Eu And Uk Competition Law Notes

- Competition Law is Designed to deal with whether an agreement (a contract) affects competition and to protect the Final Consumer (i.e. the law is concerned with the effect that an arrangement may have upon the competitive dynamic of a market). Therefore, the question is whether a contractual arrangement will have an effect on the ULTIMATE CONSUMER. ICL focuses on vertical agreements (i.e. two separate undertakings at different levels of the supply chain, i.e. they are not competitors e.g. Manufacturer and Distributor).

Horizontal agreements = agreements between competitors– i.e. at same level of the supply chain

Vertical agreements = agreements between non-competitors – i.e. at different levels of the supply chain

Competition law EU

1.¿Which competition authority will investigate?

- In EU = The competition Directorate of the European Commission (i.e. The EU Commission)

2.¿What is the legal basis for its investigation and prosecution?

- In EU = Article 101 TFEU (EU competition law)

Article 102 TFEU (Abuse of market power)

3 .¿Is there a breach of article 101(1) TFEU (anticompetitive agreement between undertakings)? P.383

1. is there an agreement (written/oral/gentlemen’s agreement (P’s intention + conduct))(say that they distribution agreement constitutes an agreement)

2. between undertakings? (YES legal & natural persons, Co.s, P’ships, FIFA, BUT NOT parent & subsidiary nor Agency Agree)(Mention that they are undertakings, because they are separate economic entities in the market unlike agents)

3. which may affect trade between Member States Art 101?NAAT rule = if the combined market share of P’s is less than 5% on the relevant market + Seller’s turnover in the EU is below 40’ it will not affect trade in EU (say specifically)

4. which have as its object/ the prevention/distortion/restriction of competition within the internal market?(say specifically why the agreement is anticompetitive, say what clauses specifically are anticompetitive and say if it relates to the object of the effect on the market and whether they are hardcore or not)

   • Hardcore/Object Restrictions in Vertical Agreements (Object Infringement)

     • Price-FixingNegative effect on Price: Products become artificially expensive.

     • Export BanNegative effect on Choice (and therefore price).

   • (Effect Infringement)Exclusive Distribution Provisions;

     • Depends upon context; what other agreements are in place? Examine wider context.

     • Probably answer; ‘Potentially has an anti-competitive effect but we don’t know on the facts...’

     • Potential Anti-Competitive Clauses (Prep Task Agreement – Just run through and explain – these might be anti-competitive)

       • 2.1 – Exclusivity/Territory: No other distributors in the area;

       • 2.3 – Exclusivity: Producer will not sell direct in the area.

       • Application: Not definitely anti-competitive but taken in conjunction with other provisions it may have that effect.

       • 3.4 & 3.5: Minimum Quantity & Maintenance of Stock: Distributor must order minimum quantity

       • Application: If so restrictive that it has an impact on their freedom – may be. E.g. they have to order so much that they cannot order anything else.

       • 5.3: Control of Packaging

       • Application: May have anti-competitive effect – e.g. language is English – they wish to sell overseas, may be anti-competitive. Legal requirements might be different in different countries.

       • 5.4: Ban on Internet Sales

       • Application: Export ban – hardcore restriction – cannot sell in other countries.

       • 8.2: Competing Goods – Distributor Cannot Sell

       • Application: Potential – less range available to consumer.

       • 8.3: No branch outside territory;

       • Application: Potential – reaching less consumers.

       • 8.4: No exporting/selling outside territory.

       • 15.8: Non-Compete – Post-2 years after termination

       • Application: potential.

2. ¿What is the consequence of that breach? P.388

- For the Companies

• Fine up to 10% of the worldwide turnover

• Cease and Desist(By Art 7 of the M Reg. But may Not be useful as already in breach)

• The breach may make the agreement void(e.g. if being sued, then say the Agreement is void, but then you are in breach so, not such a good idea after all)

• Civil/3^rd Party Action/Claim (i.e. an action for damages 2 Travel Group PLC v CardiffCity Transport)

• Bad image for the brand/co/business

- For the consumer:

• Art 101(a) The goods might be over-priced and too expensive for the consumer.

• Art 101(b) Goods are available only through a distributor, i.e. restriction of choice on consumer

3. ¿How to avoid the breach? P.390

1. ¿Does NAOMI Apply? (It is the Commission’s Notice on Agreement of Minor Importance. its aim is to assess whether an agreement has an appreciable effect on competition, thus saving the Agreement)

Pre-Conditions for NAOMI to apply:

- Vertical Agreements: Parties aggregate market share held by each P to the agreement does not exceed 15% (this % cannot increase over time) - Horizontal Agreements: P’s aggregate market share does not exceed 10%

- Art 4No breach of hardcore restrictionsby P’s

- Art 4(a) Pricing Restrictions: (distributor cannot fix the sale price)

- Art 4(b) Territorial Restrictions: (distributor cannot restrict customer or territories)

- Art4(b)(i) Exception to Art 4(b) (distributor can restrict seller from actively seeking customers in territories given in exclusivity to other sellers (passive selling is not included i.e. the customer approaches the seller))

2. ¿Does Block exemption: VRBE(Vertical Restrain Block Exemption) Apply? (Reg 330/2010)(its aim is to make Agreement exempt from art 101(1) as their “pro-comp” effect outweighs “anti-comp” effect)(Say it is a vertical agreement because they are at different levels of the supply chain, unlike horizontal agreements where Co.’s are at the same level)(It is better to rely on this exemption than on NAOMI as it gives a greater market share available for the Company’s market share to grow (Block exemptions apply for 10 years and...

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