Other Mischiefs Flashcards
What are the two other mischiefs?
i) Oligopolies
ii) Mergers
What are oligopolies?
A sector business in which market power is concentrated within a few firms.
Articles 101 and 102 and sections 2 and 18 were not designed to deal with, and are ill-suited to dealing with, oligopolistic markets. Specific legislation could be adopted for that purpose (as the Germans and the Austrians have done; see § 19 of the Gesetz gegen Wettbewerbsbeschränkungen and § 4(2) of the Austrian Kartellgesetz 2005) but neither the Council nor Parliament has seen fit to do so. The Court of Justice is managing (just) to shoe-horn oligopolies into article 102; the pre-eminent case is Cases C-395 & 396/96P Compagnie Maritime Belge v Commission [2000] ECR I-1365.
What are mergers?
Merger control legislation was adopted by the Council only in 1989, entering into force in 1990. Significant amendments were made in 2004. The governing legislation is now Regulation 139/2004 OJ 2004 L24/1.
The UK was one of the first countries to adopt merger control legislation (the Monopolies and Mergers Act 1965); the field is now governed by the Enterprise Act 2002.
There are significant differences between Regulation 139/2004 (which applies to mergers ‘with a Community dimension’) and the Enterprise Act (which applies to mergers ‘within any market or markets in the United Kingdom’), and these are the subject of a tutorial topic.
Why do we regulate mergers?
There are two key prongs of EU competition law: Article 101/102 which ensure that companies do not become dominant in the market.
The prevailing theme in competition law is simply acquiring a competition itself I.e. Organic growth.
So while abuse of a dominant position might be prohibited, we regulate mergers to ensure the new company won’t take the dominant position (when they expand quickly). This is an exception to the rule that you are allowed to take the dominant position.
The negative effect of mergers you end up with a consolidated market and there is a risk of cartel like behaviour. If market share is equal then it is less likely that businesses will be able to coordinate.
NB we have two regimes now (European MS) and (International EU regulation).
What are the jurisdictional issues of mergers?
Article 2 Enterprise Act: apply to all concentrations with a community dimension.
Article 1(2) - 2 limbs:
Two of the undertaking business concerned have to have £50,000????
What is the exception to the rule?
2/3 rule Article 1(2): [look up].
Article 1(3): £2.5bn half threshold of Article 1(2).
Key requirements of Article 1(3): more than 100 million euros.
If at least 2/3 of the european union state is within then that would be best …
See: BT takeover of EE***.
Kraft and Cadbury [although less about competition law]
Article 22
(mirror provisions) - National Authority can confer jurisdiction to the Commission.
Article 4(4) and 4(5)
at the discretion of the parties.
Article 3(1)
defines concentration in the regulations
What is the express option?
Article 3(4) expressly includes joint ventures within the idea of concentration. EE (joint venture between T mobile and Orange).
Joint venture example — ?
NB if EU has jurisdiction then national authorities don’t.
Requires turnover, exceeding 70 million s 21. Or s23(3) (goods) s23(4) (services). Alternative to the 70 millions requirement.
What is the “relevant merger situation”?
Two or more enterprises cease to be distinct s 23(1).
What is the procedure for mergers?
- Notify the commission (Article 4) [this is the difference between the UK and EU, under EU, the parties have a duty to notify the commission].
- The commission will decide whether they have jurisdiction [must calculate turnover - using Article 5].
- Procedure under regulations divided into two phases
1. Commision has 21 working days (Article 6(1)(a) to decide that it does have jurisdiction
2. Article 6(1)(b) (yes but conditions I.e. Selling off business and time limits)
3. Arises where commission has serious doubts about the compatibility of the common market: Phase 2 proceedings, which allows the commission a longer period of time to conduct an investigation. (Article 8).
NB rare for the Commission to block a merger [6000 applications and under 30 have been blocked].
What is the procedure under the Enterprise Act?
- No duty to notify
- However in practice they will notify to avoid CMA avoiding your transaction
- Possible for an authority to make a reference itself — perform an active role in policing what goes ahead. [Secretary of State s 32]
- Once this has been made if they have suspicions about the deal they can refer it to an inquiry group to decide whether the deal can go ahead or not.
- There are sections in the Act to do with governmental interference who can block a reference which may not be in the public interest [I.e. Lloyds taking over HBOS].
- They can conduct “dawn raids” on companies [and solicitors??] [Article 16 /Enterprise Act].
To what judicial supervision are the Commission and the CMA subject?
- EU: people can challenge through court of justice - power in relation to fines and decision itself. They have to annul a decision or dismiss an appeal. [Vodaphone v EE].
- CMA (UK): competition appeals tribunal s120 Enterprise Act — right to bring an action before competition appeal tribunal or court of session or court of appeal in england. They are effectively exercising judicial review. Adn third parties can bring actions as well (I.e. Vodaphone as a competitor in the EE deal).
In EU law a concentration is appraised ‘with a view to establishing whether or not [it is] compatible with the common market’ (Reg 139, art 2(1)), the test being whether it ‘would significantly impede effective competition in the common market or in a substantial part of it, in particular as a result of creation or strengthening of a dominant position’ (art 2(2)-(3)). The test adopted under the Enterprise Act is the ‘substantial lessening of competition’, or ‘SLC’, test (Enterprise Act, ss 22(1), 35(1)). How, if at all, are these different tests? Which in your view is the better?
CMA:Whether it would cause significant impedence of competition law.
Enterprise Act: “substantial lessening of competition”.
Tests are similar but general view is that the UK test is slightly more flexible than the EU test.
There might be countervailing considerations. Increased innovation and the sharing of knowledge and failing business defence (so it would cease to be a competitor anyway).
