix - happens in most exam q’s
Limit or control production
Share markets or source supply
Apply dissimilar conds to equivalent trans’s
Make the conclusion subject to acceptance by other parties

Examples of infringement in s.2 (a-e) same as Art 101(1)(a-e)

Is there an appreciable effect on competition?

Do the NAOMI thresholds apply?

Is there an appreciable effect on competition?

Do the NAOMI thresholds apply?

How to apply NAOMI

para 7 market share thresholds
If horizontal - aggregate market share must not exceed 10%
If vertical - market share of each party taken separately can’t exceed 15% [see below for vertical structure]
And in exam say “and in any event” Para 11 Hardcore Restrictions “apply” ...
Price fixing [main one]
Market/customer sharing
Agreements limit sales (markets)

[see below for vertical hardcore restrictions]

Does an Exemption apply?

- EU Block exemption

Does an Exemption apply?

UK Block exemption - s.9
Parallel exemption (EU) - s.10

Block Exemption Regulations (BER)

Main ones are:

Research and Development BER [only examinable one]

Vertical Agreement BER [see chap 8]

Technology Transfer BER

Specialisation BER

only 1 UK Block exemption - w/regards bus tickets so won’t be relevant!
Parallel exemption s.10 includes the BERs in domestic law [see left]

Might Art.101(3) assist?

- exercise w/caution as have to self assess

Might s.9 CA assist?

- exercise w/caution as have to self assess

Infringement consequences?

fines of up to 10% of worldwide group turnover by Commission or OFT
Fines of up to 1% for failure to co-operate w/investigation
Injunctions restraining from activities while the investigation takes place
Injunctions directing parties to act in a particular way
Termination or modification of an ag
Commitment to cease infringing behaviour
D’or disqualification
Adverse publicity

Infringement consequences?

same as EU

Exceptions -

(1) Limited immunity from fines s.39-40 ‘small agreement’

in relation to infringement of s.2 or 18 CA
S.2 infringement - joint turnover of parties must not exceed 20 mill
S18 CA infringement - turnover of the undertaking must not exceed 50 mill

Nb. Limited immunity not available if:

Arrangement involves price fixing
Immunity only relates to fine from OFT
Immunity doesn’t apply to Arts 101 or 102

(2) immunity for whistleblowers

Art 102/s.18 - Abuse of dominant position

2 x stage test:

co must be dominant in market
Co must have engaged in conduct that is considered abuse

Exam structure:

Nb. CONCLUDE @ end of each box

What is relevant market [see below]?

product market
Geographical market

Is the undertaking dominant in that market?

Dominance = the power [of a co] to behave to an appreciable extent independently of its competitors, suppliers and ultimately its consumers

What level of market share establishes dominance?

60-75% prima facie evidence of dominance
50-60% may be dominant, evidence of other factors required
40-50% may be dominant, supporting evidence required
Less than 40% - unlikely to constitute dominance
Below 30% - dominance is almost inconceivable

Generally below 60% on its own is unlikely to be dominance

Other factors to be considered:

barriers to entering market - refers to structural costs or regulations
Ability to act independently of competitors, suppliers and customers
Holding of key IPRs
Access to or ownership of technology not available to competitors
Superior distribution systems

Is there abuse that may affect trade in an MS?

Non-exhaustive list in Art 102(a-e) and s.18(a-e) of abuse:

imposing unfair purchase or selling prices [aka price fixing]
Limiting production, markets or technical development to prejudice of customers
Applying dissimilar conditions to equivalent trans’ w/other trading parties, thereby putting them @ a competitive disadvantage
Making the conclusion of contracts subject to acceptance by other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection w/the contracts

Infringement consequences

[see above for Art 101(1)]

Extra marks!!! Discuss s.40 CA ‘small agreements’

What is relevant market?

Demand substitutability

Extent to which customers can obtain the product or suitable alternative from a source other than the undertaking.

SSNIP test- small but significant and non-transitory increase in price

If undertaking increases price permanently by 5-10%, would this be unprofitable because a sufficient number of customers would resort to alternative products or suppliers?

See Demand Substitution in Commission Notice

Supply substitutability

The ease with which a supplier could switch into the production of products whose price will have notionally risen by 5-10%. If they can so sufficiently easily and cost effectively then this increased level of supply may render any attempted price-increase unprofitable, w/o need for any demand-side substitution

See Supply substitution in Commission Notice

Art 101(1)/s.2(1) vertical/Distribution (sgs 12)

Does Art 101(1) apply?

agreement/decision/concerted practice?
Has an object Prevention/restriction/distortion of competition
Effect on trade between MS if there is an inter-state effect

Does s.2 apply?

agreement/decision/concerted practice?
Has as object Prevention/restriction/distortion of competition
Effect on trade on UK trade if implemented in UK

Examples of infringement in art. 101(1) (a-e)

price fix - happens in most exam q’s
Limit or control production
Share markets or source supply
Apply dissimilar conds to equivalent trans’s
Make the conclusion subject to acceptance by other parties

Examples of infringement in s.2 (a-e) same as Art 101(1)(a-e)

Is there an appreciable effect on competition?

Do the NAOMI thresholds apply?

Is there an appreciable effect on competition?

Do the NAOMI thresholds apply?

How to apply NAOMI

para 7 market share thresholds
[If horizontal - aggregate market share must not exceed 10% - see above]
If vertical - market share of each party taken separately can’t exceed 15%
And in exam say “and in any event” Para 11 Hardcore Restrictions for vertical
Resale price maintenance
Certain agreements that limit sales (markets)
Fix prices
Prevention of passive selling

[see above for horizontal]

Does an Exemption apply?

VABE
EU Block exemption

Does an Exemption apply?

UK Block exemption - s.9
Parallel exemption (EU) - s.10 includes VABE and BERs

Vertical Agreement BER (‘VABE’)

(1) Art.2(1) General exemption Art.101(1) does not apply to vertical agreements

Nb. Art.2(3) VABE doesn’t benefit IP licenses

Art 3 Market Share Threshold

Exemption applies only if

market share of supplier doesn’t exceed 30% of relevant market; and
Market share of buyer doesn’t exceed 30%

Art 3(1)

Art 4 hardcore restrictions

The ag must not contain any of the following restrictions:

Art 4(a) price fixing

Art 4(b) territorial restrictions

- No ban on passive sales allowed

Ban on active sales only allowed if:
An exclusive distributor appointed in that territory; or
Territory which supplier has reserved for themselves

Art 5 non compete obligations

Ag must not:

Art 5(1)(a) impose any direct or indirect non-compete obligation which is indefinite or exceeds 5 yrs; or

Art 5(1)(b) survives termination

Exception - Art 5(3) allows post termination non-compete if:

relates to competing goods or services
Limited to premises where distributor operated
Is indispensable to protect know-how
Limited in time to 1 yr

Arts 6 and 7 w/drawal of exemption

Commission reserves right to w/draw the benefit of VABE

- parallel exemption s.10 includes VABE in domestic law

Commission Notice: Guidelines on Vertical Restraints (‘Guidelines’)

paras 70 f ags contain any hardcore restrictions, the whole ag will lose the benefit of VABE and Art 101 applies
In contract, para 71 explain that if a non-compete is in contravention of art 5 it will be severed from rest of ag

More Block Exemption Regulations (BER) Art 101(3)(b)

Main ones are:

Research and Development BER [only examinable one]

Vertical Agreement BER [see chap 8]

Technology Transfer BER

Specialisation BER

only 1 UK Block exemption - w/regards bus tickets so won’t be relevant!
Parallel exemption s.10 includes the Art 101(3)(b) BERs in domestic law [see left]

Might Art.101(3) assist?

- exercise w/caution as have to self assess

Might s.9 CA assist?

- exercise w/caution as have to self assess

Infringement consequences?

fines of up to 10% of worldwide group turnover by Commission or OFT
Fines of up...

#8609 - Competition Law - Commercial and IP

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