Competition 1 Notes

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:

  • (1) Promote a competitive market economy.

  • (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:

  • (1) FMG-- prevent barriers to trade being maintained by MSs;

  • (2) EU competition law -- prevent such barriers being re-erected by private agreements and other prohibited actions, eg price-fixing or a carve-up of the market by a group of major companies.

  • 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

  • Art 101: prohibits anti-competitive collusion between individuals, companies and other undertakings.

  • Art 102: prohibits abuse of a dominant position within a market.

• Secondary legislation:

  • Reg 1/2003 (‘modernisation regulation’): concerned with processes of enforcement of Arts 101 and 102.

  • 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:

  • Art 101(1): prohibits anti-competitive agreements, decision by associations, and concerted practices.

  • 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.

  • 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 ...

  • REGARDLESS of:

  • The legal status of the entity.

  • 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:

  • 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 profit-making.

  • 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 non-profit-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:

  • Agreement between undertakings.

  • Decision by an association of undertakings.

  • 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...

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