Competition law Flashcards
Competition law as a central element of internal market
o Against private distortion of cross border competition
Art. 26 TEU runs a bit short because it forgot to mention competition law because the four fundamental freedoms are directed to state barriers to trade.
You can use the fundamental freedoms to attack state regulations which makes it difficult to cross border trade. But not only MS having different regulations or obstacles but also private entities. In a way that internal market functions are that on one side, there are fundamental freedoms to attack state regulation and on the other side, competition law to attack private entities.
What is competition law?
- central element of internal market
- including public elements (merger control)
- and private elements (anticompetitive agreements)
private agreements to distort competition
there are two forms of private agreements (horizontal being a little bit worse). Both are addressed by competition regulations.
- Vertical relationship: not competitors but producers-distributor kind of relationship
- Horizontal: between competitors producing the same products on the same level of supply
Reason behind competition law
Competition = different companies try to make business with suppliers/customers
o Two or more companies producing or selling the same product compete against each other, getting as much of profit/market share is possible
–> pressure to make a better deal
Suppliers/customers have the choice among different offers
–> Pressure to have better products
–> Competition therefore means constant efforts
–> Competition is painful and stressful!
–> «natural» tendency to reduce pain of competition - by restraining it
how can competition be restrained?
- Government regulation
o State monopolies (salt, tv, railway, tobaco, alcohol, etc.) government deciding not to open competition
o Licensing: one has monopoly but gives a right to produce or sell in other countries - Private agreements
o Cartels - F.e. boycott, distribution agreements
o Vertical/horizontal agreements - Dominant player: a competitors with big share of the market decides to e.g. raise the price and reduce production.
Why should Government care about competition?
Government intervention necessary at all? Self-cleaning of market not enough? (Chicago School)
In the old days, there were no competition rules in swiss law. book example
The governments should care because competition in free market economy is most efficient:
Fosters innovation
Most likely to increase national welfare
Free economy corresponds to free political system
Merger control to protect free market system
Mergers can improve competitiveness but can also have negative impact on competition
o If merged undertaking acquires market dominance (monopoly)
o Abuse of market dominance usually illegal
o Connection with Market dominance, but time different!
3 elements of modern competition law
3 common elements have evolved (international «standard»)
a) Anticompetitive agreements: cartels, vertical and horizontal
b) Abuse of dominant market position
c) Merger control: preventive control
Goals of competition law
General goal: securing competition
Sometimes additional elements
o Creation of common market (EU, China): in the EU the internal market is important; thus competition law used in order to create this full internal market. Same with China having such intentions.
o State aid control (EU), etc. = states not allowed to grant specific treatment to their companies in order to keep them alive
where is merger control mentioned in TFEU
o Merger control is not mentioned in the EU treaty, but being part of modern competition system, EU could organize it in the legislation
Competition law is international
Globalization o cross-border business o cross-border conduct o cross-border effects o HOWEVER, No global coordination!
Specially: how to deal with multinational undertakings? E.g. Cartel created outside of Europe influencing competition in Europe? Commission can intervene by extra-territorial application of EU law
–> risks of conflicting decisions e.g. Honeywell
Goals and instruments of the EU competition law
Goals o Peace, o economic prosperity, o international trade o Ever closer Union (?)
Instruments
Single market
4 fundamental freedoms against state restrictions
Competition law against private restrictions
Direct applicable
I. Element: Anticompetitive Agreements
Art. 101 TFEU: all agreements between undertakings (decision concerted practices) which may affect the trade in MS and has an objective or effect of prevention or distortion of competition within internal market shall be automatically void
para 1: illegality
para 2: consequence - void
para 3: exceptions
Art. 101 application
- Scope of application: Is this an agreement?
- Trade between member states
- Object or effect?
- Escape clause: Exception?
per se violations of Art. 101
(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;
(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, have no connection with the subject of such contracts.
Exemptions art. 101 (3)
- 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 concerted 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. - -> block exemption regulation!
