W9 Competition Law Flashcards
How is competition law enforced?
By the Commission or National Competition Authorities
Art 101 TFEU
Anti-competitive behaviour
s1: Prohibits agreements to engage in anti-competitive behaviour
s2: Voids any such agreement
s3: Justifications
Art 102 TFEU
Abuse of market dominance.
Provides a non-exhaustive list of abuses prohibited by any dominant undertaking which may affect trade between Member States
What is an undertaking?
An entity engaged in economic activity regardless of the legal status of the entity and the way in which is financed (can be not for profit).
Auth: Hofner und Elser
Hofner and Elser
Facts: Action brought by recruitment consultants after a client reneged on a fee. Under German law, a public service was the only legal recruitment service. Question was whether that was market abuse, whether recruitment was a service, and whether the public service was an undertaking.
Significance: Authority for definition of undertaking. Public service was found to be an undertaking, as recruitment is an economic activity, and the legislation granting the public service exclusive authority was infringing competition law.
C-475/99 Glockner
Facts: Dispute about ambulance sub-contracts.
Significance: An undertaking is engaging in economic activity regardless of its legal status, how it is financed, or whether the economic activity is the majority of its operation.
What is the single economic unit doctrine?
One undertaking is one single economic unit, which is not equivalent to one natural or legal person.
E.g. Employees are part of the economic unit of their employer, agents form a single economic unit with their principal, and can extend to company groups.
What is market power?
The ability of a firm or firms to maintain prices above competitive levels, or maintain output of quantities, quality, variety, or innovation below competitive levels, for a significant period of time.
Case 6/72 Continental Can
Facts: Canning company challenging a decision which blocked their acquisition of 80% shareholding in another company.
Significance: The object of Art 102 is not just to protect consumers from direct exploitation, but also to protect from conduct which would limit competition and negatively impact the consumer indirectly. No causal link between market dominance and the abuse is needed if the effect is fettering competition.
Is market power concerned with the product market or the geographic market?
Both
Chiquita Banana (Case 27/76 United Brands)
Facts: Prohibition on sale of green bananas by distributors, and also unfair dealings across other trading parties, and imposing unfair pricing on consumers. United Brands’ view: the market is the sale of fruit (smaller market share, no market power). Commission’s view: the market is the sale of bananas (UB had dominant position: 40-45%)
Significance: Example of the two-pronged market power test in practice
How to determine the product market
The product must be interchangeable with other products to be in the same market.
Interchangeability applies to demand substitutability, supply substitutability, and potential competition
Measurement: SSNIP: Small but Significant Non-transitory Increase in Price
What is the SSNIP test?
Applies to determining the product market for the purposing of the market power test.
Small but Significant Non-transitory Increase in Price (SSNIP test)
— Small: 5-10%
— Non-transitory: short period of time
— E.g. if Chiquita raised the price of bananas by 10%, would you buy an apple instead? If yes, then market is fruit. If no, then market is bananas.
What is the test to determine the geographic market?
Territory in which all traders operate in the same or sufficiently homogenous conditions of competition in relation to the relevant products or services (across the EU)
E.g. buying a laptop – whole world is the geographic market since they’re the same anywhere in the market
How much of the market does an undertaking need to be considered dominant?
50+% creates a presumption of dominance
Under 50% plus other factors can be dominance - e.g. Akzo
Other factors include buyer power, viability of launching a competitive product, etc
C-97/08 Akzo v Commission
Facts: A competitor in one product market started to encroach on another product market. Akzo threatened them, then offered products at a loss (below ATC) to their competitor’s biggest customers. Akzo had the financial resources to withstand the loss.
Significance: 50+% market share is a presumption of dominance. Where a parent holds close to 100% of shares, it creates a rebuttable presumption that the parent exercises decisive influence over policy and conduct of the subsidiary.
Competition Law Structure
1) Is it an undertaking?
2) What is its market power (product and geographic)?
3) What is the effect on (internal EU) trade?
4) Is it anti-competitive (art 101) or abuse (102)?
5) Justifications/block exemptions
Societe Technique Miniere C-56/65
Facts: Agreement appointing an exclusive distributor in France was ruled non-infringing, since restriction of competition was not its object. It was the only way for the manufacturer to penetrate the new market. Court said to determine if the agreement restricted competition, you need to look at both the effect of the agreement as well as what would have happened without the agreement.
Significance: Application of EU competition law is limited to activities that have an influence on the pattern of trade between MS. Note a different approach was taken a few weeks later in Consten and Grundig, which had similar facts.
C-238/05 Asnef- Equifax
Facts: Spanish banks received permission from the Spanish competition authority to keep a central register of customer credit scores. Question was whether EU competition law was engaged. CJEU advised that the test was whether it would affect the pattern of trade between MS in a way that may hinder the attainment of a single market between MS.
Significance: Application of EU competition law is limited to activities that have an influence on the pattern of trade between MS
Marine Hoses Cartel Case
Facts: Companies involved in manufacture and sale of marine hoses globally had a bid-rigging, price-fixing, market-sharing allocation agreement which suppressed and eliminated competition between them. Japanese, US, UK, Australian and EU competition authorities worked together to arrest the responsible individuals.
Significance: Example of cartel case and international nature of competition law
T-41/96 Bayer
Facts: Company pursued a policy designed to prevent French and Spanish wholesalers from selling products in the UK, but Commission failed to show acquiescence from wholesalers to the agreement.
Significance: Commission enforcement can fail due to lack of evidence. Collusion requires a concurrence of wills.
What constitutes an “agreement” under Art 101 TFEU?
Can be formal or informal agreements, only need a “concurrence of wills”
Auth: Bayer
C-309/99 Wouters
Facts: Dutch rules prohibited members of the Bar from practising in full partnership with accountants. Was ruled not to have its object or effect the restriction of competition.
Significance: Associations of companies can be held liable for the behaviour of their members, if their recommendations coordinate the members’ behaviour on the market.
What is prohibited under Art 101 TFEU?
Agreements, decisions, and concerted practices which prevent, restrict, or distort competition
Case 48/69 Imperial Chemical Industries v Commission – Dyestuffs
Facts: Several companies simultaneously raised their prices by the same amount on the same products at the same time. One of the involved companies was HQ’d outside the EU, and argued the fine should be imposed on its subsidiaries rather than its parent.
Significance: Parallel behaviour is not alone evidence of a concerted practice, it can be taken together with its affect on the market to become evidence. Unity of conduct on the market between a parent and subsidiary overrides separate legal personality/single economic unit.
What is a “decision by association of undertakings” under Art 101 TFEU?
Coordination through trade association, e.g. Wouters
What is a “concerted practice” under 101 TFEU?
Conduct not relating to an agreement or decision. May involve direct or indirect contact where commercially sensitive information is obtained.
What are the four types of agreement under 101 TFEU?
1) Presumed illegal
2) Full economic analysis
3) De minimis
4) Safe harbour
What are presumed illegal agreements?
Agreements which contain provisions which are restrictive of competition by object (i.e. are anti-competitive on the face of them)
What are full economic analysis agreements?
All other agreements need to be analysed individually to determine whether they have as their effect the restriction of competition
What are de minimis agreements?
Agreements which do not appreciably restrict competition (e.g. small businesses which won’t affect wider market – aggregate share 10% or less)
What are safe harbour agreements?
Agreements benefiting from EU block exemption regulations
Lundbeck
Facts: Patent-holder for an anti-depressant signed agreements with four distributors agreeing to pay them to delay their market entry for a period of time. Ruled to infringe Art 101. Patent-holder tried to defend by saying the four distributors weren’t his competition since they hadn’t completed the development process for their generic versions yet. Court ruled that didn’t matter, the four distributors had a firm intention and inherent ability to enter the market.
Significance: Test for a competitor: do they compete in fact, or do they intend to compete and have the ability to compete?
Consten and Grundig
Facts: Electronic manufacturer had an exclusivity agreement with a distributor in France. Argued it was the only way to penetrate the French market. Advocate General’s opinion was swayed by this argument (as it overall increased competition within France) but the CoJ was not. Stated that since the object of the agreement suppressed competition, the effect of it did not need to be assessed.
Significance: If an agreement is anti-competitive by object, its effect may be immaterial. Rulings are inconsistent here, but note this was a few weeks after Societe Technique Miniere
What are horizontal agreements under 101 TFEU?
two undertakings at same level of production (i.e. both producers, or both distributers, etc)
What are vertical agreements under 101 TFEU?
Two different levels, e.g. distributor and wholesaler. Typically these restricted provisions are retail price maintenance (e.g. a price floor).
Does Art 101 TFEU apply to both horizontal and vertical?
Yes
C-501/06 GlaxoSmithKline
Facts: GSK entered into agreements with Spanish wholesalers which charged different prices to Spanish wholesalers than wholesalers in other MS.
Significance: To determine if conduct is a restriction by object, look at content of the provisions, objectives it seeks to ascertain and the economic and legal context. Restrictive interpretation!!
C-439/09 Pierre Fabre
Facts: Cosmetics/pharmaceutical company operated a selective distribution system (where distributors need to be authorised by specific criteria) in France, and required products be sold in a physical space with a pharmacist present. Was found to restrict Art 101 since it infringed the distributor’s ability to sell online/outside contractual territory.
Significance: Measures which restrict cross-border trade/online trade are liable to restrict competition and are restrictive by object.
What is the test for full economic analysis agreements?
Foreclosure test: if the whole market had the same agreement, would the market be closed?
