EU Competition Policy

1. EU Competition Policy Article 101 TFEU

2. Anti-trust laws in the US • The word "trust" had deviated widely from its original meaning to designate one of the most unique and highly beneficial devices of courts of equity-though it is probable that few of the laity had ever heard of this primary meaning-and had become a synonym for those monopolistic combinations which were believed to menace the normal economic development, and possibly the political freedom, of the country. As is quite generally known, the designation of these combinations by the term "trusts," was largely a historical accident. In the beginning of the development, a few of the most prominent of these organizations actually adopted the trust form, in that stock of constituent corporations was put into the hands of trustees who were to manage the entire enterprise. Later a holding corporation was more generally used and at times the constituent corporations were dissolved or became mere shells. But during the entire period the term "trusts" continued to be applied to these monopolies not merely by the public but by the legal profession, and the statutes enacted against them were frequently called "anti-trust laws.” (Brown, 1928)

3. Anti-trust law in the US • Sherman Act, 1890 attacked the twomostimportantbehaviorsagainst fair competition in the market: anti-competitive agreementsbetweenenterprises and monopolisticmarkets. • EU competition law isshaped on the US legislation

4. Competition law in the EU • Itwasconceivedas a tool to avoiddistortions in the common market. • Chapter 1 of Title VII of the TFEU, dividedintotwosections: rulesapplying to undertakings and rulesapplying to States (State aids)

5. The fourpillars of EU competition law • Article 101: anti-competitive cartels • Article 102: abuse of dominant position by an undertaking • Regulation 139/2004 and implementingregulation 802/2004: mergers • Articles 107, 108 and 109: State aids

6. Article 101 – Cartels. Notions “1. The following shall be prohibited as incompatible with the internal market: all agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the internal market, and in particular those which: (a) directly or indirectly fix purchase or selling prices or any other trading conditions; (b) limit or control production, markets, technical development, or investment; (c) share markets or sources of supply; (d) apply dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage; (e) make the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts. 2. Any agreements or decisions prohibited pursuant to this Article shall be automatically void. 3. The provisions of paragraph 1 may, however, be declared inapplicable in the case of: “

7. Article 101 – Cartels. Notions — any agreement or category of agreements between undertakings, — any decision or category of decisions by associations of undertakings, — any concerted practice or category of concerted practices, which contributes to improving the production or distribution of goods or to promoting technical or economic progress, while allowing consumers a fair share of the resulting benefit, and which does not: (a) impose on the undertakings concerned restrictions which are not indispensable to the attainment of these objectives; (b) afford such undertakings the possibility of eliminating competition in respect of a substantial part of the products in question.”

8. Article 101 – Cartels. Notions • Prohibition of allcollusionsbetweenundertakingsthathave the object or the effect of distortingcompetition in the common market • Exonetration of thosecollutionsthat are justified for their positive effect on the EU economy • Effect of anti-competitive agreements: they are automaticallyvoid

9. Undertakings • ECJ: an undertakingis «everyentityengaged in an economicactivity, regardless of the legal status of the entity and the way itisfinanced». • Itis a functionaldefinitionthatdoesnotconsider the form of the entity, that can change from State to State. Also, it can include naturalpersons and even public entities. • Economicactivity: ECJ: anyactivityconsisting in offeringgoods or services on a given market is an economicactivity»

10. Effect on trade betweenMemberStates • Principle of subsidiarity : agreements must have an inter-state dimension in orderfallwithin the jurisdition of article 101. • Agreementsconcerning a single MS are notexcludediftheyaffect inter-state trade. • Networks of agreements: Delimitis case (1991). In this case, the agreement on beer supply between a local pub and the brewery Henninger wasrelevant for the common market becauseitwas part of a network of similaragreements • De minimisrule: onlyagreementsthat produce significanteffects are covered by article 101

11. Collusionsbetweenundertakings • Agreementsbetweenundertakings • Decisions by associations of undertakings • Concertedpractices

12. Agreements: horizontal and vertical • Anybindingagreement, the contractualformisnotnecessary • Horizontal: agreementsbetween competitors (at the same commercial level) • Vertical: agreementsbetweenundertakingsatdifferentlevels of the commercial chain (for example, a producer and a distributor). In Consten and Grundig (1964), a case concerning a distributionagreement, the Court heldthat: «itisirrelevantwhether the parties to the agreement are or are not on a footing of equalityasregardstheir position and function in the economy. Thisappliesall the more since, by such an agreement, the parties mightseek, by preventing or limiting the competition of third parties in respect of the products, to create or guarantee for their benefit an unjustifiedadvantageat the expense of the consumers or user, contrary to the general aims of article 101».

13. Agreements: tacitacquiescense or unilateralconduct? • Ford case (1985). A unilateralimposition by Ford to limitorders from a dealer wasconsidered by the Court as a part of the contractual relations between the undertaking and the dealer. • In Bayer (2000), the Court specifiedthat for an apparentlyunilateralmeasure to become part of a continuousrelationship, the other party must atleasttacitly acquiesce.

14. Concertedpractices and parallelconducts • Anyform of coordinationbetweenundertakings, anypracticalcooperationbetweenthemthat can be a threat to competition. • Such a coordination can results from the behavior of the parties. • A parallelbehaviorisacceptablewhenitrespondsonly to market logic.

15. Cartel decisionsthroughassociations of undertakings • Anyanticompetitivedecisionadopted by associations of undertakings. An example are the Bar Councils.

16. Restrictions on competition: anti-competitive object or effect • Inter-brand and intra-brand competition. A restriction of competitionis a restrictionbetween competitors (inter-brand). It can also be intr-brand, for example in the case of verticalagreementsthataffectcompetitionbetweendistributors of the same brand. • In any case, the twodimensions of restrictions of competition must be evaluated and balanced.

17. Object • Objectivecontent of the agreement. • Per se rules: restrictionsthat are presumed to be sufficientlydeleterous to competition • Horizontalagreements: price fixing rules; output-limitingclauses, market sharing clauses. • Vertical agreements: fixed minimum resale price; absoluteterritorialprotection; restriction of active and passive sales to end users by members of a selectivedistribution system operatingat the retali level of trade • Restrictions of parallel trade: absoluteterritorialprotection

18. Effect • Anyagreementthathas the effect of restrictingcompetitionfallswithin the prohibition of article 101. • Rule of reason: an american doctrinethatseeks to balance the anti-competitive effects of an agreement with its pro-competitive effects. Thisisexcluded in European law becausearticle 101, para. 3 explicitlyprovidesexemptions. • ECJ: doctrine of ancillaryrestraints, clausesthat are restrictive, butnecessarywithin an overall pro-competitive agreement. They must be subordinate (ancillary) to the mainobject of the agreement.

19. De minimisrule • EU law doesnot take into account restrictions of competitionthat are minor with respect to the market share of the parties involved. According to the Commission, 10 % of the market for the parties to horizontalagreements and 15 % for verticalagreements.

20. Exemptionsthrough pro-competitive effects of agreements (article 101, para. 3) • Direct exemptions. Four cumulative criteria • The agreement must contribute to improving the production or distribution of goods • or to promotingtechnical or economic progress, whileallowing consumers a fair share of the resulting benefits • The agreement must be indispensable for the pro-competitive effects • The agreement must not eliminate competition in respect of a substantial part of the product in question

21. Exemptions by category • Blockexemptionregulations by the Commission, whohoweverretains the power to withdraw the benefit of a blockexemption from an individualagreement. • Blockexemptionregulationscontain a black list of prohibitedrestrictions and a market framework withinwhich the agreementisexempted.