9. Competition Law 1: Anti-Competitive Agreements Flashcards
What is an Undertaking?
Def: an undertaking is any “entity engaged in economic activity regardless of the legal status of the entity and the way in which it is financed” (Hofner & Elser).
Non-profit organisations are included in this definition (World Cup 1990 Package Tours).
Not where exercising authority of the state (Diego Cali).
Agreements between parents and subsidiaries ARE NOT COVERED by this.
Collusion
Collusion of any kind is prohibited by Article 101 TFEU.
‘Collusion’ is interpreted widely (Treuhand v Comm).
Art 101 TFEU denotes 3 categories of collusion:
- AGREEMENTS BETWEEN UNDERTAKINGS
- DECISIONS BY ASSOCIATIONS OF UNDERTAKINGS
- CONCERTED PRACTICES
NB: the behaviour need only be shown to be collusive, not that it falls into any of these categories absolutely (Comm v ANIC).
Collusion: Agreements between Undertakings
“Agreement” in this context is broadly defined, it includes:
- Oral Agreements (Tepea v Comm)
- Legally Binding Agreements eg. distribution, franchise and service agreements, and
- “Gentlemen’s” agreements (Hercules Chemicals v Comm)
Acquiescence to a cartel agreement by a non-party to that agreement can make them a party to the agreement (Treuhand v Comm).
Unilateral behaviour by a single undertaking will NOT constitute an agreement (Bayer AG v Comm).
Collusion: Decisions by Associations
Non-binding recommendations will constitute decisions if (Vereniging v Comm):
- previous recommendations are generally followed by an association’s member undertakings, AND
- the recommendation in concern will have a significant impact on competition in the relevant market if it were implemented.
A Chamber of lawyers constituted an Association (Wouter).
Recommendations may relate to:
- Pricing
- Market Strategies
- –Distributing good under a common label (ANSEAU)
- –territorial restrictions on selling (Transocean Marine Paint Association).
- Stock Volumes
- Similar Market related Information.
Collusion: Concerted Practices
Def: “a form of coordination between undertakings which, without having reached the stage where an agreement properly so-called has been concluded, knowingly substitutes practical cooperation between them for the risks of competition” (ICI v Comm (Dyestuffs)).
- Behaviour will not constitute a concerted practice where it is a normal feature of the market (Ahlstrom (Wood Pulp Cartel)).
CPs are identifiable by (ICI v Comm (Dyestuffs)):
- meetings between competitors AND
- parallel behaviour by competitors.
Third parties to a cartel may be guilty of infringement if they have contributed to the concerted practice (Treuhand v Comm).
Affecting Inter-State Trade
The agreement in concern must affect Inter-State trade.
‘Trade’ means the production and distribution of goods/services.
‘Effect on trade’ means a distortion of the NORMAL TRADE PATTERN. Such distortions may be caused by:
- Franchise agreements (Pronuptia de Paris)
- Exclusive distribution agreements (Consten v Grundig)
- Trade associations (Vereniging v Comm)
- Networks of agreements (Brasserie de Haecht) where parties have greater than 10-15% market share (NAOMI 2001).
Mere POTENTIAL to affect inter-state trade is sufficient to constitute “affecting inter-state trade” (STM v Maschinenbrau).
- The actual/potential effect must be appreciable, not de minimis (not insignificant).
- irrelevant whether undertaking only operating in one MS or not.
Object & Effect of Agreement
The agreement Must have the object or effect of PREVENTING, RESTRICTING or DISTORTING competition within the internal market (Art 101(1) TFEU).
- Applies to both vertical (United Brands), and horizontal (ICI (Polypropelene)) agreements.
- Object or effect are to be read disjunctively, only object OR effect need be proven, not both. (STM v Maschinenbau).
Object & Effect of Agreement: Object
The purpose of the agreement is judged objectively (Beef Industry Development Society).
TEST: the agreement must have the ABILITY to APPRECIABLY affect inter-state trade and restrict competition.
Eg.s of restrictive HORIZ agreements
- Price Fixing (101(1)(a)).
- Production limitation agreement (101(1)(b))
- sharing markets or sources of supply (101(1)(c))
- Applying dissimilar conditions to equivalent transactions (101(1)(d)).
- Supplementary obligations (tie-ins) (101(1)(e)).
- sale limitation agreements.
- Price info exchange.
EG.s of restrictive VERT agreements
- Minimum resale price fixing
- bans on parallel imports, eg limiting a distributor’s suppliers.
- passive selling (not actively selling products).
Object & Effect of Agreements: Effect
Where an agreement does not have the object of restricting competition, in order to be caught under Art 101(1), it must ACTUALLY have an appreciable effect on inter-state trade.
The agreement must be analysed in its economical context (European Night Services, Brasserie de Haecht). This involves:
- defining the relevant market
- determining the products or services in question
- balancing Art 101(1) with Art 101(3) (defences).
Defences
Three defences are available to agreements seen to fall under Art 101(1):
- THE DE MINIMIS PRINCIPLE
- ARTICLE 101(3) TFEU
- BLOCK EXEMPTIONS.
Defences: The De Minimis Principle
The Undertaking will have a defence where its actions are ‘de minimis’, i.e. they have no appreciable effect on inter-state trade (Volk v Vervaecke).
The thresholds of market share for an agreement to be de minimis are as follows (Para 7 NAOMI 2001).
- Horizontal agreements: Combined market share must be < 10% of relevant market.
- Vertical agreements: the market share of each of the undertakings must be < 15% of relevant market.
- –EXCEPTION 1: where undertakings are in actual/potential competition with each other, threshold is lowered to 10% of aggregate share of each market affected by the agreement.
- –EXCEPTION 2: v agreement may be caught by Art 101(1) despite being below 15% if it contains HARDCORE RESTRICTIONS AND has an APPRECIABLE EFFECT on interstate trade (Para 1+11 NAOMI 2001).
Defences: Article 101(3) TFEU
TEST: The agreement must:
1) improve the production or distribution of goods or promote technical/economical progress AND
2) Allow consumers a fair share of the ‘resulting benefit’.
It MUST NOT:
3) impose restrictions on the undertakings which are not indispensable to attaining the obove objectives OR
4) create the possibility of eliminating competition in a substantial part of the relevant market.
Defences: Block Exemptions
Set out in R330/2010.
Vertical Agreements will fall under a block exemption and will not breach Art 101 provided that:
1) Neither of the undertakings has a market share > 30% (Art 3(1) R330/2010).
- –NB, a v agreement with a market > 30% will not be presumed to breach Art 101(1) OR fall outside Art 101(3). It just can’t be protected via block exemption.
2) the agreement contains no HARDCORE OFFENCES (Art 4 R330/2010), such as:
- Minimum resale price fixing (Art 4(a))
- Restrictions on passive selling (Art 4(b))
- Restrictions on sale to end users (Art 4(c))
- Restrictions on cross-supplies between distributors (Art 4(d))
- Restrictions on suppliers’ ability to sell spare parts to end users, repairers or other service providers (Art 4(e)).
There is no requirement to apply for an individual exemption from the Commission, it Automatically applies. (R1/2003).
Enforcement
In addition to the infringing agreement being void (Art 101(2) TFEU), The Commission enforces breaches of Art 101 through the following:
1) Leniency/Investigation: Comm can investigate suspected infringements via investigations, inspections and dawn raids (Art 105 TFEU).
- A leniency programme also operates whereby infringing undertakings can tell the Commission about the agreements in return for immunity or a reduced fine.
2) Fines (R1/2003)
The Comm can impose:
- A fine of up to 10% annual turnover of the preceding business year on each undertaking (Art 23(2)) and
- periodic payments of up to 5% of the average daily turnover from the precedeing business year in order to compel the undertaking to stop offence or take specified actions (Art 24(1)).
3) Damages (D2014/104) + (Courage Ltd).
- Any natural/legal person that suffered harm caused by breach is able to claim and obtain full compensation for that harm (Art 3(1)).
- Undertakings or associations of undertakings in breach are jointly and severally liable for the harm caused by the infringement (Art 11).
Defence: Rule of Reason
Ancillary Restrictions, necessary of the opertation of something.
(Pronuptia) restrictions were necessary for pro competition.
(Metropole) was no RofR defence.
