Competition Law

Competition Law

1. Article 101

   • The following is incompatible with the common market
     • A - Directly or indirectly fix purchase or selling prices or any other trading conditions
     • B - Limiit or control production, markets, technical development, or investment;
     • C - Share markets or sources of supply
     • D - Apply dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage;
     • E - Make the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, ave no connection with the subject of such contracts
   • Purpose of article 101 is to prevent any restrictive practices which may have an effect on competition in the EU
   • Undertakings
     • Intended to cover only private individuals, and means natural persons (such as you and I) or legal persons (companies).
     • Case C-159/91 Pucet v Assurances Generales de France [1993] - When deciding if a body was 'undertaking', the Court of Justice decided that there was a distinction to be made based on whether the body concerned was engaged in economic activities, or whether the body pursued activites on the basis of solidarity, with no intention to make a profit.
     • Cases & Whether or not they are an undertaking.
       • Case C-343/95 Diego Cali v. SEPG - A body established by national law (in this case to collect harbour duties) was not an undertaking
       • Case C-364/92 SAT v Eurocontrol - A body set up by Treaty was not an undertaking
       • Case C-519/04p Meca-Medina and Majcen v Commission - A supporting body (such as the International Olympic Committee) could be an undertaking
   • What does Article 101 Prohibit?
     • Agreements between undertakings - Can be both binding/non-binding, written or verbal. Can even include 'gentlemen's agreements'
       • Case 32/78 BMW Belgium v Commission - Belgian car dealers signed a document agreeing to the manufacturers request not to sell cars in other Member States
       • Case C-338/00 Volkswagen v Commission - A telephone call by the manufacturer to car dealers instructing them not to do something
       • Case IV/35.733 Community v Volswagen AG and Others - Request to car dealers not to re-export cars (even though the car dealers compliance was extracted by heavy pressure)
     • Decisions by associations of undertakings - Binding or non-binding instructions/recommendations by trade associations to members
       • Where a trade association will issue a set of instructions to its members or make an agreement with its members e.g. Fixing prices on products sold by its members, as this can allow dominant sellers in the market to keep their dominant position and prevent other companies from competing with them.
     • Concerted practices - Action by competitors in a market arising from them coordinating their actions, such as coordinated price rises by different companies where there is no plausible explanation other than the concerted practise
       • Still down to the commission to get evidence to show that what is happening is a concerted practice, and not just everyone raising their prices when one company does, as what happens with petrol prices. There has to be consistent evidence of a concerted practice, but that can be one of a number of things, to conclusively be considered a concerted practice.
         • Suiker Unie v Commission [1975] - Concerted practice allows competitors to fix a position in the knowledge of what others are going to do. Not necessary for there to be a specific understanding in order for this to be a concerted practice, it just needed to involve some sort of contract, either direct or indirect.
     • Art 101(1) is not meant to be exclusive, there are other things which could potentially breach Art 101 if they meet the criteria discussed above. However, they are a good starting point. They are a follows: A - Directly or indirectly fix purchase or selling prices or any other trading conditions; B Limit or control production, markets, technical development, or investment. C - Share markets or sources of supply. D - Apply dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage.
   • Agreements
     • Vertical Agreements - Between those on different levels, e.g. imposed upon a distributor by the supplier
     • Horizontal Agreements - Between firms that operate on the same level, in the market.
     • Case 56 & 58/64 Consten v Commission [1966] - Agreement was contrary to Article 101, and came to three important points: - Article 101 could apply to vertical agreements (as this one was) as well as horizontal ones. - The fact that this agreement had streamlined and increased distribution of the product in question was irrelevant. - The important point here was that the agreement had harmed the Single European Market by an attempt to repartition along national boundaries.
   • Exemptions from Article 101 - it is possible for an agreement under Art 101 not to be declared void if it fullfills all of the following conditions: 1 - it contributes to improving production or distribution of goods or to promoting technical or economic progress. 2- It allows consumers a fair share of this benefit. 3- It does not impose conditions that are not necessary to achieve the above. 4 - It does not allow undertakings to eliminate a substantial amount of competition.
     • Individual exemption - Application to the Commission for a decision as to whether the agreement falls within Art 101(3). This has now been removed by Regulation 1/2003
     • Comfort Letter - An alternative to the individual decision, this is an informal opinion from the Commission that the agreement does not breach Art 101. Saves time, but is non-binding and has no legal effect. Also now essentially defunct.
     • Block Exemption - Blanket exemptions in certain industries passed by regulation. Again, this saves Commission time, by allowing blanket exemption in industries where it is recognised that the majority of agreements should be exempted for example certain types of vertical agreements.

2. Article 102 - abuse of dominant position

   • 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 same common market in so far as it may affect trade between Member States.
   • Requires - An undertaking, A Dominant position, Abuse of that dominant position, effect on trade between Member States. If all of these elements are present, then there is a breach of Art 102
   • Case 27/76 United Brands v Commission [1978] - Dominant position defined as being a position of economic strength, which allowed two things 1 - the Dominant undertaking to hinder effective competition 2- the undertaking to act independently of its competitors and consumers.
   • To Establish a market need to look at the following :
     • Relevant product market (RPM) - Two important factors: the ability to substitute your product for other similar products, and the similarity of your products to other products.
     • Geographical Market - You need to consider how large a geographical area the company operates in. It must be 'the common market or a substantial part of it'
   • Dominance as a Fact - This can be as simple as merely having more of a share in the market than anyone else. It can also be a case of having a larger share of the market than everyone else combined.
     • Case 85/76 Hoffman la Roche v Commission [1979] - had 70-70% in the market.
       • Case 27/76 United Brands v. Commission [1978] - 40-45% share in the market
         • Case T - 219/99 British Airways v Commission [2004] - 39.7% share in the market, where the nearest competitor, Virgin, had 5.5% share
   • Abuse - Dominance on its own is not a breach of Art 102 however the abuse of the dominance is.
     • Article 102(2) TFEU : Such abuse may, in particular, consist in:
       • A - Directly or Indirectly imposing unfair purchase or selling prices or other unfair trading conditions.
         • B - Limiting production, markets or technical development to the prejuduce of consumers
           • C - Applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage
             • 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.