chapter 1 Flashcards
Competition law
Competition law is a law that promotes or seeks to maintain market competition by regulating anti-competitive conduct by companies.
What is a compliance program
program with systematic procedures instituted by an organization to ensure that the provisions of the regulations imposed by a government agency are being met.
consequences of violation of competition law for companies
Loss of reputation, void and unenforceable contract
can a supplier prohibit a distributor from re-selling a product outside the territory clause of a contract?
what happens if its an essential part of the contract?
illegal under EU law
if its an essential part of the contract, the whole contract will be null and void if not the contract can continue to be enforced
is setting price for a distributor prohibited by EU law
yes, the distributor must be able to set freely his retail price
consequences of violation of competition law for individuals (employees)
Instant dismissal; prosecuted or serious fines
ways of enforcing competition law
courts(leniency, fines ), inspection of companies and private houses of employees(penalties for obstruction of inspection)
What is an agreement in view of competition law
gentleman’s agreement (informal agreements), concerted practices, information sharing, decision by association of undertakings
is a simple discussion considered an agreement in view of competition law
yes, no need for a written or binding agreement for a discussion to be an agreement
is knowing the price of other competitors and in turn them knowing yours considered an agreement
this qualifies as an agreement
horizontal agreements
these are agreements between competitors in the same level of the production chain (e’g Cartels)
vertical agreements
agreement b/w companies in different level of thee production chain
what are the prohibited restrictions in competition law
resale price maintenance, price fixing, bid rigging, information sharing, market/customer sharing etc.
types of illegal price fixing
fixing price itself, fixing components of a price, agreeing discount/allowances
Resale price maintenance - which is prohibited and which is permissible
if supplier gives distributor A minimum or fixed price and gives distributor B maximum or recommended price?
distributor A minimum/fixed price would be prohibited, why? because it restricts competition b/w distributors
distributor B may be permissible why? because its good for consumers
recommended resale prices are permissible as far as its s recommendation with no kind of pressure or incentive from the supplier
what is maximum discount equal to?
maximum discount is equal to minimum resell price
General rule of the horizontal market
Market and customer sharing is prohibited
Market sharing: allocation of market according to towns regions etc
customer sharing: according to class, type, size of customers
Active and passive sales
Active sales - distributor engages in proactive search o f customers outside a territory
Passive sales- customers approach distributor without him doing anything in particular (websites are considered passive sales)
Horizontal relationships and the do not
Bid rigging and collective tendering is prohibited
agreement to restrict production/supply (quota) is prohibited
- do compete hard for every contract you decide to get
- do avoid the coordination of your bid with other bidders
- do not discuss your proposal for a particular contract with any other party in a bidding situation
- do not agree with other bidders the price to quote in response to invitations to tender
- do not prepare a weak bid in the expectation that the contract will be awarded to someone else
- do not agree with other bidders to rotate the contract so that the bidder whose turn it is to receive a contract ensures that its quote is lower
competition rules are different from unfair competition
competition rules is for the benefit of the consumer while unfair competition are anti competition rules.
What is the aim of trade association meetings
the aim of the meetings in trade associations is to improve regulations and lobbying
*provided the lobbying is not used to fix price
what is permissible in trade associations?
trade associations can collect data(statistics) and recirculate it in which all suppliers can not figure out the total size of the market in volume and value
but provide to each member their own market share (total size of the market and own market figure)
what is prohibited in a trade association?
price exchanging
it is prohibited because it can influence the decision of market players
you can discuss market trends, environmental issues, common industry initiatives but if you depart to fields such as prices, customers, products to be launched then that is a danger zone
if you are attending such a trade association meeting that moves towards a danger zone of prohibitions, what do you do?
you should immediately object and if it continues protest and make sure you leave such meeting and also make sure your leaving the meeting is on the record.
what are dominant companies
companies with strong values in the market are dominant companies
if a company has a dominant position it is not bad but its the abuse of that position that is bad (e.g discriminatory prizing)
- the company can not refuse to supply to customers
- not only big companies can be dominant but small companies that are in a narrow field can also be a dominant company(Company that has a monopoly is a typical example of a dominant company)
Abuse of dominance (art. 102 TFEU) applies to what?
applies to unilateral practices
Legal definition of a dominant company
this is the ability of a company to act in a market, independently of his competitors, customers and suppliers; because of such market power it can decide market policy without taking into consideration how others in the market will act, dictating its own position
how to access dominance in the market
to access dominance in the market
- look at the market share
- but need to first determine the relevant market
- look at the market structure as well as other factors such as structure of the level of customers
- look at the buying power of customers
- look at barriers to entry
abuses to dominance includes
discriminatory pricing excessive " predatory " refusal to deal/supply tying and mixed bundling certain types of loyalty rebates
What is discriminatory pricing as an abuse of dominance
the application of “dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage”.
Under European competition policy, price discrimination constitutes a worry for three different reasons.
First, price discrimination by dominant firms may reduce
consumer welfare by extracting consumer surplus (without any exclusionary impact on competitors). This is generally referred to as “exploitative” price discrimination.
Second, the pursuit of the Internal market objective has given mandate to Competition to defeat attempts by private firms to erect barriers to trade between Member States which allows them to price discriminate across countries (the issue of geographic price discrimination is particularly prominent in the area of car sales and
pharmaceuticals).
Finally, price discrimination can lead to exclusionary effects. Such exclusionary effects can either affect the dominant firm’s rivals (primary line discrimination) or the dominant firm’s downstream customers (secondary line
discrimination).
What is excessive pricing as an abuse of dominance
pricing higher than what would be expected in a competitive market
pricing high for a long period of time causing little competitive pressure
What is predatory pricing as an abuse of dominance
pricing below cost..which is not a problem when you are a small and just entering the market but when you are dominant it can become a predatory strategy which can not be sustainable for small competitors
when setting price make sure the goods and services covers its costs
refusal to deal/supply as an abuse of dominance
Refusal to deal is most accurately categorised as a form of exclusionary abuse in that such a refusal will only be considered unlawful under European law to the extent that it is liable to exclude competitors, thereby seriously undermining effective competition in a market.
What is tying and mixed bundling as an abuse of dominance
the extension of dominance position from one product to another
