L9: Anti-Competition Flashcards
1
Q
what is the effect of Art 101(1)?
A
prohibits 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.
2
Q
What is the effect of art 101(2)
A
treats prohibited agreements as void
3
Q
article 101 3
A
allows for individual exceptions from 101 (1)
4
Q
What are the requirements of article 101(3)?
A
An agreement must have:
beneficial effects
Must be proportionate
No substantial elimination of competition
5
Q
Article 102
A
Prohibits abusive conducts by businesses that have substantial market power
6
Q
What behaviour does article 102 target?
A
Unilateral behaviour by dominant undertakings
7
Q
Who enforces article 101 and 102
A
The european commission, national courts and national competition authorities
8
Q
Why are restrictive business practices harmful?
A
harm consumers, detrimental effect on business efficacy, likely to disadvantage small and medium sized businesses
9
Q
Article 101 TFEU summary
A
prohibits business agreements or arrangements which prevent, restrict, or distort competition within the internal market and affect trade between Member States.
10
Q
What does 102 prohibit
A
the abuse of market power, or ‘dominance’, normally by businesses acting unilaterally, within the internal market.
11
Q
What is an undertaking?
A
Businesses
12
Q
Does articles 101 and 102 concern the behaviour of MS?
A
No- they concern behaviour of businesses
13
Q
What type of agreements does art 101 cover
A
formal agreements, informal arrangements between undertakings
14
Q
What happens if an undertaking is found to be in breach of art 101
A
agreement is void
15
Q
Conditions for breach of art 101
A
1) all agreements between undertakings, decisions by associations of undertakings, and concerted practices
2) which may affect trade between MS
3) which have as their object or effect the prevention, restriction, or distortion of competition within the internal market
16
Q
How has undertaking been defined in Hofner?
A
natural and legal persons (individuals and companies) engaged in commercial activity for the provision of goods or services
17
Q
Definition of agreement
A
formal binding contracts and also less formal agreements or arrangements, for instance the so-called ‘gentleman’s agreement’ concluded simply by a handshake which may not be recorded in writing.
18
Q
Is a decision covered by art 101?
A
yes- Anti-competitive activity might be coordinated through a trade association, for instance through a decision requiring its members to raise their prices to a specified level or to refuse supplies to particular categories of customer.
19
Q
Judgement of IAZ International
A
even if a recommendation was expressed to be non-binding it would fall within [Article 101(1)] if it was intended to be anti-competitive and was normally complied with, resulting in an appreciable effect on competition.
20
Q
What is a cartel?
A
A group of independent companies or businesses, operating in the same market, that collude to fix prices, share markets, or engage in other forms of anti-competitive behaviour.
21
Q
What is a horizontal agreement
A
concluded between parties operating at the same level of the production/distribution chain (e.g. agreement between manufacturers)
22
Q
What is a vertical agreement
A
operate at different levels, for instance a distribution agreement between a manufacturer and a distributor.
23
Q
What did Consten establish ?
A
Both vertical and horizontal agreements are capable of falling within art 101
24
Q
What constitutes an agreement, decision or concerted practice affecting trade?
A
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’
25
Wilkin
Facts: Under loan agreements with the brewery, Mr and Mrs Wilkin undertook to obtain all their supplies of beer and soft drinks exclusively from the brewery. When this obligation was breached, the brewery sought repayment of the loan in the national court. The couple argued that the agreements infringed [Article 101] and were therefore void.
Held: Considering whether the agreements should be assessed in isolation or in the light of other similar agreements, the Court of Justice held that the effect on trade between Member States must be examined in the overall legal and economic context. The existence of similar contracts was a factor to be taken into account.
26
Does an agreement,decision or concerted practice have to have an actual effect on the market?
No- sufficient to establish an anti-competitive object or anti-competitive effect
27
What is a de minimis agreement?
if the parties’ aggregate share of the relevant market does not exceed 10 per cent or; (normally competitors horizontal)
if the market share of each of the parties does not exceed 15 per cent (normally non-competitors vertical)
28
What are the exceptions to art 101
art 101 (3)-
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;.
does not
impose on the undertakings concerned restrictions which are not indispensable to the attainment of these objectives;
afford such undertakings the possibility of eliminating competition in respect of a substantial part of the products in question.
29
What is an improvement on production or distribution of goods or promoting technical or economic progress?
Requires effiency gains- quantitative (Reduced costs from improved production) qualitative- generating better products or enhanced research
30
ACEC berliet
Facts: The ACEC/Berliet agreement provided for technical cooperation and joint research on the development of a bus equipped with electric transmission. There were restrictive clauses controlling production and markets. Exemption was granted on the basis that the agreement allowed each party to concentrate on the areas within its own expertise, Berliet on research on vehicles and their manufacture and ACEC on research on electrical constructions.
31
Allowing consumers a fair share of the resulting benefit
resulting benefit must at least compensate consumers for any negative impact caused by the restriction of competition
32
No restrictions that are not indispensable
This condition requires proportionality. Restrictions must not go beyond what is necessary to achieve the beneficial objectives of the agreement. If the benefits can be achieved by less restrictive means, exemption will not apply.
33
CECED
Facts: Domestic appliance manufacturers undertook to phase out washing machines with low energy efficiency. The agreement was found to breach [Article 101(1)] because it restricted consumer choice and raised production costs for some manufacturers. The Commission, interpreting economic efficiency to include environmental benefits as well as technical efficiency, considered whether there were less restrictive ways of reducing energy consumption, such as informing consumers about the energy costs of machines, allowing them to make a choice. The Commission concluded that this would not be the most effective means. Consequently, the agreement was necessary to achieve the benefits.
34
No elimination of competition
There must be no elimination of competition in respect of the product in question.
35
Why did the commission find no elimination of competition in CECED?
manufacturers could still compete on other features, such as price and technical performance.
36
What is a block exemption?
Exemption under Article 101(3) TFEU applied to categories of agreement.
37
Reg 330/2010 block exemption for vertical agreement
Article 2 of the Regulation exempts from Article 101(1) vertical agreements relating to the conditions under which the parties may purchase, sell, or resell certain goods or services, to the extent that these agreements contain otherwise prohibited restrictions.
38
When does art 2 reg 330/2010 apply
only where both the supplier’s market share does not exceed 30 per cent on the relevant market on which it sells the contract goods or services, and the buyer’s market share does not exceed 30 per cent on the relevant market on which it purchases the contract goods or services.
39
When does block exemption not apply to vert agreements
agreements containing hardcore restrictionsW
40
What is a hardcore restriction
restrictions by the supplier on the buyer’s ability to determine its sale price, save for maximum or recommended sale prices, and restrictions on the territory into which the buyer may resell the goods or services, with some specified exceptions.
41
Article 102
Any abuse by one or more undertakings of a dominant position within the internal market or in a substantial part of it shall be prohibited as incompatible with the internal market in so far as it may affect trade between Member States.
42
How to establish a breach of 102
1) undertaking has a dominant position
2) undertkaing abused that position
3) abuse capable of affecting trade
43
What = dominant position?
an undertaking that has considerable economic strength or market power
44
how did COJ define dominance in united brands
A position of economic strength enjoyed by an undertaking that enables it to prevent effective competition … on the relevant market by giving it the power to behave to an appreciable extent independently of its competitors, customers … and consumers.
45
Why will an undertaking that is allegedly dominant seek to establish the widest possible market as the relevant market?
The wider the market, the smaller the undertaking’s market share and the less likely it is to be dominant. no dominance= no breach
46
What are the 3 aspects to establishing relevant market
product, geographic, seasonal
47
What is a relevant product market?
the market for the undertaking's own product or service
48
How is the relevant product market identified?
1) product substitution
1a) demand substituability
2) supply substitutability
49
What is demand substitutability?
Concerns consumer behaviour-whether a consumer would be willing and able to substitute one product for another or, to put it another way, to switch her/his demand from one product to another.
50
What happens if a consumer is willing and able to switch
establishment of demand substitutability.
51
United brands
Facts: United Brands, a banana producer, challenged a Commission decision that it had abused a dominant position.
Held: Considering dominance, the Court of Justice first addressed the RPM. United Brands sought to define the RPM broadly, as fresh fruit. The Commission claimed that the RPM was bananas. Having considered product substitution and cross-elasticity of demand, the Court agreed with the Commission. It found that bananas are unique because of their appearance, taste, softness, seedlessness, and easy handling, all characteristics which make them a particularly suitable fruit for the old, the sick, and the very young. In these respects, no other fruits are acceptable as substitutes and there is little cross-elasticity of demand. The RPM was the banana market.
52
How can product pricing factor into determining deman substituability
consumer’s response to a small but significant (between 5 and 10 per cent) permanent increase in the price of p. 189↵a product. If such an increase would cause the consumer to switch from one product to another, this indicates that the two products are in the same product market. =
53
SSNIP test
SSNIP test small but significant non transitory increase in price
54
Does the RPM have to be the market for the ultimate consumer?
No- can be an intermediate market along the chain of production
55
Istituto
Facts: Commercial Solvents and its subsidiary Istituto challenged a Commission decision that they had infringed [Article 102] by refusing to supply the raw material aminobutanol, used in the manufacture of an anti-tuberculosis drug, to Zoja, an Italian drugs manufacturer. They disputed the Commission’s definition of the RPM, arguing that this was the market for the end product, the drug supplied to the ultimate consumer and not, as the Commission had found, the market for the supply of the raw material.
Held: The Court of Justice held that the RPM was Commercial Solvents’ raw material, aminobutanol.
56
What is supply substitutability
concerns the capability of other producers supplying similar products.
57
How can supply substitutability be established?
determine whether any such producer could easily and cheaply enter the product market in question by simply adapting their production. If products are sufficiently similar to make this feasible, there is high cross-elasticity of supply and an allegedly dominant firm’s market position is not so powerful as might appear at first sight.
58
What is meant by relevant geographic market?
‘an area where the objective conditions of competition applying to the product in question’ are the same for all traders
59
Wht is the effect of goods being easily and cheaply transportable?
geographic market is the whole of the EU
60
How else can a geographic market be categorised
area to which customers are prepared to travel to buy the product or service, or in which they are prepared to look for substitutes.
61
Does market dominance have to be extensive geographically
dominance must be ‘within the internal market or a substantial part of it’. A geographic market need not be very extensive to satisfy this condition.
62
Indicators of dominance
market structure, the length of time that the undertaking has held its market share, its financial and technological resources, vertical integration, intellectual property rights, and behaviour.
63
Market share
large market shares are evidence of dominant position
64
Microsoft
Had a market share of over 90% = clear evidence of dominance
65
What is a variable in market share
market structure- united brans was held to be dominant with share of 40-45
66
What is the influence of financial and technological resources on market position
Extensive financial and technological resources may allow a company to maintain, or ‘entrench’, its market position, for instance through persistent price-cutting, perhaps selling below cost.
67
What is vertical integration
An undertaking that is vertically integrated exerts control in the production and supply chain.
68
How can possession of intellectual property or property rights = market power
prevent competitors from reproducing information or making products which the rights protect.
69
Does market dominance itself constitute a breach of art 102
infringement occurs only where there is an abuse of a dominant position that may affect trade between Member States.
70
What constitutes abuse of dominant position
directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions;
(b)
p. 193limiting production, markets or technical development to the prejudice of consumers;
(c)
applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage;
(d)
making 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.
71
What is discriminatory pricing
charging different customers different prices for the same product without justification.
72
How can differential pricing be justified
on the basis of different transport costs, different labour costs, or different market conditions, there is no abuse.
73
What is abusive discounting
discounts offered to customers who buy minimum quantities (‘quantity’ discounts), who agree to purchase all or most of their requirements from the supplier (‘loyalty’ or ‘fidelity’ discounts), or who reach specific sales targets (‘target’ discounts). Quantity discounts are unobjectionable provided they apply without discrimination to all purchasers and are justified, for instance if linked directly to the volume of goods supplied and the savings achieved by bulk production
74
Hoffmann
Facts: Fidelity discounts offered by Roche obliged or induced customers to buy all or most of their vitamin requirements exclusively or in preference from the company. Most contracts also contained the so-called ‘English clause’, which allowed customers, if they discovered cheaper prices elsewhere, to ask Roche to reduce its prices. If Roche did not do so, customers could buy from other suppliers.
Held: The Court of Justice found that the company’s practices were abusive. Insofar as the agreements enabled purchasers to buy at the lowest price, they were not exploitative. However, customers’ commercial freedom was limited because the fidelity discounts induced them to buy from Roche. The arrangements also gave Roche access to information about its rivals’ pricing policies, allowing it to react quickly, reducing its prices, and undermining competition.
75
What is a tie in?
require or induce the purchaser of goods or services to buy other goods or services from the same supplier.Microsoft abused its dominant position in the personal computer market by bundling together its Windows operating system and Windows Media Player
76
What is predatory pricing?
price reduction below the cost of production. A dominant undertaking with sufficient resources to withstand short-term losses can use this strategy to target its smaller, less prosperous rivals.
77
Why do companies predatorily price
designed to drive existing competitors out of the market or prevent market entry by potential competitors.
78
Akzo
Facts: AKZO produced organic peroxides for use in the plastics industry and for flour bleaching. When Engineering and Chemical Supplies (ECS), which had supplied organic peroxides for flour, decided to begin supplying to the plastics sector, AKZO reduced its prices in the flour sector. AKZO challenged a Commission decision finding predatory pricing.
Held: The Court of Justice held that prices are predatory if they are intended to eliminate competition. There is a deemed intention if prices fall below average variable costs (costs which vary depending on the quantities produced). An undertaking has no interest in applying such prices, save to eliminate competition and then subsequently increase prices, to the detriment of consumers. Where prices fall below average total costs (variable costs plus fixed costs), but above average variable costs, prices are abusive ‘if … determined as part of a plan for eliminating a competitor’.
79
What is refusal to supply?
a dominant undertaking’s refusal to supply goods or services may be abusive. It will be an abuse if it is intended to eliminate competition.
80
Istituto ex of refusal to supply
Facts: Commercial Solvents refused to supply Zoja, an Italian drug manufacturer, with the raw material used for the manufacture of an anti-tuberculosis drug.
Held: The Court of Justice found the anti-competitive nature of Commercial Solvents’ behaviour to be apparent, since at the same time as it was refusing further supplies to Zoja, its own subsidiary, Istituto, was emerging as a competitor in the same market as Zoja, the market for the manufacture and supply of the drug.
81
Microsoft
Facts: Microsoft refused to provide its competitors with ‘interoperability information’ that would have enabled them to develop competing products.
Held: This was condemned as an abuse, since there was a real risk that Microsoft would succeed in eliminating all effective competition on the relevant market.
82
What is the doctrine of essential facilities?
dominant undertaking which owns or controls a facility that is essential to conducting a business abuses its position if it refuses access to another undertaking which cannot feasibly set up a facility of its own to run its business.
83
Hilti
example of export/import ban. The company had exerted pressure upon its distributors in the Netherlands not to supply Hilti’s cartridge strips in the UK. It did this because it wished to reserve the UK market to itself.
84
What is an illegal advantage?
Google’s abuse was to give its shopping comparison product an illegal advantage. It did this by providing Google Shopping (formerly Google Product Search and Froogle) with prominent placement on its search engine and by demoting comparison products through the use of algorithms. The effect of these abuses being that consumers rarely saw rival comparison services in Google’s search results.
85
How does something affect trade
‘direct or indirect, actual or potential’ effect (Société Technique Minière v Maschinenbau Ulm GmbH (Case 56/65)).
86
