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Horizontal Agreements Notes

LPC Law Notes > International Competition and Anti-Trust Notes

This is an extract of our Horizontal Agreements document, which we sell as part of our International Competition and Anti-Trust Notes collection written by the top tier of Cambridge And Oxilp And College Of Law students.

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Outcomes:

1. Understand some of the ways in which horizontal arrangements can restrict competition

2. Appreciate the methods employed in horizontal agreements to restrict competition

3. Identify the pro-competitive effects of horizontal agreements

4. Identify and use information from a number of sources of competition law and policy

5. Apply that information to a scenario and draft a briefing note Outcome 1 & 2 - horizontal agreements - anti-competitive effects What is a horizontal agreement?
How can it restrict competition?
Effects on competition

Direct evidence Indirect evidence

Horizontal agreement ? those between undertakings at the same level of the market eg two manufacturers
- includes Cartels (most serious type of anticompetitive behaviour) Competition is based on the theory of competition between competitors and arrangements between horizontal undertakings removes this competitive dynamic Can lead to price fixing, market sharing and may limit output or exclude potential new competitors to from the market. Onus to prove alleged conduct falls on the Commission and where there is no agreement it may resort to direct or indirect evidence of a concerted practice. Where there is evidence of both parallel conduct and contact between the parties (even a single meeting) it is probable that a concerted practice will be held to exist (Case c-8/08 T-Mobile Netherlands BV v Raad van Bestuur) e.g. proof of plans, meetings, minutes of meetings or the exchange of confidential information e.g. showing the existence of and participation in an informal system of exchange of information or joint discussions, or proof of market behaviour which can only be explained by collusion

Where indirect evidence is adduced it will be open to the parties to rebut allegations by providing alternative explanations Horizontal arrangements in context of anti-competitive agreements (Art 101(1)) Price fixing
? Object of any price-fixing horizontal agreement is the restriction of competition o DON'T need to show that there has been any anti-competitive effect on the market due to pernicious effect on competition of such behaviour Types of price fixing arrangements:
? jointly setting prices, price levels, minimum or

????Market Sharing??Collective tendering/bid rigging???

maximum prices, or jointly observing mutually acceptable price lists; jointly agreeing on the amount and date of price increases; jointly agreeing on a price list or increase to be announced publicly by one competitor but which others are prepared to follow; jointly agreeing on an essential element of the price or, sometimes, the underlying formula for the calculation of the price; jointly setting different price levels for different customers/countries; direct or indirect setting of prices under revenue sharing agreements; jointly agreeing on identical levels of discount or setting a maximum level of trade discount; jointly setting recommended prices; and/or regularly exchanging commercially sensitive price information Price fixing is often accompanied with market sharing infringements Will be caught by Art 101 TFEU o Restricts customer choice by reducing the number of products available in a territory or to particular customers Dividing up the market geographically along national lines will be particularly serious in the context of the EU since such an agreement cuts directly across the fundamental objective of a single internal market Markets can be divided geographically or by class of consumer Considered to have as their object the restriction of competition and therefore actual effects need not be proven Will rarely apply for Art 101(3) exemption Infringement relates to the common commercial practice of putting work out to tender - each tender submitted should be done confidentially and not in collusion with other suppliers Consists of agreeing or simply consulting in advance with competitors as to the terms of the bid they intend to make in response to an offer to tender Caught by Art 101(1) TFEU Eg agreement to quote identical prices or setting up a central administration to deal with all tendering opportunities according to a predetermined set of rules In order to allocate contracts and fix tenders,

Information sharing between competitors

not only is the price competition process eliminated, but a situation may also result in which markets are allocated and customers are shared out along lines other than those which would arise under normal competition (PreInsulated Pipes [1999] OJ L24/1)
? It is unlikely that any system of bid-rigging will satisfy the conditions set out in Article 101(3) TFEU and thereby qualify for an exemption from the prohibition
? Often information sharing is a necessary and legitimate part of business activity
? Where information sharing does not have an anti competitive object must see whether it has an anti competitive effect o Question - whether the information exchange is capable of providing an 'artificial transparency' between the parties which influences their conduct to the detriment of consumers Factors to consider if there has been a breach of Art 101(1):
? Market structure o a market with oligopolistic tendencies (ie where there are only a few very large operators on the market) is more likely to result in a finding that information sharing will have a negative impact on competition o information exchanges which appear only to be capable of marginally affecting the commercial decisions of competitors will take on greater significance if those competitors together control a significant proportion of the market
? Nature of information o specific information on pricing policies or intended conduct in the future (whether it be in relation to pricing, investments, R&D or otherwise) will tend to lead to further and closer investigation o may raise competition concerns if it is commercially valuable
? Access to information o fact that the information exchanged is available publicly elsewhere on a less convenient basis will reduce but not eliminate the competition risk associated with the information exchange
? Category of person having access to information
? Frequency of the information exchange

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