Competition Law

Question 1

What are the objectives of competition Law?

Are they compatible with each other and with other union aims?

Answer 1

▪The primary objective is to ENHANCE EFFICIENCY, in the sense of maximising consumer welfare & achieving the optimal allocation of resources. Traditional economic theory indicates that goods and services will be produced most efficiently where there is perfect competition or, more realistically, workable competition

▪A second objective of Competition policy may be to protect consumers and smaller firms from large aggregations of economic power (monopolies/agreements by undertakings)

▪A third objective is to facilitate the creation of a single European market (single market imperative) & to prevent this from being frustrated by private undertakings

▪the objectives and priorities of EU competition policy have not remained static across time..

Question 2

To what extent does competition law presuppose the economic theory of classical economists (such as Adam Smith)?

Answer 2

▪small extent
▪theory of ‘perfect competition’ is very idealistic but too liberal and unlikely
▪Competition law is beneficial as it provides some regulation (of the market - objective) > Government intervention is sometimes needed (e.g. when economies slow down)

Question 3

What is a “concerted practice”?

Answer 3

coordination between undertakings which, without having reached the stage of concluding a formal agreement, have knowingly substituted practical cooperation for the risks of competition (anti-competitive object)

Question 4

why is the economic term “oligopolistic market” relevant to the definition of a concerted practice?

Answer 4

▪tendency for all prices to be raised at the same time (because each firm independently recognises it’s mutual interdependence

▪Characteristics of oligopolistic market; relatively few sellers, high barriers to entry, little product differentiation, and price transparency

The theory of oligopolistic Interdependance has attracted criticism;

1) it overstates the interdependence of oligopolists
2) it presents too simplistic a picture of industrial market structures
3) it fails to explain why in some oligopolistic markets competition is intense
4) it doesn’t explain satisfactorily it’s central proposition, which is that oligopolists can earn supra-competitive profits without actually colluding

Question 5

why has the commission & ECJ made a broad interpretation of the phrase “..may affect trade between member states”?

Answer 5

▪articles 101 & 102 TFEU
▪requirements merely viewed as jurisdictional matter
▪actual/potential negative impact
▪pre-emptive of damage

Question 6

distinguish between horizontal and vertical agreements

Answer 6

▪horizontal > agreement between manufacturers (more damaging to Competition)

▪agreement between manufacturer and consumer

Question 7

What is meant by “the rule of reason” in the context of EU competition law? From which jurisdiction does the term originate ?

Answer 7

▪no rule of reason in Europe

▪derogation Article 101 s.3 > to achieve balance; 1. improves production/distribution of goods 2. provides benefit 3. doesn’t eliminate competition
-An agreement with these features passes clearance (checked by commission/block exemption)

▪Metro TV case

Question 8

What are the 3 essential conditions for violation of article 102?

Answer 8

1) Establish dominant position
2) Abuse of that position
3) Abuse must affect trade between member states

Question 9

Article 102 - Definition of dominance

Answer 9

The legal definition of a dominant position in EU law was given by the ECJ inUnited BrandsandHoffmann-La Roche: “a position of economic strength enjoyed by an undertaking which enables it to prevent effective competition being maintained on the relevant market by affording it the power to behave to an appreciable extent independently of its competitors, its customers and ultimately of its consumers”

In United Brands the relevant product market was bananas

Question 10

Article 101 tfeu

Answer 10

Article 101 is the principal vehicle for the control of anti-competitive agreements. Such agreements can be horizontal or vertical.

Key features include;

▪the meaning given to the term agreement, undertaking and concerted practice > In Hofner, the ECJ held that the term undertaking covers any entity engaged in an economic activity regardless of it’s legal status and the way in which it is financed

▪the relationship between article (1) and (3)
▪the extent to which economic analysis does and should take place within article 101

▪the interpretation accorded to article 101 (3), including whether non-economic factors can be taken into account