Uk Competition Notes

"Competition Law"2010 Cosmo Graham Chapter 1: Introduction to competition law and policy Introduction * * * * * Aim of competition law is to prevent agreements between companies with substantial market power which unreasonably restricts operation of competition on market. Examples show how large sums of money are at stake. Recent Examples * British Airways/Virgin and fuel surcharges # Agreed to raise from 5 to 60. Virgin not fined because they came out and said it. # Case still pending for the 4 BA executives, check to see what happens. * Asda, Morrisons, Tesco et al, OFT investigation: # Alleged collusion of pricing, costing consumers around 270 million. Some companies admitted involvement and paid total only 116, others deny and case continues. # Interesting side-note, Morrissons was going to sue OFT for libel because of the terms of first press release. * Replica football kit # 2003, OFT fined 18 million a few businesses for fixing prices on replica umbro kit, such that all had high prices. Some appealed, but not successful. Both states and private parties need to be controlled! Core Competition Law Problems and Provisions that Deal with them: Anti-competitive agreements: Art 101 TFEU and s.2 of Competition Act 1998 Anti-competitive conduct by companies with strong market positions: Art 102 TFEU and s. 18 of Competition Act 1998 - generally referred to as abuse of dominant position. Mergers which will substantially reduce competition: Council Reg 139/2004 EC and Part 3 of Enterprise Act 2002 Must always ask ourselves how we define consumer welfare, is it just to maximize consumer's surplus, or is it that producer benefits should also be counted? 2: The Prohibition on Anti-Competitive Agreements: Introduction: * Look here at what type of agreement fall to be controlled by competition law. Three themes underpin discussion and development of law in this area: * 1. Debate over what is a restriction of competition. * 2. Concern that European Commission is able to enforce rules effectively and undertakings engaged in anti competitive activities are unable to realy on what are perceived as 'technical' defences. * 3. Major procedural changes that have taken place since 1999 and which culminated in implementation of Reg 1/2003 in May 2004. * Structure of chapter: # 1. Discuss what is an undertaking because this determines what types of organisation are subject to competition law. # 2. Discuss meaning of agreement, concerted practice and decisions by assoc. of undertakings. # 3. Look at issue of what it means for an agreement or concerted practice or decision by an assoc. of undertakings to have as its object or effect the prevention, restriction or distortion of competition in common market. Art 101 TFEU: Preliminary Issues: * * * This article prohibits agreements between undertakings which may affect inter state trade and which have as their object or effect the prevention, restriction or distortion of competition within the common market. If in breach - automatically void under 101(2) but prohibition may be dec inapplicable under 101(3) given certain conditions. Competition Act 1998 ss 2 and 9 essentially mirror this. * * * * "agreement or a decision by an association of undertakings or a concerted practice" between "undertakings" "affect trade between MS" "object or effect the prevention, restriction or distortion of competition, in an appreciable manner, within the common market." * Problem, all agreements between contracting parties restrict their freedom of action to a certain extent as pointed out by Justice Brandeis already in 1918. Modern commercial agreements make it difficult to answer question if agreement has detrimental competitive effect. - e.g. What if two big companies pool research efforts for a new product? Starting point for most economists: horizontal (undertakings which operate at same level of production, like manufactures of same good) v vertical agreements (different levels of production, e.g., clothes manufacturer to supply a retail store with its clothes). Horizontal agreements viewed with more suspicion. Bork 1993 argues that ALL vertical agreements should be ok and pro-competitive, but Court in Consten & Grundig said that Article applies to all agreements so long as they meet criteria in Article. But how much sense in this divide? EU comp law concerns to regulate agreements which divide up markets on national lines even though, on economic analysis, such agreements would have no detrimental effect, may even be positive. So, historically, Eu law taken much stricter approach to vertical agreements than econ analysis would suggest, even though the attitude has begun to change in recent years. Second problem for a pure econ approach is procedural - because Commission does not have resources to examine effect of every agreement. The 101(3) policy swamped the Commission not least because it gave the companies immunity from fines. Appreciate that 101(1) and 101(3) related - if 101(1) wider, greater need for general rules under Art 101(3). Historically - Commission taken expansive view of 101(1) and has been criticised for it. * * * * * * * There are also some agreements which are per se unlawful, details not relevant here. Art 101 operates different, look if the agreement have object or restricting competition and these fall foul of prohibition in Art 101(1) without much inquiry being 

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