#13669 - Anti Competitive Agreements Decisions And Concerted Practices

Outcomes

Understand and explain the elements of Article 101 TFEU and compare these to other regimes around the world
Identify and apply methodology to analyse potential breaches relating to Article 101
Understand Chapter I of the Competition Act and its relationship to Article 101
Consider recent decisions of the European Commission and Competition and Markets Authority relating to anti-competitive agreements
Apply letter writing skills

Outcome 1 – elements of Article 101 TFEU

Definition	Art 101 TFEU prohibits business agreements that may affect trade between Member States and have as their object or effect the prevention, restriction or distortion of competition in the common market
Agreement	Covers all types of commercial arrangements whether in writing or oral (includes gentlemen’s agreements). It is sufficient for undertakings to have expressed their joint intention to conduct themselves on the market in a specific way
Undertaking	Covers virtually all legal or natural persons carrying on economic or commercial activities Must be separate undertakings i.e. not patent or subsidiary companies or agency relationships
Decisions by associations of undertakings	Decisions by for example trade associations will be caught by Article 101
Concerted Practices	Concerted practice is defined a s a form of coordination between businesses which falls short even of an informal agreement, but which knowingly substitutes practical cooperation between them for the risks of competition Legislation extends to include conduct that impacts on competition but is made outside an agreement or decision Issue with establishing a breach of concerted practices is one of intent and evidence Parallel pricing is not conclusive evidence of a concerted practice but will be strong evidence of one if having regard to the specific features of the market concerned the conditions of competition including the prices charged are different from those which would normally be expected if there were effective competition Generally in an oligopoly (where the market is controlled by a number of undertakings) parallel conduct is often regarded as a natural economic phenomenon and so will not breach Article 101
Effect of trade	Article 101(1) will catch any agreement that is capable of influencing the pattern of trade between MS’s Does not need to have such an effect Agreements are regarded not to affect trade if the combined market share of the parties to the agreement are less than 5% on the relevant market provided in the case of horizontal agreements that the parties’ aggregate turnover in the EU does not exceed 40 million (NAAT) (in relation to vertical agreements seller’s turnover may not exceed 40 million)
Object or effect	If an agreement has as its object or effect the prevention, restriction or distortion of competition it will be caught by Article 101(1) Prosecution of Object infringements: Competition authorities do not have to prove that there would be an affect on competition, where an agreement may affect trade the mere existence of the infringement is enough Current list of object infringements in regard to horizontal relationships: Fixing prices Exchanging pricing information Market sharing Limiting output Limiting sales Exclusive dealing Current list of object infringements in regard to vertical relationships: Resale price maintenance Export bans (e.g. preventing a distributor from exporting goods outside allotted territory) Prosecution of effects infringement must show that there is an appreciable effect on competition on the market
Prevention, restriction or distortion of competition of the internal market	Arrangement as a whole needs to be considered (such as the market in which it operates, the parties and their respective shares) in order to assess if there has been an impact on competition Terms prevention, restriction or distortion used relatively interchangeably Ask the question ‘does the agreement restrict actual or potential competition that would have existed without the agreement or restrictions contained in it?
Appreciability	Agreement will not breach Article 101(1) where it has only an insignificant effect on the market, taking into account the weak position which the persons concerned have on the market of the product in question See NAOMI and NAAT rule
Article 101(2) – sanction	Any agreement in breach is automatically void – i.e. has no effect (nullity of the clause in the agreement, not whole agreement)
Article 101(3) – exemption	Must satisfy 4 conditions: Agreement must contribute to an improvement in the production or distribution of goods or the promotion of technical or economic progress Consumers will get a fair share of the resulting benefit The agreement does not impose on the undertakings restrictions which are not indispensible The agreement will not afford them the possibility of substantially eliminating the competition Exemption can either be an individual exemption or a block exemption Individual exemption Undertakings have to make their own assessment of the compatibility of their arrangements in the light of EU competition law and the case law Undertaking must prove that the conditions under 101(3) are met Block exemption Commission issued block exemptions which outlined a set of criteria within which an agreement would be exempted from Article 101(1) Block exemptions are accompanied by guidelines which provide an invaluable source of information on how the Commission will interpret the exemption Block exemption regulations can be withdrawn where a particular agreement has effects incompatible with Article 101(1) Generally have a life of 10 years, can be re-issued after a consultation period

Outcome 2 – methodology to analyse potential breaches

Explain why Art 101 TFEU is relevant:

State: ‘Art 101 TFEU prohibits business agreements that may affect trade between Member States and have as their object or effect the prevention, restriction or distortion of competition in the common market’
Consider in turn each of the 5 constituent parts to Art 101?

Has there been an AGREEMENT?

Included within the scope of Art 101(1) TFEU are:
- Both horizontal (same level of supply) and vertical agreements (Consten and Grundig)
- Oral/gentleman’s agreement (Quinine Cartel)
- Decisions by associations of undertakings/trade associations (to fall within 101(1), these need not be legally binding – IAZ NV International Belgium)
- Regulatory rules circulated by professional bodies, unless they are reasonable (Wouters v Algemene)
- Concerted practices:
  - Definition: Coordination between businesses which falls short of informal agreement but ‘knowingly substitutes practical cooperation between them for risks of competition’ (Dyestuffs)
  - Presumptions of concerted practices arise where there is:
    - Contact between parties and subsequent similar practice
    - Parallel conduct (simultaneous practices), provided that the conditions of competition are different from those normally expected in that market (Dyestuffs). But this presumption is rebutted if the market is an oligopoly, where coordinated pricing strategies may instead be explained by transparent price structures (Woodpulp). Although parallel pricing may well be an indication of the existence of a concerted practice, the particular circumstances of the market must always be considered

Is the agreement between TWO OR MORE UNDERTAKINGS?

Undertaking – very broadly defined: ‘any natural or legal person engaged in economic activity’ (OFT Guidelines 403)
The undertakings must be separate. This will not include:
- Parent/subsidiary companies: any agreement will be seen as an allocation of business within one corporate group
- Principal/agent relationship (e.g. a company’s overseas distribution agent) where financial responsibility is borne by principal
apply to facts: check the relationship between the two companies is not one of the exceptions

Does the agreement AFFECT TRADE BETWEEN MEMBER STATES?

Apply STM test: Is it ‘possible to foresee with a sufficient degree of probability… that the agreement may have an influence, direct or indirect, actual or potential, on the pattern of trade between member states?’
- Test is interpreted very widely, and has been held to catch:
  - Agreements between parties based in the same MS e.g. Dutch choice Cooperative – agreement between Dutch dairy producers sealed off market, non-Dutch producers could not enter
  - Agreements between parties based outside the EU e.g. Woodpulp; even if agreement was formed outside EU, if it was implemented within the Community, EU has jurisdiction
Consider potential (as well as actual) effect on trade (Consten and Grundig)
Look at agreement in light of any network of agreements it forms part of (i.e. its cumulative effect), even if individually it does not appear to affect trade (Brasserie de Haecht)
An agreement that in fact increases trade between MSs still affects trade (Consten and Grundig)
apply to facts: does the agreement affect trade between MSs? Almost certainly yes.

Does the agreement have as its OBJECT or EFFECT, the PREVENTION, RESTRICTION OR DISTORTION OF COMPETITION in the common market? (look at specific terms and their object or effect)

If the behaviour is on the list of object offences at p16 of your textbook, then it is deemed to prevent, restrict or distort competition. If the behaviour is not on that list, then the Commission/NCA would need to prove that it had such an effect.

If it either has the object or effect, then...

#13669 - Anti Competitive Agreements Decisions And Concerted Practices - International Competition and Anti-Trust

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