EU Competition Law Flashcards
• Art 101 and 102 TFEU
Art 101(1) TFEU
• This is the principle weapon to control anti-competitive behaviour by cartels.
o Incompatible with the internal market:
♣ ‘all agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect the trade between MSs which have as their object or effect the prevention, restriction or distortion of competition within the internal market…’
o Undertakings:
♣ Term not defined.
♣ The EU Courts and competition authorities have taken a broad view.
♣ Höfer, the ECJ held that the term covered entities engaged in economic activities. These included: corporations, partnerships, individuals, trade associations, the liberal professionals, state owned corporations, and cooperatives.
♣ Firms that are legally distinct may be treated as a single unit because of their close economic link. This may be the case with agreements made between parent and subsidiary where they are seen as a single economic unit. The issue is whether the subsidiary has real autonomy, or whether it merely carries out the instructions of its parent. If Art 101 is inapplicable, it may still possible to apply 102.
o Agreements, decisions and concerted practices: Art 101 requires the existence of an agreement, decision or concerted practice.
♣ Agreements (A)
• These can be formal or less formal agreements to ensure that anti-competitive practices are caught. Quinine Cartel case.
• An agreement can be deduced from conduct.
• EU courts have held that for there to be an agreement within Art 101 it was sufficient that the undertakings should have expressed their joint intentions to conduct themselves on the market in a specific way. Such as achieving price and sales-volume targets. Hüls AG v Commission.
♣ Concerted practice (B)-There is room for discussion on what will constitute a concerted practice.
• Collusion – an agreement between two or more parties, sometimes illegal and secretive, to limit open competition by deceiving, misleading or defrauding others of their legal right, or to obtain an objective forbidden by law by gaining an unfair market advantage. It is an agreement among other firms or individuals to divide the market, set prices, limit products or limit opportunities.
• Concerted practice – Conduct on the part of two or more parties which falls short of an agreement or decision for either the purpose of the prohibition of Art 101(1) TFEU, but which consists of some form of direct or indirect, and often informal, contract or co-operation between competitors.
• The term ‘concerted practice’ must capture colluding behaviour between firms. But it cannot be interpreted too broadly as it can capture parallel pricing that is rational or a natural response to the market. So in normal competitive markets, it is unlikely that firms will price at the same level without some collusion, because of differences in cost structures and the like. For instance, in oligopolies where there is little product differentiation and price changes are easily detectable by competitors.
o Price uniformity is the result of oligopolies so it will not be sensible to penalise them for colluding.
o ICI v Commission.
• Four points should be made on the term of concerted practice:
1. The burden of proving an infringement of Art 101 rests with the Commission, and the mere existence of parallel conduct will not, in itself, prove concerted practice.
2. The Court will not readily accept that uniformity of price is the result of oligopolistic market structure. The Court will look for indicators of collusion.
3. There can be differences of opinion with regard to the existence of a concerted practice Wood Pulp. ECJ held that parallel conduct cannot be regarded as proof of concertation unless this constituted the only plausible explanation for the conduct.
4. There is the issue of whether a concerted practice must have been put into effect. Issue addressed in Hüls and affirmed in T-Mobile.
♣ Object of effect of preventing, restricting or distorting competition. There is room for discussion on the interpretation of this phrase.
o 101(1) requires that the agreement, decision, or concerted practice had the object or effect of preventing, restricting or distorting competition in the internal market.
♣ There is academic debate about whether EU law should adopt a rule of reason (concept used to interpret Sherman antitrust law in the US). This was affected by Art 101(3), whereby agreements that are held to restrict competition can be exempted following an economic analysis.
Art 102
• It is generally accepted that Art 102 is to protect consumers rather than particular competitors, and that this requires protection of the competitive process from foreclosure.
• The essence of Art 102 is the control of market power, whether by a single firm or, subject to certain conditions. Monopoly power can lead to higher prices and lower output than under more normal competitive conditions, and this is the core rationale for legal regulation.
• Art 102 does not, however, prohibit market power per se. It proscribes the abuse of market power. Firms are encouraged to compete, with the most efficient players being successful. Since, it would not be correct to penalize the winner for being more efficient than its competitors.
• Art 102 requires that the undertaking or undertakings be in a dominant position. Dominance must be assessed in relation to the three variables: the product market, the geographical market, and the temporal factor.
o The product market:
♣ A firm will only have market power in the supply of particular goods or services. The narrower the definition of the product market, the easier it is to conclude that an undertaking is dominant under Art 102.
♣ The general approach has been to focus upon interchangeability: the extent to which the goods or services are interchangeable with other products. This is addressed by looking at both the demand and supply sides of the market.
• For the demand side interchangeability requires investigation of cross-elasticity of the product. (The existence of high cross-elasticities, where consumers switch from one product to another due to a rise in price means that the products are part of the same market.)
♣ United Brands Company – indicates how the Court defines The product market and the problems that this can entail.
o The geographical market:
♣ Defined as the territory in which all traders operate in the same or sufficiently homogeneous conditions of competition in relation to the relevant products or services, without being necessary for those conditions to be perfectly homogeneous Treta Park v Commission.
♣ In the absence of geographic factors, the relevant geographic market was held in Hilti to be the entire EU.
o Temporal factor:
♣ Markets have a temporal element. Thus, a firm may possess market power at a particular time of year, during which competition from other products is low because these other products are available only seasonally.
Dominance
• (A) Single firm dominance
o When the Court has defined the relevant market, it then has to decide whether the undertaking is dominant within that sphere. The test quoted in United Brands and approved in Hoffmann-La Roche:
♣ ‘Such a position does not preclude some competition, which it does where there is a monopoly or a quasi-monopoly, but enables the undertaking which profits by it, if not to determine, at least to have an appreciable influence on the conditions under which that competition will develop, and in any case to act largely in disregard of it so long as such conduct does not operate to its detriment. A dominant position must also be distinguished from parallel courses of conduct which are peculiar to oligopolies in that in a oligopoly the courses of conduct interact, while in the case of an undertaking occupying the dominant position the conduct of the undertaking which derives profits from that position is to a great determined unilaterally. The existence of a dominant position may be derived from several factors which, taken separately, are not necessarily determinative but among these factors a highly important one is the existence of very large market shares.’
• Where there is not a statutory monopoly the Court will consider two types of evidence to determine whether the firm has market share: the market share of the undertaking; and whether other factors serve to reinforce its dominance (this part is criticized).
Note
• Art 102 applies to exploitative and exclusionary abuses. Hence, the provision protects both the consumer and the competitors.
• Covers exploitation and anti-competitive behaviour.
• The article prohibits unfair pricing and limits of productivity capacity.
• British Airways plc v Commission, T-219/99, ECLI:EU:T:2003:343 (focus on paragraphs 175-300)
o CFI:
♣ BA’s market share is 39.7% whereas its competitor’s market share was in the 7% region. (BA has international links, increasing its market share, but it was still dominant).
o The Court of Justice found:
♣ To determine whether BA abused its dominant position by applying its performance reward schemes to travel agents established in the UK, the rules governing those rewards had to be considered. Further whether in providing an advantage not based on any economic service, BA tended to remove or restrict the agents’ freedom to sell their services to the airlines of their choice and thereby hinder the access of BA’s competitor airlines to the UK market for air travel agency services.
o The Court Held:
♣ That BA’ argument that there is no proof of damage caused to consumers by its reward schemes cannot be accepted.
♣ BA reinforced the anti-competitive effect of its initial performance reward scheme by extending its new system of incentives to all UK air travel agencies.
♣ BA cannot naturally be regarded as having believed in good faith, throughout the administrative procedure, that its incentive schemes were compatible with Community competition law.
• Expedia Inc v Autorité de la concurrence , C-226/11 ECLI:EU:C:2012:795
o Competition – Article 101(1) TFEU – agreements, decisions and concerted practices – appreciable restriction – Reg 1/2003 – Article 3(2) – National Competition authority – practices which may affect trade between MSs – Proceedings and penalty – market share thresholds of the de minimis notice not attained.
• Question referred for a preliminary ruling:
o The court seeks to know whether, Art 101(1) and Art 3(3) Reg No 1/2003 must be interpreted as precluding (stopping) a national competition authority from applying Art 101(1) to an agreement between undertakings that may affect trade between MSs, but does not reach the threshold specidified by the Commission in its de minimis notice.
o The Court said that even if the threshold is not met Art 101(1) will still apply.
♣ Consten SA and Grundig, 56 and 58/64, ECLI:EU:C:1966:
o Facts
♣ Grunding granted Consten a sole distributorship for its electronic products in France. Consten had an obligation to take a minimum amount of the product; it had to provide publicity; and undertook not to sell the products of competing manufacturers.
♣ Consten undertook not to sell the goods outside the contract territory. A similar prohibition existed on the other Grunding distributors in other countries.
♣ Grunding assigned to Consten its trademark GINT, which Consten could use against unauthorised sales in France.
♣ UNEF bought Grunding goods in Germany and sold them in France more cheaply than Consten.
♣ Consten brought an action for infringement of its trademark, and UNEF contended that the agreement between Grunding and Consten violated Art 85 now (101).
• It was contested that the agreement constituted an infringement of Art 85(1).
• ‘Although competition between producers is generally more noticeable than that between distributors of products of the same make, it does not thereby follow that an agreement tending to restrict the latter kind of competition should escape the prohibition of Art 85(1) merely because it might increase the former.’
• ‘Besides, for the purpose of applying Art 85(1), there is no need to take account of the concrete effects of an agreement once it appears that it has as its object the prevention, restriction or distortion of competition.’
♣ Anti-competitive nature of an agreement will be determined by its content, the objectives it seeks to attain, and the economic and legal context of which it forms part. The parties’ intention is not a necessary factor but may be taken into account. Competition Authority v Beef Industry Development Society Ltd.
♣ Völk v Vervaecke , 5/69 ECLI:EU:C:1969:35
o Rules on competition between undertakings – agreements which may affect trade between Member States – Exclusive dealing arrangements with absolute territorial protection – prohibition – possibility of avoiding such prohibition by reason of the weak position of the parties concerned on the market in the products in question.
o Facts
♣ Mr Volk trades under the name of ‘Maison Josef Erd’, an undertaking manufacturing washing-machines under the trademark ‘konstant’.
♣ Mr Volk concluded a verbal agreement that:
• A) Vervaecke shall order 50 washing machines from his company every two months until a total of 600 appliances is reached.
• B) The price is fixed at DM 578 per appliance.
• C) When Vervaecke fulfils the undertaking to deliver a total of 600 washing-machines in all, it shall be released from its obligations under the contract.
o The Court
♣ An exclusive dealing agreement, even with absolute territorial protection, may, having regard to the weak position of the persons concerned on the market in the products in question, escape the prohibition laid down in Art 85(1).
♣ ** ICI v Commission , 48/69 ECLI:EU:C:1972:70
♣ Facts and issues:
o On the basis of information supplied by trade associations of the various industries using dyestuffs, the Commission made inquiries as to whether increases in prices for these products which had occurred since the beginning of 1964 in the countries of the Community were made by mutual agreement between the undertakings concerned.
o As a result of these inquiries the Commission found that three uniform price increases had taken place. The uniform increase had been of 15% in the prices of most dyes based on aniline, with the exception of certain categories, took place in Italy, the Netherlands, Belgium and Luxembourg and in certain third countries.
o ‘a concerted practice does not have all the elements of a contract but may…out of coordination which becomes apparent from the behaviour of the participants.’ + ‘Although parallel behaviour may not by itself be identified with a concerted practice, it may however amount to strong evidence of such a practice if it leads to conditions of competition which do not correspond to the normal conditions of the market…’
♣ The fine
o ‘In view of the frequent and extent of the applicant’s participation in the prohibited practices, and taking into account the consequences thereof in relation to the creation of a common market in the products in question, the amount of the fine is appropriate to the gravity of the infringement of the Community rules on competition.’
♣ ** United Brands v Commission, 27/76 ECLI:EU:C:1978:22
o One of the cases which defines the product market and the problems that this can entail.
o Facts
♣ United Brands produced bananas, and was accused of a variety of abusive practices.
♣ An initial issue concerned the definition of the product market.
♣ UB argued that bananas were part of a larger market in fresh fruit, and produced studies to show that the cross-elasticity between bananas and other fruit was high.
o Commission
♣ The Commission contended that cross-elasticity was low, and bananas were a distinct market because they constituted an important part of the diet for certain consumers, and because they had specific qualities which made other fruits unacceptable as substitutes.
♣ ‘The banana has certain characteristics, appearance, taste, softness, seedlessness, easy handling, a constant level of production which enable it to satisfy the constant needs of an important section of the population consisting of the very young, the old and the sick.’
♣ *Hoffmann La Roche v Commission 85/76 ECLI:EU:C:1979:36
o The ECJ reiterated the point in Continental Can: There was no need to prove that the abuse had been brought about by the firm’s market power. The concept of abuse was ‘objective’ and could apply to any behaviour which influenced the ‘structure’ of the market and weakened competition.
♣ Facts and issues
o Hoffmann AG had committed an infringement of Article 86 of the Treaty ‘by concluding agreements which contain an obligation upon purchasers, or by the grant of fidelity rebates offer them an incentive, to buy all or most of their requirements exclusively, or in preference from Hoffmann AG’
o The decision concerned 26 agreements concluded by Hoffmann with 22 named undertakings engages in the production and/or sale of vitamins in the Common Market for use either in the pharmaceutical industry 25% or for food 15% or as an additive in animal feed 60%.
o Hoffmann is the world’s largest manufacturer of bulk vitamins. In each of the markets of vitamin production, it is said to have dominant position which it has intentionally or negligently abused.
o Hoffmann Roche AG offered incentives to buy all or most of their requirements of vitamins exclusively or in preference from Roche.
♣ Höfner and Elser v Macroton, C-41/90 ECLI:EU:C:1991:161
♣ The case
o Concerned the definition of an ‘undertaking’ and abuse of a dominant position.
♣ Facts
o The German Federal Office for Employment (Bundesanstalt) possessed a statutory monopoly on placing employees with employers. German law also allowed B after consulting with workers and employer associations to entrust other institutions or people with employment procurement services under its supervision. It had become the practice that a number of executive recruitment business developed, to which the B turned a blind eye. However, without the explicit approval of the B, acts, including contracts which infringed the statutory provision were void under the German Civil Code.
o Mr Höfner and Mr Elser were recruitment consultants who had placed a candidate as a sales director with a company called Macrotron GmbH. Macroton G had decided that they did not want the candidate. Mr H and Mr Elser argued that the man was suitable, and sued for breach of contract.
o In its defence Macrotron argued that any contract was void.
o Mr Honfner and Mr Else therefore challenged the provision declaring the contract void under the EC competition law provision, Art 82.
♣ Judgment
o As a preliminary question the CJEU held that the B, even though it was a public body, could be subject to competition laws. It was an ‘undertaking’, and therefore fell within the scope of the Treaty.
o Furthermore, by failing to satisfy demand for a good or service, the exclusive right of the German government to regulate employment services could amount to the abuse of a dominant position.
♣ Rhone-Poulenc, T-1/89, ECLI:EU:T:1991:56
♣ The case
o Competition – cartels – agreements between undertakings – common purpose as to the conduct to be adopted on the market -
♣ Summary
o In order for there to be an agreement within the meaning of Art 85, it is sufficient that the undertakings in question should have expressed their joint intentions to conduct themselves in a specific way. This is the case where there are common intentions between a number of undertakings to achieve target prices and sales volume targets.
♣ Facts
o Concerned a Commission decision fining 15 producers of polypropylene for infringing Art 85(1) of the ECC Treaty.
♣ ACF Chemiefarma v Commission (Quinine cartel), 41/69 ECLI:EU:C:1970:71
o A number of firms agreed to fix prices and divide the market in quinine. They made an agreement to this effect, which affected trade with non-Member States. They also made a gentlemen’s agreement, which extended this to sales within the common market.
o The gentlemen’s agreement had as its object the restriction of competition within the Common Market.
♣ The case serves as a good example of the ECJ’s approach. Informal agreements can be caught under Art 101 and the mere fact that the parties claim to have terminated them will not be conclusive. So the Court examines the facts to determine whether it was economically plausible that the parties’ pricing behaviour could have been achieved without collusion.
o The Polypropylene case –
♣ The Commission held that there was a single agreement between firms in the petrochemical industry, which had continued over many years. Even though the agreement was oral, even though there were no sanctions for breach and even though it was not legally binding. So an agreement existed if the parties reached consensus on a plan which limited, or was likely to limit, their commercial freedom by determining the lines of their mutual action or abstention from action in the market.
♣ France Télécom SA v Commission T-340/03 , ECLI:EU:T:2007:22 appealed in C-202/07 ECLI:EU:C:2009:214 – appeal dismissed
♣ The case
o Competition – administrative procedure – statement objectives.
o ‘A dominant position exists where the undertaking concerned is in a position of economic strength which enables it to prevent effective competition being maintained on the relevant market by giving it the power to behave to an appreciable extent independently of its competitors, its customers and, ultimately, consumers; in order to establish that a dominant position exists, the Commission does not need to demonstrate that an undertaking’s competitors will be foreclosed from the market, even in the long term;’
♣ **Intel Commission Decision of 13 May 2009, OJ C227/13, appealed by Intel in case T-286/2009, ECLI:EU:T:2014:547 – appealed to Court of Justice: C- 413/14P – no decision made yet.
♣ The case
o The Commission fined the undertaking for a number of practices it found foreclosed the market against its competitor, AMD, to the detriment of consumers. The practices included giving rebates on its processing units to computer manufacturers such as Dell and HP.
o The rebates were conditional on the OEMs purchasing 80-100% of their requirements from Intel. The Commission stated in the decision that the Guidance Paper was not applicable since it did not apply to existing proceedings but was a ‘document intended to set out priorities for cases that the Commission will focus upon the future’.
