This is an extract of our Article 101 Tfeu document, which we sell as part of our Competition Law Notes collection written by the top tier of Oxford students.
The following is a more accessble plain text extract of the PDF sample above, taken from our Competition Law Notes. Due to the challenges of extracting text from PDFs, it will have odd formatting:
Article 101 TFEU - Vertical & Horizontal Agreements
To begin, cartels are rather unstable:
If firm X wants to start a cartel, they will be apprehensive about whether they can trust firm Y
and firm Z.
Also difficult for X to police the other firms' output and pricing strategies to ensure they aren't undercutting the agreed price.
o However, the internet has made this easier - maximum transparency of prices of available products online, as cartel leaders can create algorithms to monitor the price of other colluding firms.
Can even perhaps add a provision punishing deviants by making cartel leader drop their price in response to deviations from cartel agreement.
- Often when you see a price war, it indicates a cartel - firms may be cheating on each other, or firms may be punishing each other by undercutting price.
- Big way of disincentivising cheating is by threatening to drop price.
Colluding firm thus lose their incentive to cheat - stabilising tool.
X also has to eliminate branding discrepancies - if customers like firm Y because of their branding, it is not a homogenous product.
Competition authorities do not want to have to deal with cartels after they have been effective - they want to find out about them to destabilise them.
ARTICLE 101 TFEU
Article 101 TFEU can be broken down into four questions:
Is there an agreement, decision of association or concerted practice between undertakings?
It its object or effect to prevent, restrict or distort competition?
Does it appreciably affect trade between Member States?
Is there an individual exemption under Article 101(3) TFEU or a relevant block exemption?
Article 101 TFEU is concerned with multilateral conduct on the part of 2+ undertakings.
Article 101(2) TFEU renders any agreement prohibited pursuant to Article 101 TFEU automatically void - however, this only applies to the parts of the agreement subject to the agreement, or the whole if the parts are not severable from the whole agreement.
1 - Agreement, decision of association or concerted practice between undertakings?
1.1 - Undertaking?
The EU legislator did not define 'undertaking'- it is an ambiguous concept.
The Court has adopted a functional definition of 'undertaking' - is the entity active on the market?
Hofner : 'Undertaking' encompasses every entity engaged in economic activity,
regardless of legal status of entity and way it is financed.
o Functional definition relies on nature of activity rather than form of entity.
In SAT , Euro-control financed by contributions of Member States which established it, carrying out public/state tasks in the public interest -
activities were not of an economic nature.
o Offering goods and services on a given market is characteristic of economic activity
Distinguish between (a) economic act of selling, and (b) buying and distributing - only (a) indicates that X is an undertaking.
Nature of the purchasing activity must be determined according to the subsequent use of the purchased goods.
AG Maduro: We should establish whether the State-owned organisation would be guided solely by considerations of solidarity, intended to exclude all market considerations - if so,
not an undertaking.
The fact firm X is state-owned will not matter where X is engaged in economic activity.
The functional approach requires each activity to be evaluated in its context (SELEX ) - while
Euro-control did not constitute an 'undertaking' in SAT  in relation to airspace management,
Euro-control could be an 'undertaking' in relation to other activities.
o Conduct of employees is incorporated into employer's economic unit -
employees do not constitute undertakings in themselves (Jean Claude Becu ).
o Conduct of subsidiary can be imputed to the parent company, even if the subsidiary has a separate legal personality (Telefunken ).
Particularly so where subsidiary does not decide independently on its own conduct, but carries out parent company's instructions.
- Viho : Parker Pen and its subsidiaries a single economic unit -
subsidiaries did not enjoy real autonomy in determining course of action on the market.
o Where parent company has 100% shareholding in a subsidiary, there is a rebuttable presumption of decisive influence over subsidiary's conduct (AKZO ).
Parent company must show that its subsidiary acts independently on the market to avoid liability.
ii. 1.2 - Agreement, decision of association or concerted practice?
1.2.1 - Agreement?
Generally, it is sufficient that 2+ have expressed a joint intention to conduct themselves in a specific way on the market. The concept of an agreement centres on the existence of a concurrence of wills between the parties, the form it is manifested in being insignificant.
General understandings, non-legally-binding agreements, oral agreements, and non-enforceable agreements are all applicable under Article 101 TFEU. EC and European Courts have consistently stretched the idea of an agreement.
The Court will deem mere participation in system of anticompetitive behaviour an agreement where there is tacit or express acceptance by the contracting parties of a policy adopted where that policy is anticompetitive (Telefunken ). This is particularly so where there are contractual relations between the parties.
Ford : Ford UK charged more than Ford Germany due to higher costs of production.
Clients in Ireland realised that FG's right-hand drive cars were cheaper than FUK's left-hand drive car. Clients thus asked FG to ship right-hand drive cars to UK. FUK complained to Ford
HQ about this; Ford HQ had an interest in keeping FUK happy. Ford HQ told German Ford dealers that it would no longer accept their orders for right-hand cars; all such cars would have to be purchased from a UK Ford dealer or FUK subsidiary. EC said this was an anticompetitive agreement between Ford HQ and its distributors to limit the sale of goods in the MS. Ford HQ said the decision to stop supplies was unilateral and wasn't subject to
Article 101 TFEU.
o Held: Ford HQ and FG breached Article 101 TFEU.
Decisions of this kind do not constitute, on the part of U, a unilateral act;
rather they form part of contractual relations between U and its dealers.
- Admission to Ford HQ dealer network implies acceptance by contracting parties of Ford's policy with regard to models to be delivered to German market.
NOTE: Similarly to Telefunken , then, the activity formed part of an ongoing relationship between defendants and distributors. Ford  and Telefunken  can be distinguished by fact that T's policies benefitted its own distributors, while Ford HQ's did not benefit FG. So, Ford  is an extension of Telefunken  - not necessary that the conduct operates to distributors'
advantage for conduct to form part of an agreement between manufacturer and distributor.
This idea of tacit acceptance is consistent through the case law:
Sandoz : S tried to deter imports to countries where prices of its pharmaceuticals products not controlled by adding 'export prohibited' to invoices sent to distributors. Often,
company receiving the imports never intended to sell the goods. EC said that companies agreed to limit trade between Member States and hence it was anticompetitive agreement under Article 101 TFEU.
o Held: S and its distributors breached Article 101 TFEU.
Distributors tacitly accepted S's wish by placing repeated orders and making successive payments without contesting the restrictive conditions.
Agreement need not be a valid and binding contract under national law.
Whole and continuous commercial relations, of which 'export prohibited'
formed an integral part, established between S and its distributors, were governed by pre-established general agreement applicable to numerous individual orders for S's products.
- Volkswagen  qualifies this -
The form of any apparent concurrence is not itself decisive.
EC must prove a concurrence of wills, otherwise it would contravene the presumption of innocence.
Inferring a concurrence of wills solely from clauses in a dealership agreement is inadequate - compliance/noncompliance with contractual clauses is not necessarily decisive.
However, while tacit acceptance is sufficient to engage Article 101 TFEU, there must be a meeting of minds. Active resistance against the new policy will undermine the existence of a convergence of wills.
Per Bayer , there must be at least acquiescence by the other partners for it to constitute an agreement - active resistance against a policy adopted by one party to the alleged agreement will disprove any concurrence of wills.
o It appears that the Court will create what is in effect a presumption of a concurrence of wills - one party must create something to establish it is not a meeting of minds.
1.2.2 - Decision?
Article 101 TFEU prevents the use of associations as a vehicle to coordinate and promote anticompetitive activities.
A measure may be categorised as a decision of an association of Us for the purposes of Article 101
TFEU even if it is not binding on its members concerned, at least to the extent that the members to whom the decision applies comply with its terms (Chrysler ).
Chrysler : Mercedes Belgian and Belgian Mercedes dealers' association agreed to limit discounts on vehicles. o
Held: MB and BMDA breached Article 101 TFEU.
MB did not publicly distance itself from the discussions; it led other participants to believe it accepted the decisions taken and would contribute by its own conduct to the common objectives of the meeting.
NOTE: The concept of 'decision' is linked only to decisions of associations.
1.2.3 - Concerted practice?
It is possible for some cooperation between Us to occur without giving rise to an agreement.
'Concerted practice' refers to coordination between Us which, without reaching level of agreement, establishes practical cooperation between them.
Concerted practice established by showing parallel conduct between Us which cannot be explained by any other reason than cooperation - must distinguish between anticompetitive parallel conduct and similarity of conduct resulting from competitive process. So, where U1 and U2 adapt themselves intelligently and unilaterally to existing/anticipated conduct of competitors, this will not be a concerted practice.
Huls : Three elements of concerted practice -
1. Us concerting with each other;
o Subject to proof to the contrary, it is presumed that Us taking part in concerted action and remaining active on the market take account of the information exchanged with competitors for purposes of determining their conduct.
True particularly where Us concerted together on a regular basis over a long period.
2. Subsequent conduct on the market;
3. Relationship of cause and effect between the two.
Suiker Unie : Each economic operator must determine independently the policy they intend to adopt on the internal market - U may adapt themselves intelligently to existing/anticipated conduct of competitors, but they may not (a) influence conduct of competitors, or (b) disclose their course of conduct to competitors.
220.127.116.11 - Significance of advanced price announcements
Parallel conduct aiming to stabilise prices at a different level of that that competition would have reached is indicative of concerted practice:
ICI Dyestuffs :
o Parallel behaviour amounts to strong evidence of concerted practice when it leads to conditions of competition which do not respond to market characteristics (e.g. product,
size and number of Us, volume on market).
Particularly so where price stabilisation allows Us to consolidate established positions to detriment of effective freedom of movement of products in market and freedom of choice of consumers.
Particularly of concern to EC and Court are advanced price announcements - these eliminate all uncertainty between Us as to future conduct and eliminate a large part of risk usually inherent in change of conduct on market:
ICI Dyestuffs : Advanced price announcements allow other Us to observe each other's reactions to different markets and adapt accordingly.
However, the Court must also take into account specific characteristics of the market:
Woodpulp II : Market for wood-pulp characterised by long-term contracts and
'quarterly price announcements' by which producers communicated changes in price to customers. EC found practice of price announcement to facilitate collusion between Us,
infringing Article 101 TFEU.
o Held: Parties did not breach Article 101 TFEU.
Given characteristics of market, communications arising from price announcement did not lessen each U's uncertainty as to future conduct of its competitors.
Parallel conduct cannot be regarded as proof of concentration unless concentration provides the only plausible explanation for such conduct.
- Article 101 TFEU does not deprive Us of ability to adapt themselves intelligently to existing and anticipated conduct of competitors.
- In present case, pulp market is a long-term market and it is necessary to limit commercial risks by announcing prices in advance.
18.104.22.168 - Participation in meetings; public distancing
Sufficient for EC to show that U participated in meetings in which anticompetitive were concluded without manifestly opposing them (Aalborg Portland ).
Where U has been present, for U to show that its participation was without anticompetitive intention by demonstrating that it indicated to competitors that its participation was different in spirit from competitors.
EC must show that:
a) U intended to contribute by its own conduct to common objectives;
U must publicly distance itself from the content of the meeting or report it to authorities.
- Otherwise, U effectively encourages the continuation of the infringement,
compromising its discovery.
b) U was either:
I. Aware of actual conduct planned or put into effect by other Us in pursuit of common objectives; or
II. Could reasonably have foreseen it and was prepared to take the risk.
22.214.171.124 - Concerted Practice vs Tacit Collusion
Tacit collusion describes conditions that naturally occur on a market that are anticompetitive but legal.
Concerted practices & agreements Article 101 TFEU;
Tacit collusion falls outside Article 101 TFEU.
o However, it is relevant to EUMR - may give rise to collective dominance.
Indeed, it is better to label it conscious parallelism - refers to a market in which companies create an interdependence that makes them operate as one without entering into an illegal agreement or concerted practice.
This does not happen in many markets and is quite a unique dynamic.
o Homogeneous product;
o No buyer power;
o Ability to respond to changes in conduct of competitors.
Conscious parallelism all about firms (i.e. competitors) recognising their interdependence -
If all coffee sellers are selling at £1, and one reduces to 80p, the others will follow because otherwise all customers will go to the 80p seller.
One firm may drop prices further to 60p to increase revenue; once again, everyone will follow
- now the market is stuck at 60p.
Firm X may increase prices back up to £1; if no one follows, then firm X will drop price back down again to 60p because customers will not go to them.
o Firms need to appreciate that unless they follow, they cannot increase their prices.
Line between concerted practice and conscious parallelism is very important distinction - EC cannot just assume that when firms act in parallel they can infer concerted practice from it.
Firms are able to offer alternative rationale for their conduct to avoid liability (i.e. that it was rational reaction by undertakings to market characteristics).
o EC will look on market for conduct that doesn't make any sense - if it isn't clear what the logic behind a course of conduct is, EC will enquire.
o EC tries to identify markets that do not behave in rational ways that actors would normally behave.
EC cannot condemn firms for behaving rationally, even if their conduct is anticompetitive.
In the internet age, we see tacit collusion on steroids - rather than reacting organically and instinctively to market changes, firms' rational reaction will be to use an algorithm.
The characteristics of the internet enhance the ability of firms to engage in tacit collusion.
o Prices are more transparent;
In Chile, government forced petrol companies to post prices online with idea that people would use an app on their phone to travel to cheapest station; prices went up.
Transparency meant that once X increased their price, everyone else followed.
o Firms can change prices faster;
o Prices more stable since algorithms can monitor prices.
Issue with use of algorithms in this way is that tacit collusion is meant to be an outcome, not a business strategy.
o Firms can train their algorithm to implement the model of tacit collusion - this is not anticompetitive under the EU competition regime.
NOTE: It should be anticompetitive - there is a problem with enhancing capabilities to tacitly collude in this way because then it is no longer a rational reaction to market characteristics, but rather a pre-determined decision to follow competitors' market conduct.
- Arguably, this is a concerted practice rather than tacit collusion in its traditional sense - per Sulker Unie, U may adapt themselves intelligently to existing/anticipated conduct of competitors, but they may not influence conduct of competitors.
When each competitor is employing algorithms to track each others' market movements, they are accepting that they will influence each others' conduct, most likely leading to a long term price increase.
- Tacit collusion also largely relies on assumption that firms are acting rationally in following each other on the market; however, there is no need for firms to act rationally in these instances.
If algorithms are following and collating pieces of information such as output and price, they may lack human elements which would make a price increase irrational (for example).
Main justification for permitting tacit collusion is that you can't punish U for acting rationally, however once even U accepts that their conduct on the market won't necessarily be rational, this justification can't apply universally.
126.96.36.199 - Burden of Proof
As the General Court in CISAC  laid out, there are two main scenarios under which an infringement of Article 101 TFEU will be alleged by EC and U will be able to respond:
1. EC's reasoning based on supposition that facts established cannot be explained by anything other than concertation between Us;
o Most likely situation - existence of anticompetitive practice or agreement inferred from coincidences and indicators taken together.
2. Proof of concentration not simply based on mere finding of parallel markets, but on documents showing that practices were result of concertation.
Where (1) is the case, sufficient for U to prove circumstances showing EC's findings in different light,
allowing another explanation of parallel markets.
Where (2) is the case, U must challenge existence of the facts established on the basis of EC's documents.
1.3 - Joint classification and single overall agreement
When dealing with complex cartel agreements involving different levels of cooperation, "joint classification" can establish coordination without distinguishing between agreements or concerted practices.
EC not required to establish exact level of participation of each cartel member - can rely on concept of "single continuous infringement". EC must establish that U was aware, or could reasonably have foreseen, the illegal nature of the common overriding objective of the infringement.
1.3.1 - Joint classification
This relates to the different forms of cooperation within a complex cartel agreement (i.e. agreement or concerted practice or decision of association).
LVM : EC can characterise the complex infringement as an agreement 'and/or'
concerted practice inasmuch as infringement contains element that can be classified as either/or.
o EC cannot be expected to classify infringement precisely in context of complex infringement involving multiple producers over a number of years.
1.3.2 - Single continuous infringement
This relates to U's level of participation (i.e. where U has been involved in some of the of the constituent elements of the cartel).
EC does not have to prove that each of the constituent conducts are anticompetitive. This is useful for analysing a number of potential small-scale infringements of Article 101 TFEU.
LVM : U may be responsible for overall cartel even if it only participated directly in one or some of its constituent elements.
o U must have known, or ought to have knew, that:
a) Collusion in which it participated was part of an overall plan intended to distort competition; and b) The overall plan included all constituent elements of the cartel.
Buy the full version of these notes or essay plans and more in our Competition Law Notes.