Homewood: EU Law Concentrate 4e
'In targeting both exploitative and anti-competitive abuses, Article 102 TFEU makes a significant contribution to the achievement of the aims of European Union competition law.'
In the light of this statement and with reference to the interpretation of 'abuse' by the Court of Justice, critically discuss the extent to which Article 102 TFEU has succeeded in achieving the aims of EU competition law.
This question requires you to consider the general aims of EU competition law, as well as to discuss the concept of 'abuse', as interpreted by the Court of Justice. A number of different answer structures would be acceptable, but your answer should broadly cover the following, with commentary and analysis of the cases referred to.
Identification of the scope of the question
- Aims of EU competition law: achieving the internal market, efficiency, protection of the consumer, protection of small- and medium-sized undertakings.
- The three elements of Article 102, namely dominant position abuse, may affect trade between Member States. The question focuses specifically on the concept of 'abuse'.
- Exploitative and anti-competitive abuses
Examples of abuse
- Examples of abuse in Article 102 – unfair pricing/trading conditions; limit production, markets, technical development to detriment of consumers; discriminatory treatment; imposition of supplementary obligations not connected to the subject of contracts.
Interpretation and application of 'abuse' by the Court of Justice: analysis of the cases with reference to the aims of EU competition law
- Distinction between exploitative and anti-competitive abuses, with definition/explanation.
- Exploitative abuses, protection of the consumer:
- unfair pricing (eg United Brands, British Leyland);
- price discrimination (eg United Brands).
- Anti-competitive abuses:
- predatory pricing (eg AKZO, Tetra Pak) – protection of small- and medium-sized undertakings;
- refusal to supply (eg Commercial Solvents, Hugin, Sealink, United Brands, TVListings) – protection of small- and medium-sized undertakings and achieving internal market;
- in all the above cases, the promotion of efficiency and the internal market through increased/the protection of Community-wide competition.
- Exploitative and anti-competitive abuses:
- target discounting (eg Michelin) – protection of the consumer;
- loyalty rebating (eg Hoffman-La Roche) – promotion of efficiency;
- tie-ins (eg Hoffman-La Roche, Hilti) – protecting the consumer, promotion of efficiency;
- import and export bans (eg Hilti) – achieving the internal market.
- Commission review of Article 102 – discussion paper of 2005 and Guidance of 2009 – focus on exclusionary conduct that harms consumer – an effects-based approach – the debate continues.
The Court of Justice has addressed both forms of abuse and in doing so has furthered the aims of EU competition law. The Commission's developing approach suggests an increasingly effects-based regime, which focuses on the protection of the consumer.
This is a sample of our (approximately) 22 page long Article 101 notes, which we sell as part of the Competition Law Notes collection, a Distinction package written at Oxbridge in 2013 that contains (approximately) 301 pages of notes across 36 different documents.
Article 101 Revision
The following is a plain text extract of the PDF sample above, taken from our Competition Law Notes. This text version has had its formatting removed so pay attention to its contents alone rather than its presentation. The version you download will have its original formatting intact and so will be much prettier to look at.
Article 101 Competition Law LLM
Table of Contents
LLM Competition Law Lecture Notes
Article 101(1) TFEU Requirements for Article 101(1) TFEU
Undertakings Collusion With object or effect to prevent, restrict or distort competition Appreciable effect on competition (de facto - Völk v Vervaecke) Appreciable effect on inter state trade (de facto - Völk v Vervaecke)
The Concept of an Undertaking What is an undertaking? Article 101 only applies where there are 2 or more 'undertakings'. What does that mean? We need to distinguish between cases where there are two undertakings, and where there is only one undertaking. Fines are capped at the turnover of the entire undertaking, so the definition of undertaking is very important. If a subsidiary company breaches competition law, then the entire multinational is hit. Need a narrow concept for the purposes of jurisdiction, but then a wide concept for enforcement. Broad concept is different to a formalistic definition, which is better for the 27 different legal systems we are looking at. We don't look at the form of the actor; we look at the substance and/or function of the actor. An undertaking is any entity engaged in an economic activity, where this is defined as offering goods and services on a given market. This means that there does not need to be profit, or private ownership. It could be a publically owned company, particularly if it is carrying out public service (Ambulanz Glockner), and all it needs is the potential to make profit. The public body could itself be an undertaking even if no private body can enter the market, as long as there is no factual requirement that a public body govern the market. Höfner and Elser The German Federal Office for Employment possessed a statutory monopoly on placing employees with employers. German law also allowed the Bundesanstalt to entrust other institutions or people with employment procurement services under its supervision. Höfner and Elser were recruitment consultants & placed a candidate as a sales director with a company called Macrotron, who had decided that they did not want the candidate so argued that any contract was void. Höfner and Elser therefore challenged the provision declaring the contract void under the EC competition law provision, Article . As a preliminary question, the European Court of Justice held that the Bundesanstalt, even though it was a public body, could be subject to competition laws. It was an "undertaking", and therefore fell within the scope of the Treaty. Furthermore, by failing to satisfy demand for a good or service, the exclusive right of the German government to regulate employment services could amount to the abuse of a dominant position. Where a subsidiary company has no economic independence, where the subsidiary forms an economic unit with the parent, wherein the subsidiary has no real freedom to determine its course of action on the market, then the subsidiary and parent may be treated as a single economic entity for the purpose of Art 101 TFEU. The question is whether they behave together as a single unit on the market (Daimler Chrysler). See below.
Why a Functional Approach?
Could be about the 27 different legal systems, could be about the public / private divide (Odudu). This is the idea that we want to distinguish between private activities and public activities. We want
4 to capture the market in private activities, regardless of who is controlling the behaviour. Member states are using private companies to do public services, and we are concerned about the interaction between this and competition law.
Solidarity Competition law doesn't apply to undertakings that are engaged in the (inherently uncommercial act of) involuntary subsidisation of one social group by another.
1. Look at the social objective of the activity performed E.g. Compulsory participation, or no-fault element.
2. The existence of state control If the entity can act to a certain extent independent of state control, this doesn't mean no solidarity, but the cases are not clear on the boundary between state control and no state control
3. The essence of solidarity Need redistribution of income between those who are better off and those who, in view of their resources and state of health, would be deprived of the necessary social cover.
Public Power If a private company is exercising public power, it's not subject to competition rules. This requires a company to exercise public authority. Cali & Figli SEPG granted a contract over port to provide environmental services. Even though it was charging for its goods and services, not an undertaking, for public power reason Competition law did apply in the Airport de Paris case for some areas. Assessed from the perspective of the entity itself, don't just look at the overall transaction; you look at the entity you're trying to apply competition law to. For example, FENIN The 26 different entities that made up the Spanish Health Service were thought to be abusing their Monopsony. Competition law didn't apply - don't look at the transaction, also look at what the Spanish Health System is doing - it is a public service - universal access, so fell outside competition law. Contrast with BetterCare - the NHS was found to be an economic entity, but after FENIN, this is probably wrong.
Territorial Scope Single Economic Entity Doctrine If we have a parent company located outside EU, with a subsidiary inside, enforcement jurisdiction can be founded on the basis of the subsidiary. More controversially, is there an effects doctrine (where jurisdiction can be found on the basis that conduct occurring outside the territory has an effect on the territory)? In Wood Pulp, it was found that, despite what the Commission said, no jurisdiction could be found. The CJEU rejected the effects jurisdiction, but they said that implementation could give jurisdiction. This is all about territoriality. More complex is jurisdiction for purposes of the merger regulation. Here, the turnover threshold leads to a finding of a 'community dimension'. Gencor
LLM Competition Law Lecture Notes
Merger between two South African companies approved by the SA government. The general court rejected the effects analysis and went for the implementation analysis instead, and then goes on to look at comity analysis - would any principle of public international law prevent jurisdiction? Answer no, but that's the CJEU looking at its own jurisdiction.
The Structure of Article 101 TFEU Three Pronged Structure:
Article 101(1) o Most important bit is the sentence at the beginning, not the examples.
Article 101(2) o Any agreement that violates Article 101(1) and can't be saved by Art 101(3) is null, particularly contracts.
Article 101(3) o This is an exemption to Article 101(1), and is meant to be exhaustive, so no other way to get around Article 101(1) o Used to require notification to the Commission for this to apply (not any more) Need to show: agreement, anti-competitive and affects trade between member states. Horizontal and Vertical agreements are both covered. Horizontal - competitors. Vertical - agreement between wholesaler and retailer, for example. EU is very sceptical of vertical, more so than US, which sees them as benign. Standard of proof same for vertical and horizontal.
Agreement Can be just a gentleman's agreement. Chemiefarmer Document to cartel the sale of quinine outside of the European Union, agreed to do it inside the EU too. CJEU found that both the written agreement and the gentleman's agreement contradicted Art 101 Activision Blizzard Formal distribution agreement allowed passive sale into other countries, but not active sales. Then secret side agreement that said that they wouldn't engage in either. Side agreement, contradicting the agreement is caught by art 101. Further, cheating doesn't negate the existence of the agreement. Tepea D entered into series of oral distribution agreements in breach of Art 101. As long as you can show a concurrence of wills, this constitutes an agreement for the purposes of Article 101(1) TFEU. E.ON Agreement in the 1970s between E.ON and GDF Suez that they wouldn't sell into each other's markets after the construction of the MEGAL (Mittel-Europäische-Gasleitung) gas pipeline across Germany to deliver Russian gas to Germany and France. In 2004, the parties signed a new agreement that contradicted this, but the arrangement informally continued into 2005. Commission found that the competition laws had been breached. It's all about the economic consequences rather than the legal form. Concurrence of wills not formal agreement.
Concerted Practice If we can show tacit agreement, and not independent action, where they know that acting in tandem will lead to benefits (e.g. super-competitive profits). ICI Defendant undertakings all sold chemicals of a specific range of colours, and increased their prices over three years by same amount. The commission couldn't show actual agreement, but informal contact between the companies supported this claim.
LLM Competition Law Lecture Notes
This constituted sufficient evidence for concerted practice. CJEU upheld commission's finding. Not a contract but may arise out of coordination. Suiker Unie Requirement of conditions of competition that do not correspond to "the normal conditions of the market," having regard to the nature of the products, the importance and number of the undertakings as well as the size and nature of that market. This added a requirement of a behavioural element. There can be seen to be a tension here. To what extent is tacit behaviour a form of co-ordination?
CJEU says that economic operators are required to independently develop their conduct on the market. Though they can be adaptive, they're not allowed any contact with competitors. The notion of concerted practice implies conduct, not just agreement. In Huls in addition to concertation, need to show subsequent conduct, plus cause and effect between the two. There is a rebuttable presumption that undertakings that participate in concerted action, and remain active on the market, take account of information exchanged in determining their market conduct. What about purely parallel behaviour, e.g. in Oligopoly? Does this give evidence of a concerted practice? In ICI there needed to be meetings. Wood Pulp 2 The Commission found that only concertation could explain the price rises, but had no physical evidence of agreements between undertakings. CJEU hired economic experts, who found that the market was oligopolistic, with a very stable price structure, with slow change. This meant that parallel behaviour could be explained by something other than concerted practice. Further, producers had adopted the practice of announcing prices a few weeks in advance. This created market transparency, which facilitated co-ordination, and explained some of the market structure. Information publication was blind and not through agreements. Thus, the commission's decision was annulled. Independent economic operators are not allowed to get together, though they can react in a competitive manner to the behaviour of their rivals. Information Exchange Can Information Exchange constitute concerted practice? Information exchange can be very beneficial, as it improves efficiency in the market, but it can also facilitate co-ordination. UK Tractor Exchange 8 manufacturers and importers entered into very detailed info sharing agreement through their trade association. This allowed market participants to figure out the exact sale volumes of their competitors and in which market these sales occurred. The market itself had a very high concentration and high barriers to entry. This information sharing facilitated collusive behaviour. In a very competitive market, transparency can be a good thing, as rivals need to know how much they need to lower prices by, and consumers get best deal - atomised competition leads to more intense competition. In high competition → lack of competitive action. T-Mobile Interesting example of information sharing. There was a single meeting between 5 mobile operators in the Netherlands. In the meeting the operators discussed reducing the commissions paid to dealers. Allegation was not that this was an anti-competitive agreement, but rather that this was a concerted practice. The preliminary ruling found that this single instance could be a concerted practice if it removes uncertainty in a highly concentrated market. Default assumption is that the market must have
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