EU law - Week 5A Flashcards
What are the purposes of (EU) competition law? primary + ancillary
Primary purpose:
a. Establishment of the internal market (market integration)
b. Ensuring a level playing field (equal conditions of competition)
- Prohibition of practices such as:
■ Agreements/practices that restrict free trade and competition
■ Abuse by an undertaking of its dominant position in the market
■ Mergers or acquisitions that reduce competition
■ Government aid that selectively benefits specific undertakings, thereby distorting competition in the internal market.
Ancillary aim:
- Better quality of products and services for lower prices
- More consumer welfare
- Competition brings innovation and creativity
What does competition law consist of? (areas/ laws)
- Cartel prohibition (Art. 101 TFEU)
- Prohibition misuse dominant position (Art. 102 TFEU)
- Mergel Control (Merger Control Regulation)
- State aid prohibition (Art 107-109 TFEU)
Article 101 TFEU refers to “undertakings”, what are these?
‘- Undertaking’: broad ‘catch all’ and functional definition: “every entity engaged in an economic activity regardless of its legal status and the way it is financed” (Höfner & Elser, par. 21)
- Economic activity = offering goods or services on a market
- Thus, also public entities can be ‘undertakings’
- But economic activity excludes activity that is an essential function of the State and is not profit-making
Examples:
1. Poucet & Pistre
- Management of social security system is not economic activity since it is based on the principle of national solidarity (essential feature of State activity) and is entirely non-profit making
2. Hofner & Elser (para 21 & 22):
- Employment procurement performed by the German govt employment agency is economic activity since it is not necessarily carried out by (and so not essential to) the State
Article 101 TFEU refers to “agreements between undertakings”, what are these?
Agreement’: All forms of agreements with at least 2 parties, including:
a. Formal agreements (Consten & Grundig)
b. Oral agreements
- in these there is a binding/legal obligation established
c. Gentlemen’s agreements / Non legally binding agreements
- it is not legally binding but parties consider the agreement binding as matter of honour or social norms that say you should not break a commitment made)
What elements need to be proven to establish violation of Art 101(1)?
- Agreement or decision or concerted practice by
undertakings - That may affect trade btw member States (not just
within one member State) - Have as their object/purpose or if not object, an
effect - Of preventing, restricting or distorting competition in
the internal market
How does the Ford case relate to forms of collusion?
Ford case: Was the withdrawal by Ford Germany of all right-hand-drive cars from Ford’s exclusive distributors in Germany a form of agreement or a unilateral act?
–» Yes, there was tacit acceptance (distributors signed a contract that left room for Ford to make decisions like the one made hence they implicitly accepted (see para 21)
What is the distinction between horizontal and vertical agreements?
- Horizontal agreements: agreements between competing undertakings operating at the same/equal level of the production/distribution chain, eg Albert Heijn (AH) and Spar (both retailers/distributors). A restriction of competition/trade is usually and logically a restriction agreed on between competitors (undertakings on equal footing).
- Vertical agreements: agreements btw undertakings that are at different levels of the production/distribution chain and are thus not competitors, eg AH (a distributor) and Cocacola (a producer). But vertical agreements can still:
- Can restrict competition between the distributor (intra-brand) that signed the agreement (AH) and competing distributors (e.g. Spar, Aldi).
- Can also restrict inter-brand competition (competition between producers of different brands – Cocacola and Pepsi)
What did the Consten & Grundig case entail?
■ Grundig appointed Consten SaRL as sole distributor of its electronic products in France
■ 3rd party company, UNEF purchased Grundig products in Germany and sold them in France (at a cheaper price). Consten contended that UNEF had violated the trade mark assigned to it in the sole distributor agreement by Grundig.
■ Commission in a decision concludes that the sole distributorship agreement (including trademark) violated Article 101 TFEU –» Thus, also vertical agreements are covered by the prohibition of Art. 101(1) TFEU
Arguments:
- Textual argument: “Article [101 TFEU] refers in a general way to all agreements which distort competition within the Common Market and does not lay down any distinction between those agreements based on whether they are made between competitors operating at the same level in the economic process or between non-competing persons operating at different levels” (para 2.)
- Teleological argument: “Competition may be distorted within the meaning of Article [101(1) TFEU] not only by agreements which limit it as between the parties, but also by agreements which prevent or restrict the competition which might take place between one of them and third parties” (para. 3)
Where can we found the exceptions for competition?
Art. 101(3) TFEU
“Paragraph 1 may be declared inapplicable [by Commission, also by NCA’s] in the case of an agreement, decision or concerted practice that
(1) contributes to improving the production or distribution of goods or to promote the logical progress;
(2) while allowing consumers a fair share of the resulting benefit
(3) without imposing restrictions that are not indispensable to attain those objectives
(4) without eliminating competition in respect of a substantial part of the products in question”
What is the effect on trade between MS? (Consten & Grundig ruling)
See Consten & Grundig:
- the agreement must be a threat, either direct or indirect, actual or potential’ to trade between MS
- Thus also when all parties are located in the same MS
- But subsequently a de minimis rule was introduced by the CJEU: when the joint market share is small, the effect on trade between MS is likely small as well, not “appreciable”
What are some examples of “abuses by one or more undertakings of a dominant position within the internal market”? (Article 102 TFEU)
(a) unfair purchase or selling prices
(b) limiting production
(c) applying dissimilar conditions to equivalent transactions
(d) making the conclusion of contracts subject to acceptance of supplementary obligations (= tied selling)
Disclamer: Having a dominant position is not prohibited (‘why penalizing growth?’); only its Abuse is prohibited
How do you determine a dominant position on the market? Which case?
“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 the consumers”. (United Brands, para 65)
Mainly look at market shares (simplified):
- 60% = dominance
- 45% - 60% = could be dominance (mainly look at market shares of the undertaking’s competitors)
- less than 45%: no dominance
What is a state aid? (established by Altmark case)
The prohibition (Art. 107(1) TFEU):
“Any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the internal market.”
Additional case law:
- Altmark, para 75:
1. There must be an intervention by the State or through State resources.
2. The intervention must be liable to affect trade between Member States.
3. It must confer an advantage on the recipient.
3. It must distort or threaten to distort competition.
What are the exception/ exemptions for state aid?
Exceptions (Art. 107(2))
- Example: aid to make good the damage caused by natural disasters or exceptional occurrences;
Exemptions to be granted (or not) by the European Commission (Art. 107(3))
- Example: aid to promote the economic development of areas where the standard of living is abnormally low or where there is serious underemployment, and of the outermost regions;
What does the Ford case entail?
Context:
-Ford AG produces both left- and right-hand drive cars on a regular basis
- Ford AG established a selective distribution system based on a main dealer agreement binding on its German distributors. The agreement was notified to the Commission
-Until the 80s certain number of right-hand cars were constructed to British specifications in Germany and were sold in Germany. At one point: increase in demand for right hand cars, because prices were considerably lower in the German than the British market > British consumers started buying from Germany
-From May 1: German dealers can no longer accept their orders for right hand cars, they have to be purchased from a Ford dealer established in the UK or from a subsidiary from the UK
Question:
-Was this decision by Ford an unilateral act or an agreement? (agreement > covered by art. 101, unilateral act not covered by art. 101)
- Yes, there was tacit acceptance (distributors signed a contract that left room for Ford to make decisions like the one made hence they implicitly accepted (see para 21)
