Competition 1 Notes
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Competition 1 Revision
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EU lec Competition 1, Collusion, 24/11/16 Aims of EU Competition Law:
One of fundamental tasks of EU: establish a single market (Art 3 TFEU). Includes establishing competition rules necessary for functioning of internal market: Art 3(1)(b) TFEU.
Two basic and complementary aims of EU competition law: o (1) Promote a competitive market economy. o (2) to prevent barriers to the integration of the single, internal market.
Competition law works on other side of same coin of free movement of goods: o (1) FMG-- prevent barriers to trade being maintained by MSs; o (2) EU competition law -- prevent such barriers being reerected by private agreements and other prohibited actions, eg price-fixing or a carve-up of the market by a group of major companies. o So free movement of goods, and EU competition law, two sides of same coin preventing the distortion of the internal market by either MSs or private enterprise. The function of the Commission, central role in EU competition law
Not only initiates policy and legislative proposals on competition matters;
But also administers and enforces EU competition law.
Responsible for: fact-finding; and responsible for taking action for infringements of EU competition law.
Can: impose fines & penalties on individuals, companies, and other undertakings.
These may be challenged by way of JR in an action for annulment before the ECJ.
Under Reg 1/2003: the National Competition Authorities of MSs and national courts are also responsible for enforcing EU competition law. Main sources of EU competition law
Primary legislation, Arts 101-109 TFEU o Art 101: prohibits anti-competitive collusion between individuals, companies and other undertakings. o Art 102: prohibits abuse of a dominant position within a market.
Secondary legislation: o Reg 1/2003 ('modernisation regulation'): concerned with processes of enforcement of Arts 101 and 102. o Reg 330/2010: grants block exemptions for 'vertical agreements' which would otherwise breach Art 101 TFEU.
+ case law principles, ECJ: through review of decisions of Commission; and through answers to preliminary references from national courts. Structure of Art 101 TFEU
Para 1: Prohibits anti-competitive collusion.
Para 2: Legal effect: Makes a prohibited agreement void in law.
Para 3: Exemption—where enhances competition.
Art 101, Para 1---Anti-Competitive Collusion prohibition
Art 101: prohibits anti-competitive collusion between individuals, companies and other undertakings.
Structure of Art 101: o Art 101(1): prohibits anti-competitive agreements, decision by associations, and concerted practices. o Art 101(2), sets out the legal effect of the prohibition: any agreement/decision in reach of Art 101(1) is automatically void. Has retrospective effect on any agreement/decision already in operation. o Art 101(3): provies that Art 101(1) is not applicable if agreements, decisions or concerted practices have certain pro-competitive effects. If an agreement, decision or concerted practice which violates Art 101(1), but satisfies Art 101(3), will be found lawful. What is an undertaking?
Art 101 only applies to 'undertakings'---What are 'undertakings':
Hofner & Elser: any entity engaged in an economic activity . . . o REGARDLESS of: o The legal status of the entity. o The way in which it is financed.
[it adds that 'employment procurement' is an economic activity].
In Hofner itself, applied to a public employment agency: engaged in business of employment procurement—was classified as an undertaking (albeit in relation to Art 102).
Examples of undertakings: individuals, limited companies (even if based/incorporated outside EU), partnerships, trade associations, the professions, non-profit-making organisations, state organisations which carry on economic or commercial activities.
Undertakings includes organisations that lack a profit motive: o Distribution of Package Tours During 1990 World Cup Decision (1992): FIFA, the Italian FA, and the local organizations committee, were undertakings under Art 101.
MOTOE v Elliniko Dimosio (2008): doesn't have to be profitmaking. o In this case, ELPA was a non-profit making body having sole public power to grant the authorisation of motorcycle events in Greece. It also organised such events for itself from which it gained money from sponsorship, advertising and insurance contracts. ECJ held: ELPA was an undertaking, because of the way it engaged in economic activity; this was irrespective of its legal form or way it was financed. The fact it was nonprofit-making was irrelevant: as it still competed with other operators, who sought to make a profit. 3 requirements under Art 101(1) TFEU to be prohibited
(1) a Form of collusion, 3 types: o Agreement between undertakings. o Decision by an association of undertakings. o Concerted practice.
(2) which May affect trade between MSs (actual or potential effect on trade)
(3) which has as its object or effect the prevention, restriction or distortion of competition within the internal market.
Balancing with Art 101(3): the wide drafting of Art 101(1) creates 2 problems for EU competition authorities: (1) drafted and interpreted so widely, that it has potential to catch a wide variety of contracts, as contracts usually contain some type of restrain on at least one party. (2) contracts & agreements often complex—may contain some clauses that increase competition, and others that restricts it. Need to balance Art 101(1) with Art 101(3)—to decide if it infringes Art 101. Art 101(1)--Requirement 1, a form of collusion (agreement; decision; or concerted practice).
3 types of collusion
1. Agreement between undertakings.
2. Decision by an association of undertakings.
3. Concerted practice.
Note that all 3 of these involve 'undertakings' defined above)
Note that, it is not necessary for the Commission to identify precisely which form of collusion exists before deciding that a breach of Art 101(1) has taken place:
the collusion might involve a formal contract or an informal agreement/ arrangement.
The important distinction is between non-collusive/independent behaviour, which is lawful; and collusive behaviour, which is unlawful under Art 101.
Confirmed in Commission v ANIC (1999): HELD: ANIC's conduct manifested both an unlawful agreement AND and concerted 3
practice. Court stated: it was not necessary to establish into which category the form of collusion fell—Art 101 distinguishes between the 3 types only to widen the net. Form of collusion (1)—agreement between undertakings
What is an agreement—interpreted widely.
Hercules Chemicals NV:: sufficient if the undertakings have 'expressed their joint intention to conduct themselves on the market in a specific way'.
Includes: o Formal written contracts. o Oral agreements (Tepea v Commission) o Gentleman's agreements (agreements considered to be morally binding only) (Hercules Chemicals): see above, 'expressed their joint intention . . . ' o Tacit acquiescence (AC Treuhand)
Involved a consultancy firm. This actively contributed towards a cartel (arranged meetings for it, prepared documents for the cartel, helped deal with its finances etc).
Members of the cartel had a written agreement between them; but the consulting firm hadn't signed the written agreement, it was only helping the cartel.
But ECJ: the consultancy firm had tacitly acquiesced in the running of the cartel, by actively contributing to it (even though it wasn't a party to the written agreement of the cartel), and was operating in a different market to it)--and so held to have entered an 'agreement'.
It was sufficient that C actively contributed to the cartel; and that there was a sufficiently definite and decisive causal link between the activity and the restriction of competition on the peroxide market.
CF AC Treuhand with . . . .Must be between at least 2 undertakings-- agreement does not include unilateral conduct (Bayer AG v Commission, 2000): o Bayer was manufacturing medicines. Imposed an export ban on its French and Spanish wholesalers (to stop them selling to UK). o Commission argued: the wholesalers had tacitly acquiesced, and so it was an agreement between the subsidiaries and the wholesalers. o ECJ held: the wholesalers were not tacitly acquiescent (indeed their conduct demonstrated the opposite), so it was unilateral conduct by Bayer, so no agreement.
Difference between Vertical & Horizontal agreements: o Vertical agreement: undertakings at different levels of trade and industry (eg between manufacturer and retailer, or distributor and manufacturer).
Eg SARL & Grundig: involved an agreement between a manufacturer and distributor. ECJ rejected argument that Art 101 applies only to horizontal agreements. o Horizontal agreement: agreement at same level of trade and industry (eg between manufacturers).
Form of Collusion (2), Decision by associations
Common in many industries to belong to a trade association that acts on behalf of its members—activities such as promotional campaigns, public education, market research, setting of standards etc.
Associations of undertakings, includes: o Egs: trade associations; o cooperatives; o chambers of lawyers (Wouters).
'Decisions' include: o Formal decisions: may fall under Art 101(1). Eg, if a trade association adopts a price list or sets minimum prices at which products must be sold.
'Decisions' include non-binding recommendations: o Vereniging van Cementhandelaren, re system of guide/'target' prices for cement wholesalers in Netherlands.: o Held that a system of guide or 'target' prices adopted by a trade association for cement wholesalers in Netherlands was prohibited under Art 101, notwithstanding the associations' contention that its members remained free to calculate their own prices for individual transactions. o Rationale for this comes from NV IAZ Internatioal Belgium v Commission (ANSEAU-NAVEWA), re system of recommended conformity checks & labels for washing machines & dishwashers imported into Belgium
—'appreciable influence' on competition: o Dealing with water-suppliers, things like dishwashers. o Had recommended its members to take account of a system of conformity checks and labels, for washing machines and dishwashers. Only a recommendation. o Rationale: The members did all start using the system of conformity checks and labels. Because recommendations by associations re normally followed by their members, and so the effect of a recommendation by an association is equivalent of a 'decision'. o Ultimately, the recommendation was having an influence on competition, by making imports of washing machines &
dishwashers into Belgium impossible or very difficulty. o Held: 'A Recommendation, even if it has no binding effect, cannot escape Article 101(1) where compliance with the recommendation by the undertakings to which it is
addressed has an appreciable influence on competition in the market in question'. Form of collusion (3), Concerted practices (basically to catch everything else)
To catch those forms of co-operation that do not amount to a formal oral or written agreement, or, in the case of an association of undertakings, to a decision.
It may be any coordinated behavior where there is little evidence of agreement, other than the suspicious behavior itself.
Defined in ICI Ltd v Commission (Dyestuffs): 'A form of coordination between undertakings which… knowingly substitutes practical co-operation between them for the risks of competition"
Concerted practice (CF parallel behaviour) o Distinguished from 'parallel behaviour' (Wood Pulp): parallel behaviour is where one entity does something; and then another undertaking merely responds to what the first undertaking did. This is not unlawful if there was no cooperation between the parties (Ahlstrom Oy v Comm'n Wood Pulp). ) o Concerted practice May be inferred from evidence: o Dyestuffs. In Dyestuffs, a subsidiary of ICI increased the price of a bleaching agent. Its competitors then increased their prices by the same margin in a short space of time afterwards. This happened three times. o ECJ: there was sufficient evidence to infer a concerted practice—although there was no evidence of any agreement or decision; there was enough evidence to infer:
(1) the similarity of timing and rate of price increases (within short time, on three separate occasions);
(2) the similarity of the wording of instructions sent out by parent company producers to subsidiaries;
(3) evidence of contact meetings between the firms.
However, ECJ keen to guard against inferring a concerted practice too easily (Wood Pulp): ECJ emphasised you shouldn't infer proof of a concerted practice from parallel behaviour, unless it's the 'only plausible' explanation. So parallel conduct cannot itself be 'regarded as furnishing proof' of concertation—unless concertation constitutes the 'only plausible explanation' for such conduct. o ECJ noted that, although Art 101 prohibits any form of collusion which distorts competition, it does not deprive economic operators of the right to adapt themselves intelligently to the conduct of their competitors. o In this case: parallel pricing was not found to breach Art 101(1)—as it was not the only plausible explanation for the
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