Chapter 7

Question 1

What are the sources?

Answer 1

Articles 101 - 109 TFEU

Question 2

What is Article 101(1)

Answer 2

‘1. The following shall be prohibited as incompatible with the internal market: all agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the internal market, and in particular those which:
» Directly or indirectly fix purchase or selling prices or any other trading conditions;
» Limit or control production, markets, technical development, or investment;
» Share markets or sources of supply;
» Apply dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage;
» Make 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

Question 3

What is Article 101(2)

Answer 3

Any agreements or decisions prohibited pursuant to this Article shall be automatically void

Question 4

What is Article 101(3)

Answer 4

The provisions of paragraph 1 can be inapplicable in the case of:

• Any agreement or category of agreements between undertakings,
• Any decision or category of decisions by associations of undertakings,
• Any concerted practice or category of concerted practices,

which contributes to improving the production or distribution of goods or to promoting technical or economic progress, while allowing consumers a fair share of the resulting benefit, and which does not:
(a) Impose on the undertakings concerned restrictions which are not indispensable to the attainment of these objectives;
(b) Afford such undertakings the possibility of eliminating
competition in respect of a substantial part of the products in question.’

Question 5

What are ‘undertakings’?

Answer 5

Hofner
‘…the concept of an undertaking encompasses every entity engaged in an economic activity, regardless of the legal status of the entity and the way in which it is financed and, secondly, that employment procurement is an economic activity’
eg. individuals, partnerships, non profits etc
even if non profit -
MOTOE

NOT when it is exercising the official authority of the State
Diego

Question 6

What happened in MOTOE

Answer 6

ELPA was a non-profit making body having sole public power to grant the authorisation of motorcycle events in Greece.
It also organised such events for itself from which it gained money from sponsorship, advertising and insurance contracts.
ELPA refused to grant authorisation of a rival organisation’s event. The Grand Chamber of the Court of Justice held that to use its public powers to do this amounted to an abuse of dominance under Article 102.
It stated that ELPA was an undertaking because it was engaged in an economic activity and this was irrespective of ELPA’s legal form and the way it was financed.
The fact that it was non profit-making was also irrelevant as it still competed with other operators who sought to make a profit. In such a context, its public powers gave it such an obvious advantage over them that the refusal of authorisation amounted to an abuse contrary to Article 102.

Question 7

What happened in Diego

Answer 7

Exclusive concession by a port authority to perform an antipollution surveillance service at an oil port
- The Court of Justice treated the company as, in effect, performing a regulatory function on behalf of the State
This activity was connected, by reason of its nature, its aim and the rules to which it was subject, with the exercise of powers which are typically those of a public authority.

Question 8

What happened in Hofner

Answer 8

The Court of Justice held that a public employment agency engaged in the business of employment procurement may be classified as an undertaking for the purpose of applying EU competition rules, albeit those in Article 102 TFEU

Question 9

What are the 3 Elements in Article 101(1)

Answer 9

> Must be some sort of collusion between two or more undertakings in the form of an agreement or a concerted practice
Any agreement/decision/practice must have an actual or potential effect on trade between MS
Any agreement, decision or practice must have as its object or effect the prevention, restriction or distortion of competition within the single market.

Question 10

What are the 3 forms of collusion

Answer 10

• agreements between undertakings
• decisions by associations of undertaking
• concerted practices

Not necessary to establish which category it falls into
eg ANIC

Question 11

Agreements between Undertakings

Answer 11

Agreements
> legally binding 
> oral agreements
Tepea
> Moral Agreements
Hercules

Not unilateral
eg Bayer

Even if it appears unilateral
AC Treuhand

Question 12

What happened in Bayer

Answer 12

• Bayer AG manufactured a range of medicines under the trade name Adalat which were designed to treat cardio-vascular disease.
• In most Member States, the price was fixed by national health authorities. At the relevant time, the prices fixed by French and Spanish national health authorities were on average 40% lower than those in the United Kingdom.
• Because of this, French and Spanish wholesalers began to export Adalat to the United Kingdom. This resulted in sales by Bayer’s British subsidiary falling by almost a half.
  imposing an export ban through its French and Spanish subsidiaries on the French and Spanish wholesalers.
• The Commission decided that the wholesalers had acquiesced in this and that their acquiescence resulted in an agreement between the subsidiaries and the wholesalers. The General Court disagreed.
• It held that the conduct of the wholesalers did not constitute sufficient proof that they had acquiesced in the export ban. Indeed, their conduct demonstrated precisely the opposite
• Moreover, the Commission could not legitimately regard an agreement between the wholesalers and the manufacturer as being established on the basis of the mere finding that pre-existing commercial relations between the wholesalers and the subsidiaries continued.
  Bayer had not acted unlawfully, because it had simply made a unilateral decision

Question 13

What happened in AC Treuhand?

Answer 13

• a consultancy firm which contributed actively and intentionally to a cartel between organic peroxide producers by storing secret documents, collecting and distributing commercial information amongst the members, organising meetings and reimbursing expenses so as to conceal the cartel.
• It was held to have participated in the cartel’s agreement even though it was not an actual party to the written agreement between the members of the cartel and it was not operating in the same market as the cartel.
• Causal link

Question 14

Decisions by Associations of Undertakings

Answer 14

Vereninging
» System of ‘target’ prices adopted by a trade association for cement wholesalers in the Netherlands was prohibited by Article 101 TFEU

NV IAZ Int Belgium

• water suppliers
• entering into an agreement with other organisations to establish a system of conformity checks and labels for washing machines and dishwashers
• Had the effect of making imports of washing machines and dishwashers into Belgium impossible or very difficult.
• Water supply undertakings were carrying out checks to determine whether machines connected to the water supply system were provided with a conformity label.

Question 15

Concerted Practices

Answer 15

A concerted practice may be any co-ordinated behaviour where there is little evidence of an agreement, other than the suspicious behaviour itself. The behaviour may be strong evidence of a concerted practice where it leads to market conditions that do not appear to be normal and competitive.

Dyestuffs
defined as ::
“‘ ‘[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””
- in case
- The Court observed that the producers had raised their prices by similar amounts on three different occasions. The rates of individual price increases were the same in all the relevant countries and, generally, related to the same products. The price increases were put into effect on almost the same day. The orders put out by a number of the producers contained very similar wording and were sent out on the same day.

versus
A.Ahlstrom
- parallel pricing was not found by the Court of Justice to breach Article 101(1) TFEU as it was not the only plausible explanation for the parallel conduct and could be explained as a normal feature of that market.
- “” it must be noted that parallel conduct cannot be regarded as furnishing proof of concertation unless concertation constitutes the only plausible explanation for such conduct. It is necessary to bear in mind that, although Article [101] of the Treaty prohibits any form of collusion which distorts competition, it does not deprive economic operators of the right to adapt themselves intelligently to the existing and anticipated conduct of their competitors.””

Question 16

Effect on Trade between MS

Answer 16

STM Test
- Foresee with a sufficient degree of probability on the basis of a set of objective factors of law or of fact that the agreement in question may have an influence, direct or indirect, actual or potential, on the pattern of trade between MS

Brasserie
- Agreements may combine to have a cumulative effect on competition and so the existence of similar contracts was a consideration that could be taken into account.

Etablissements
- Exclusive distribution agreement.
Arguments made before the Court was that the Commission had failed to show that trade would have been greater without the agreement in dispute. The Court held that the agreement clearly placed limitations on the freedom of trade between Member States.

Question 17

What happened in Etablissements

Answer 17

Effect on Trade

• Exclusive distribution agreement. Grundig, a manufacturer of electronic appliances such as televisions and radios, appointed Consten as its sole distributor in France and granted exclusive rights to its trademark in France
  Consten agreed not to re-export the products to other Member States. Grundig also obtained similar assurances from its other distributors in other Member States. The agreement set up a total ban on parallel imports and exports, thereby providing absolute territorial protection.
  the agreement breached Article 101 TFEU.
  Restriction
  Argument - Commission failed to show that trade would have been greater without the agreement in dispute.
  Agreement clearly placed limitations on the freedom of trade between Member States.

Question 18

What happened in Brasserie

Answer 18

Similar contracts taken into account with Effect on Trade

Belgian brewery and belgian cafe
B would lend the café equipment. Café to obtain supplies exclusively. Café sued.
Breached Article 101 TFEU
Agreements may combine to have a cumulative effect on competition.

Question 19

What is the STM test

Answer 19

The Court of Justice stated that: ‘It must be possible to foresee with a sufficient degree of probability on the basis of a set of objective factors of law or of fact that the agreement in question may have an influence, direct or indirect, actual or potential, on the pattern of trade between Member States
The types of agreements which have been found to have an effect on inter-State trade include contracts which prohibit distributors from selling goods other than in their own national market or agreements whereby producers agree to protect each other’s national markets. Even the effect of a number of small agreements, if taken collectively, has been found to affect the single market.

Question 20

Object/Effect

Horizontal / Vertical

Answer 20

Both
Horizontal - undertakings at the same level of trade or industry
Vertical - between undertakings at different levels of trade or industry, for example, those between a producer and a distributor or wholesaler.
Établissements
COJ rejected an argument that Article 101(1) applies to only horizontal agreements

Question 21

Object/Effect

Answer 21

Alternative and NOT cumulative

STM
First necessary to consider what is the object of an agreement

Question 22

Object

Answer 22

STM:
- Looking at the agreement’s purpose in the economic context in which the agreement is to operate

GSK
Intention irrelevant

Beef
Look at it objectively

Establissement
Don’t care about the actual effect of an agreement

Question 23

What happened in Beef Industry

Answer 23

Determine the Object objectively

• reducing the number of beef processors.
• Decommission their processing plants in return for compensation
• Subjective intention irrelevant of restricting competition or that the agreement pursues other legitimate objectives.

Question 24

Effect

Answer 24

EU Night Services
Actual conditions in which it functions (esp economic context)
the products or services covered by the agreement and the actual structure of the market concerned

Article 101(1) from para a-e has non-exhaustive list of restrictions

I the pattern of competition differs from what it would have been had there been no agreement, decision or practice, the Commission is likely to find that there is prevention, restriction or distortion of competition.

Question 25

What is the Rule of Reason / Ancillary Restrictions

Answer 25

When anti-competitive elements are essential for an agreement STM > German manufacturer granted a French company exclusive rights to sell machinery in France. > the objective of the agreement was to open up a new market and that, far from being a restriction on competition, this was procompetitive. > The Court of Justice responded by opining that: ‘…it may be doubted whether there is an interference with competition if the said agreement seems really necessary for the penetration of a new area by an undertaking.’ Pronuptia > Schillgalis had a franchise from Pronuptia de Paris to sell clothing in three cities. > Compatibility of franchise agreements depended on the provisions contained in them. > Such agreements generally enabled independent businessmen to have the chance of establishing themselves in the market by using the trade mark of the franchisor and to have access to commercial methods which they would not have otherwise acquired. > The franchisor had to be able to communicate their know-how and provide assistance without running the risk that this would aid its competitors. It must also be able to protect its identity and reputation. > The anticompetitive restrictions in such agreements enabled the franchiser to be able to do this. Without them, franchisor would not be willing to enter into such an agreement. Consequently, such restrictions would not fall within the prohibition in article 101(1) so long as they were strictly necessary to achieve these objectives. Was this the Rule of Reason Approach? Weighing the anti-competitive effects of an agreement against its pro-competitive effects American approach No! That's what Art 101(3) is for Why in STM? The agreement had not been notified to the Commission. At that time, an agreement could only benefit from an exemption under Article 101(3) TFEU if it had been notified to the Commission. Seeking to circumvent this problem by inviting the Court to undertake the balancing exercise in the context of Article 101(1) TFEU. The Court appeared to have taken up the invitation. Addressed in Met TV - Denied that there was a rule of reason defence under Article 101(1). Said: Restriction would not be prohibited by Article 101(1) where that restriction was ancillary to the agreement and that agreement was not itself anticompetitive. ‘…the concept of an ‘ancillary restriction’ covers any restriction which is directly related and necessary to the implementation of a main operation.’ Two Fold Test: >> The restriction has to be objectively necessary for the implementation of the main operation under the agreement. >> Second, the restriction has to be proportionate in the sense that its duration and scope must not exceed what is necessary to implement the operation. Confirmed in Mastercard Ancillary restriction would be objectively necessary only where the main operation would not be possible to carry out in the absence of the restriction in question.

Question 26

The 'de minimus' defence

Answer 26

Only applies when it is the EFFECT Expedia Defence doesn't apply when its the object Volk 0.2% +0.08% Notice on Agreements (soft law) Horizontal - aggregate MS of 10% Vertical - each of 15%

Question 27

Article 101(3)

Answer 27

Provisions of Article 101(1) are inapplicable when they satisfy these 4 conditions: 1. improve the production/dis of goods or promote tech or ec progress 2. allow consumers a fair share of the resulting benefit (eg wider choice or goods or better living conditions). Must not 3. contain dispensable restrictions 4. substantially eliminate comp in the relevant market Marine Paint - Association agreed to produce identical paints and to market them in identical packaging with the same trade mark. Each member was given the exclusive right to promote the sale of the paints in the territory which they were allocated. No exports. Agreement enabled its members to compete with larger producers of marine paint and so it was entitled to an individual exemption under Article 101(3) TFEU

Question 28

What are the 4 conditions in Article 101(3)

Answer 28

Provisions of Article 101(1) are inapplicable when they satisfy these 4 conditions: 1. improve the production/dis of goods or promote tech or ec progress 2. allow consumers a fair share of the resulting benefit (eg wider choice or goods or better living conditions). Must not 3. contain dispensable restrictions 4. substantially eliminate comp in the relevant market

Question 29

What are Block Exemptions

Answer 29

Block exemptions are provided for in Article 101(3) TFEU by referring to ‘categories of agreements’.

Question 30

Regulation 330/2010

Answer 30

Block exemption ``` Article 2(1) The exemption Article 101(1) does not apply to vertical agreements ``` ``` Article 3(1) Only applies when the market share held by the supplier does not exceed 30% of the relevant market and the market share held by the buyer does not exceed 30% Both the supplier’s and the buyer’s market shares must fall below 30% ``` Article 6 ‘the Commission may by regulation declare that, where parallel networks of similar vertical restraints cover more than 50% of a relevant market, this Regulation shall not apply to vertical agreements containing specific restraints relating to that market’. Article 4 Hardcore Restrictions The exemption provided by Article 2 does not apply at all to an agreement which has as its object one of these restrictions. - restricting a buyer's ability to determine the sale price - restricting the territory into which the buyer may sell the goods or services or restricting the customer to whom the buyer may sell the goods or services Can restrict sales either - into the exclusive territory or - to an exclusive customer group --- restrictions on active selling are acceptable ---- agreements must not stop the distributor from responding to unsolicited requests from customers from that area --- Internet Sales Guidelines on Vertical Restraints - a website will be passive selling as long as it is not targeting at a territory from which the distributor is excluded by the vertical agreement Article 5 - Excluded restrictions The exemption provided by Article 2 does not apply to any terms in the agreement which contains one of these restrictions. the REST of the agreement may benefit from the block exemption The parties to the agreement will either have to rely on the offending term benefiting from an individual exemption by satisfying the conditions in Article 101(3) or they will have remove it from the agreement. eg. A non-compete obligation causing the buyer to not to manufacture sell goods which compete with the contract goods or services indefinitely or for a period which exceeds five years (Article 5(1)(a)). The five-year time limit does not apply where the contract goods or services are sold by the buyer from premises and land owned by the supplier or leased by the supplier from third parties not connected with the buyer (Article 5(2)). A term which causes the buyer, after termination of the agreement, not to manufacture, purchase, sell or resell goods or services (Article 5(1)(b)).

Question 31

Internet Sales

Answer 31

Guidelines on Vertical Restraints Website will be passive selling as long as it is not targeted at a territory from which the distributor is excluded by the vertical agreement. Sending unsolicited emails to customers/territorial areas is active selling. Online adverts specifically addressed to customers outside the distributor’s territory are active selling. eg banner adverts on a third party website. Examples of ‘hardcore restrictions’ provided in the guidance include: – Stopping customers in another territory from viewing the website or rerouting them – Terminating transactions where the address revealed on a credit card is outside the distributor’s allocated territory; – Limiting overall sales made over the net; and – Paying a higher price for goods sold online. This is known as dual pricing. The Guidelines make clear that objective efficiencies provable in individual cases will allow Article 101(3) exemption

Question 32

Modernisation Regulation

Answer 32

Article 1/2003 /2003 - abolished the system of prior notification - empowers national Comp Authorities (3 + 4) and national courts (3+6) to enforce Article 101 and 102 Fines INFRINGEMENT under article 23(2) max fine is 10% of its total turnover in the preceding business year - Activities of its members - the maximum fine is 10% of the sum of the total turnover of each member active on the market affected by the infringement of the association Penalty - Penalty payments not exceeding 5% of the average daily turnover in the preceding business year per day 2. Failing to cooperate with an investigation article 23(1) Fines of no more than 1% of the total turnover where an undertaking or association of undertakings has intentionally or negligently supplied misleading or incorrect information, provided incomplete records or refused to submit to an investigation also can impose periodic penalty payments based on daily turnover (art 24) ``` Damages Courage damages can be awarded by National COurt for losses Manfredi Any individual can claim compensation ``` Right to Fill Compensation Join + Severally Liable

Question 33

Damages

Answer 33

Courage - the Court of Justice held that damages can be awarded by a national court for losses caused by a contract or by conduct which infringed Article 101 TFEU Why? IN ORDER to protect the rights which it confers on individuals Manfredi v Lloyd - COJ - ‘any individual can claim compensation for the harm suffered where there is a causal relationship between that harm and an agreement or practice prohibited under Article [101 TFEU].’ right to full compensation Article 3 of Directive 2014/104 > MS shall ensure that any natural or legal person who has suffered harm caused by an infringement of comp law is able to claim and to obtain full compensation for that harm > Full compensation shall place a person who has suffered harm in the position in which that person would have been had the infringement of competition law not been committed. It shall therefore cover the right to compensation for actual loss and for loss of profit, plus the payment of interest. > Full compensation under this Directive shall not lead to overcompensation, whether by means of punitive, multiple or other types of damages ``` Article 12(1) undertakings to be joint and severally liable ‘Member States shall ensure that undertakings which have infringed competition law through joint behaviour are jointly and severally liable for the harm caused by the infringement of competition law; with the effect that each of those undertakings is bound to compensate for the harm in full, and the injured party has the right to require full compensation from any of them until he has been fully compensated.’ ``` exemption from joint and several liability > provided by Article 11(2) for small and medium enterprises with a market share of less than 5% in the relevant market where joint and several liability would jeopardise their economic viability, although Member States must still ensure that they remain liable to their direct and indirect purchasers Under Article 11(4), Member States are to ensure that undertakings and natural persons who have been granted immunity from fines by a competition authority in return for cooperating with the investigation of a Competition authority will still be jointly and severally liable to their direct and indirect purchasers but will only be jointly and severally liable to other injured parties where full compensation cannot be obtained from the other undertakings that were involved in the same infringement.