Business Law II Flashcards
Objective and Tasks of ECB (which article)
Objective:
Maintaining price stability (primary task under Art 127 TFEU)
Internal goal: maximum inflation rate of two per cent
Economic welfare of the eurozone is not an official objective!
Tasks:
to define and implement the monetary policy for the Eurozone
to conduct foreign exchange operations,
to take care of the foreign reserves
to refinance commercial banks
to issue bills (exclusively) and coins (jointly with member state
central banks)
How does the introduction of the Euro affect businesses?
may influence decision on where to establish business in
Europe (BMW / Rover)
may reduce currency risks (facilitates maintenance of price
stability)
may reduce transaction costs
may reduce capital costs (access to “cheap continental
money”, e.g. mortgage rates in continental Europe v UK) may enhance ability to pin down costs accurately when
quoting
may enhance ability to trade with partners in euro also
beyond the eurozone
Classical and new approach under monetary policy
ECB lowered interest rates to zero to avoid credit crunch (classical)
New approach
ECB buys debt instruments from commercial banks and states
Purpose: raising the prices and lowering their yield, while
simultaneously increasing the monetary base
First measures taken in late 2009; official quantitative easing
program (€ 60bn a month) started in March 2015
Outright Monetary Transactions (OMT)
QE aims for planned purchase of debt instruments from all states
OMT aims for unlimited purchases of debt instruments from states
in danger of default (Mario Draghi, 2012: ‘whatever it takes’)
Common Agricultural Policy-goals (which clause is about CAP)
safeguarding agricultural productivity and assuring availability
of supplies
ensuring farmers’ fair income and fair prices for consumers
stabilizing markets
Common Agricultural Policy- Criticism
Oversupply („EG-Butterberg“)
Inefficient state intervention
Unfair focus on farming
Artificially high food prices
CAP (and US subsidies) is hampering the development
of Third World Countries
CAP is more beneficial for larger farms
What is Securities Regulation (Capital Market Law)
Regulation of…
…offering of and trading in financial products (primary and
secondary market)
…financial markets and financial intermediaries
Aims and objectives of securities regulation
the protection of investors
ensuring that markets are fair, efficient and transparent;
the reduction of systemic risk
Why are information assymmetries bad?
unfair
decisions based on missing information
Principal-agent theory
the example with the cars
What are the prospectus requirements?
All offers to the public…
• offers are public if they are made to an open (i.e. not restricted) group of
investors
…require a prospectus before the emission starts
• prospectus is a document containing information about the company that an
average investor needs to make an informed decisions
Regulatory principle of Ad-hoc Disclosure?
Listed companies…
• Includes listing at EU-regulated markets and at exchange regulated
markets („Freiverkehr“)
…need to disclose all information relevant to the markets…
• includes all information that are potentially relevant for the share
price and directly related to the issuer (insider information, Art. 7)
…immediately
• this would usually be: on the same day
Regulatory principle of Insider Trading?
Regulatory principle, Art. 8 and Art. 14 MAR)
A person in possession of insider information (again, Art. 7
MAR!) must not…
• …buy or sell financial instruments in relation to the insider
information, or…
• …suggest or recommend dealing in these financial instruments
to a third party, or…
• … disclose the information to outsiders
Regulatory Principle of Market Manipulation?
Regulatory principle, Art. 12 and Art. 14 MAR: Simplified – prohibition of misleading the markets, e.g.
• Releasing incorrect statements, etc.
• Faciliate rumours, etc.
• Putting in and cancelling orders to provoke a market reaction, etc.
The Three Pillars of EU Competition Law
Anticompetitive Conduct, Art 101 TFEU (‘Cartels’)
Abuse of Market Power, Art 102 TFEU
Merger Control, Regulation139/2004/EC
Block Exemption Regulations (BER, just read)
Different rules for competing and non-competing businesses; special rules for selective distribution systems
Core Restraints, usually relating to price fixing or no-competition clauses -> the whole agreement is void
Grey Clauses, containing restraints which are deemend bad but not crucial -> the respective clause is void
All other clauses within the ambit of the BER are exempt (=permitted)
Examples of BER
Vertical agreements (330/2010/EU)
Technology transfer and license agreements (316/2014/EU)
Research and Development (1217/2010/EU)
Consequences of Contravention (Infringement of 101)
Agreement is void, Art 101(2) TFEU
Fines up to 10 percent of annual turnover, Reg 1/2003/EU, Art 23
Private litigation under national laws (e.g. § 33 GWB)
Serious threat to established distribution systems
What does exactly Dominant Market Position means?
Idea: A dominating undertaking is partly or fully detached from basic
market mechanisms; but no legal definition
Dominance depends on market structure (market entry barriers; market
shares of competitors)
Mere size does not necessary result in a dominant position
Rebuttable assumptions (e.g., 30 per cent market share)
Council of the European Union
Status
One of the two primary legislative bodies
Arguably most important organ of the EU
Structure
Formed by ministers from member states
Presidency rotates every six months („Trio“)
Meets in Brussels or Luxemburg
Decisions usually by qualified majority
55 per cent of member states AND 65 per cent of population
In special cases: unanimous vote required, for example, for further approximation of laws, Art 115 TFEU
European Council
Status
No formal powers
Defines major policies of the EU
Structure
Comprises heads of member states/governments, the President of the Commission, and the EU (Council) President
Meets twice a year
European Commission
Status
Executive branch of the EU (day-to-day business)
Can initiate EU legislation
‘Guardian of the Treaties’ Issue: Commission as EU government?
Structure
28 members, appointed for five years
24 Departments, called Directorates-General
25.000 employees, 65% based in Brussels
European Parliament
Budget Power
Shared with Council of the EU
Budget suggested by Commission
Legislative Power
Shared with Council of the EU (ordinary procedure) Right of legislative initiative lies with the Commission!
Supervision Powers
Can start inquiries on all EU matters
Can require Commission to submit reports
Approves Commission; can force Commission to resign
General Court
First instance for most legal matters (eg, review of decisions made by the Commission)
Civil Services Tribunal
Forum for legal disputes between the European Union and its civil servants
Measures and Principles of the Internal market
Effet utile
Interpretation of domestic laws in accordance with EU law
Duty of loyalty
The Member States shall facilitate the achievement of the Union’s tasks and refrain from any measure which could jeopardise the attainment of the Union’s objectives.’ (Art 4 TEU)
Principle of non-discrimination, Art 18 (later) Five freedoms (later) Customs Union (later) and Schengen Treaty
European Economic Interest Grouping (EEIG)
Purpose
facilitating economic activities of members by pooling
resources, activities or skills. Grouping does not have to
generate profits for itself.
Requirements
Must have at least two members from different Member
States.
No more than 500 employees!
Societas Europeae (SE) + Creation and Registration
The ‘European Company’ -> Uniform business structure for the entire EU
SE can be created by:
merging existing plcs from at least two Member States;
forming a holding company promoted by plcs from at least two Member States;
forming a subsidiary of companies from at least two Member States;
transforming a plc which for at least two years has had a subsidiary in another Member State.
Minimum capital requirement: EURO 120.000,-
Choice between one-board structure and two-board
structure
Difference between Customs Union and Free Trade Association
In CU you have unified tariffs and duties for all the goods travelling between Member States and coming from outside. (much much deeper integration)
In Free Trade Association it is only between Member States.
Consequences of the Shengen Agreement
No fixed border controls between signee states
But reintroduction possible for six months if necessary
Mechanism of the Dublin Agreement
Asylum seekers‘ applications are processed only (!) in the Member State in which they entered the EU
If asylum seekers travel to other Member States, they can be deported to their point of entry
Member States can use „sovereignty clause“ if necessary
Objectives of Competition Law
=> enhancing efficiency:
maximizing consumer welfare
achieving the optimal allocation of resources
=> protecting consumers and smaller firms from large aggregation of economic power
=> facilitating the creation of a single European market
prevent creation from being frustrated by private undertakings
