Solicitors Qualifying Examination

Competition Law – Articles 101 and 102 TFEU | EU Law – SQE1 & SQE2 Examinations – solicitorsqualifyingexamination.net

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Competition Law – Articles 101 and 102 TFEU
• Different areas of EU law complement one another: free movement of
goods / services prevents barriers to trade + competition law prevents
re-erection of such barriers by private agreements / price fixing / carving
up of the market
• Commission:
o Initiates policy and legislation
o Administers / enforces EU competition law – fact finding and
imposing fines / penalties
§ May be challenged by JR to General Court / CJEU
• Reg 1/2003 – National competition authorities also enforce EU law
Sources of EU competition law
• Art 101 TFEU – prohibits anti-competitive collusion
• Art 102 TFEU – prohibits abuse of dominant position
• Reg 1/2003 (‘modernisation regulation’) – enforcement of Art 101/2
• Reg 330/2010 – block exemptions for ‘vertical’ agreements that would
otherwise breach Art 101 TFEU
• CJEU – review of decisions by Commission + answers to preliminary
references from national courts
© Liam Porritt 2020 2
Article 101 TFEU
Applies to Undertakings
• Every entity engaged in an economic activity (even if based outside EU)
(inc. employment procurement) (Hofner & Else v Macroton GmbH)
o Includes non-profit-making organisations (MOTOE v Elliniko) and
state organisations w/economic activities
o Excludes entities exercising the official authority of the State
(Diego Calì & Figli Srl – port anti-pollution authorised by State at
charge dictated by authority + in public interest, as essential
function of the State)
Article 101(1) TFEU
Prohibition (makes void – Art 101(2)) if…
1. Collusion (meeting of minds – direct or indirect) between undertakings /
by associations resulting in agreement / decision / concerted practice
2. Actual or potential effect on trade between MSs
3. Object or effect of preventing, restricting or distorting competition
within the single market
#1 – Agreements, decisions and concerted practices
• Independent behavior (i.e. no collusion) = lawful
• Commission does not have to establish which of agreement / decision /
concerted practice is present (ANIC Partecipazioni)
Agreements
1. Includes oral agreements (Tepea v Commission)
2. Joint intention is sufficient – no need for formal ‘agreement’ (Hercules
Chemicals)
3. Acquiescence/complicity = agreement (AC Treuhand AG v Commission –
consultancy complicit in facilitating work of cartel in peroxide market =
agreement)
4. Unilateral behavior ≠ agreement under Art 101(1) (Bayer AG v
Commission – ban by Bayer on exports by their wholesalers to UK ≠
agreement)
• Includes horizontal agreements – undertakings at same level of trade (e.g.
two manufacturers or two wholesalers in competition)
• Includes vertical agreements – undertakings at different levels of trade
(e.g. producer + distributor) (Établissements Consten & Grundig)
© Liam Porritt 2020 3
Decisions by associations of undertakings
• Includes non-binding recommendations
o Vereniging – guide prices for cement wholesalers = prohibited,
despite members being free to calculate prices for individual
transactions
o NV IAZ International Belgium v Commission – guide prices /
recommended practices prohibited, where appreciable influence
on competition
§ Facts: water supply association agreed with other
organisations re: washing machine standards and labels =>
suppliers free to ignore this, but in practice all water supply
companies were checking for labels, making it hard to
import washing machines
Concerted practices
• Little evidence of agreement, other than suspicious behavior (ICI v
Commission (‘Dyestuffs’) – look for evidence of contact to suggest some
collusion, which seems to be only plausible explanation for behaviour)
o Facts: uniform price increases within a short time by several
undertakings on separate occasions => no explanation + no
relationship of pricing to supply and demand
• Distinguish from parallel behavior = same behaviour (e.g. lowering
pricing), as long as no cooperation between them, i.e. not concerted
practice where collusion is not the only plausible explanation (Wood Pulp
Cartel)
#2 – Effect on Trade between MSs
• Possible to foresee with sufficient degree of probability on the basis of
objective law/facts that agreement may influence (‘appreciably’) trade
between MSs (Société Technique Minière (S.T.M.) v Maschinenbau Ulm)
o E.g. agreements to prohibit distributors from selling in other MS /
producers protect one another’s national markets
o E.g. Établissements Consten & Grundig v Commission – Grundig,
manufacturer, appointed Consten sole distributor in France +
Consten not to distribute to other MS; same across MS = no ability
for trade between MSs other than from Grundig
• May be a number of small agreements together (Brasseri de Haecht v
Wilkin-Janssen – brewery lends to café + café buys from brewery
exclusively; many such agreements could contribute to inhibit trade
between MS cumulatively)
© Liam Porritt 2020 4
#3 – Object or effect of prevention, restriction or distortion of competition
Object / Effect
• Purpose of agreement considered first, and if not consider effect (it is an
either/or test) (S.T.M. case)
Object
1. Need not account for the intention of the parties (GSK v Commission)
2. Objective purpose of agreement = anti-competitive by nature
(regardless of other motives) (Competition Authority v Beef Industry
Development Society Ltd)
3. So likely to have negative effects that there is no need to examine actual
effect (Société Technique Minière; Établissements Consten; Groupement des
Cartes Bancaires)
o Beef Industry: Reduction of number of beef processors by
agreement = other legitimate objectives irrelevant for Art 101(1)
and objective object here = reduce competition
• Includes (there are other more obvious ones!):
o Ban on parallel imports – distributor in MS can only buy from
authorised dealer
o Ban on passive selling – buyer seeks out seller rather than the
other way round
Effect
• Analysis of agreement in the context of the market / economic context in
which it operates = would have / has had effect on competition (European
Night Services v Commission)
Preventing, restricting or distorting competition
Non-exhaustive blacklist (Art 10(1)):
a) Price fixing / fixing trading conditions (prohibits export bans or parallel
import bans)
b) Limit / control production/markets/technical development/investment
c) Share markets / sources of supply (between rivals)
d) Apply dissimilar conditions to equivalent transactions
e) Require acceptance of supplementary obligations unconnected with
subject of contract in question
© Liam Porritt 2020 5
Defence 1: Ancillary restrictions
• Rule of Reason (no longer accepted) – Anti-competitive elements (e.g.
exclusive distribution agreements) may be deemed to not be anticompetitive if necessary for the penetration of a new area by an
undertaking (the S.T.M case) = net gain for competition
o Pronuptia de Paris GmbH v Pronuptia de Paris Irmgard Schillgallis –
franchise agreements may often contain anti-competitive elements
enabling franchisors to share know-how without risk of this aiding
competitors; as long as measures are necessary to allow franchisor
to carry out franchise, they are permissible
• Ancillary restrictions – no need for net gain for competition (Métropole
Télévision v Commission; Mastercard v Commission)
1. Restriction is objectively necessary for implementation (not
necessarily success) of main operation of agreement – i.e. main
operation impossible without restriction
2. Restriction proportionate
Defence 2: ‘De minimis’
• Agreement must have ‘appreciable’ potential or actual effect on
competition or inter-State trade (Völk v Vervaecke)
o Völk has 0.2% of German washing machine market + gives
exclusive distribution to Vervaecke in Luxembourg + Belgium =
outside Art 101
• Does not apply where object is prevention, restriction or distortion of
competition (must be effect) (Expedia v Autorité de la Concurrence)
• Notice on Agreements of Minor Importance (guidelines only):
o Horizontal agreements: aggregate market share < 10% = ‘de
minimis’
o Vertical agreements: each undertaking market share < 15% = ‘de
minimis’
© Liam Porritt 2020 6
Article 101(3) TFEU – Individual Exemptions
• Art 101(3) – Exception if agreement / category of agreement:
1. Contributes to improvement of production / distribution; OR
2. Promotes technical / economic progress;
3. AND (for either of above) allows consumers (all parties down
chain) fair share of resulting benefit
4. AND does not (proportionality):
§ Impose on undertakings unnecessary restrictions (for procompetitive ends)
§ Substantially eliminate competition in relevant market
• Transocean Marine Paint Association – association agreement to use same
packaging + each member has limited distribution in specific country =>
necessary to enable to compete with large companies, so exempt under
Art 101(3)
Regulation 330/2010 – block exemption for vertical agreements
• Art 2(1) – Exempts all vertical agreements
• Exemption does not apply if:
o Art 3(1) – Either supplier’s or buyer’s market shares > 30% (i.e.
must both be ≤ 30% for exemption)
o Art 4 – ‘hardcore’ restrictions
§ Supplier restricts buyer’s ability to determine sale price
beyond max sale price or RRP
§ Supplier restricts territory/customers for resale beyond
restricting active sales (i.e. restricts passive sales)
reserved in territory/customer group to supplier or
another buyer
• E.g. agreement not to actively sell in UK, because
another buyer sells there, but ability to fulfill orders
that are passively received
§ Supplier restricts internet sales of buyer / forces rerouting
of customers to another distributor’s website
§ Supplier terminates transactions as customer’s credit card
address outside distributor’s territory
§ Supplier charges more for goods sold online (dual pricing)
o Art 5 – ‘excluded’ restrictions – exemption does not apply to terms
(only to these terms, not whole agreement)
§ Non-compete obligation ~ indefinite or exceeding 5-
year period (where buyer not selling from premises owned
by supplier)
§ Restriction on manufacture, buying or selling
goods/services after termination of agreement
© Liam Porritt 2020 7
Regulation 1/2003 – the ‘Modernisation Regulation’
• Removed obligation to apply to Commission for confirmation that
agreement satisfies conditions under Art 101(3)
• Allows national Competition Authorities and courts to enforce Art 101/2
• Art 23(2) – fines for infringement of Art 101/2 – up to 10% of previous
year’s turnover + ongoing 5% of turnover fine until infringement ends +
1% for failure to cooperate with investigation
Damages
• National courts can award damages for losses caused by infringement of
Art 101 (Courage Ltd v Crehan + Directive 2014/104 + Manfredi +
Directive 2014/104)
• Dir 2014/104, Art 11(1) – joint and several liability
o Not for market share < 5%, where jeopardise economic viability
© Liam Porritt 2020 8
Article 102 TFEU
• Prohibits abuse by one or more undertakings of dominant position that is
capable of affecting trade between MSs
o Weakens competition
o Prevents competitors from entering a market
o Enables a dominant undertaking to exploit customers
Test for infringement:
1. Dominant position of undertaking – determine market and whether
dominant
2. Conduct investigated amounts to an abuse, including:
Ø Directly or indirectly imposing unfair purchase or selling prices /
traditing conditions
Ø Limiting production, markets or technical development to
prejudice customers
Ø Applying dissimilar conditions to equivalent transactions
(contractual discrimination)
Ø Require acceptance of supplementary obligations unconnected
with subject of contract in question (supplementary obligations)
3. The abuse may affect trade between MSs
Identifying The Relevant Market
• Determine products in competition in geographical area + time frame =
establish constraints exerted by competitors + whether this prevents
their behaving independently of effective competitive pressure
Relevant product market (RPM)
• Products or services in competition
• Hilti AG v Commisssion – nails guns part of market including other
industrial fasteners? No – so, Hilti dominant.
Factors
• Interchangeability or substitution
• Demand substitutability – regarded as substitutable by consumers by
price + intended use = in competition
o United Brands Co v Commission – bananas in different market to
fruit as available all year round and suitable for young and very old
consumers
o Cross-elasticity of demand – price changes, so customers buy more
of other product = in competition
§ SSNIP test – when small price rise profitable (i.e. consumers
will not change product due to price rise), limits of market
found
© Liam Porritt 2020 9
• Supply substitutability – suppliers can switch production to relevant
product and market without significant additional costs / risks = unlikely
manufacturer is dominant / will remain dominant
o Euroemballage Corn and Continental Can Co. v Commission – metal
cans all one market as producers of milk cans could also easily
start producing preserved meat / fish cans
o Michelin – Tires for HGVs = own market as investment required to
go into this market
o Microsoft v Commission – Operating systems is its own market as
other tech companies cannot easily develop this
• Aftermarkets – ‘consumables’ or spare parts after initial sale – may be
their own market
o Hilti – market for compatible nails + cartridges
o Hugin – market for spare parts for cash registers => refusal to
supply to those who maintained registers = abuse of dominant
position
Relevant Geographic Market (RGM)
• Relevant market must be within the common market or in a substantial
part of it (includes places where high volume of interstate trade, such as
ports and airports, even though they have a small geographical coverage)
• RGM = defined geographical area where competition sufficiently
homogeneous (United Brands)
o Is trade possible between regions / MSs? – Do others do it? Are
transport costs too great for this to be possible?
• Examples
o Hilti – RGM = EU
o United Brands (re: bananas) – RGM = 6 MSs
o Michelin – RGM = Netherlands
o Alsatel v Novasam – RGM = France: regardless of where a company
operates (e.g. only in Alsace-Lorraine), area extends to area of
competition homogeneity, as same authority throughout France
o B&I Line – RGM = the port of Holyhead (deemed to be substantial
part of common market due to volume of trade)
Relevant temporal market (RTM)
• ABG Oil case – crisis led to drop in supply of oil in Netherlands, creating
temporary potential dominance for a few companies (including BP)
© Liam Porritt 2020 10
Establishing Dominance in the relevant market
• Economic strength enabling prevention of effective competition – can act
to an appreciable extent independently of competitors, customers
and consumers (United Brands)
• Collective dominance possible where independent undertakings jointly
have licences / agreements giving them a technological lead, leading to
presentation on the market as a single entity + behavior independent
of competitors (‘Italian Flat Glass’)
o Here, there was deemed insufficient evidence that three
undertakings being considered presented themselves as a single
entity
Factors
1. Market share
o > 50% = dominance (Azko Chemie BV v Commission)
§ 91.8% in TetraPak = dominance
§ 70% in Intel Corp = dominance
o Lower may be dominant relative to other competitors
§ United Brands – 40-45% = dominant vs 17% of nearest
competitor
2. IP rights – Tetra Pak (exclusive design rights to cartons) + Hugin
(exclusive rights to spare parts as designs protected)
3. Superior technology + developed sales network (assistance of customers,
here in how they should take vitamins in vitamin company) (Hoffmann v
Commission)
o Michelin – Michelin were the only producer of some tires
4. Wealth of capital and financial barriers
o Access to capital leading to predatory pricing forcing out
competitors (AKZO Chemie VC v Commission – absorption of losses
into parent company)
o Financial barriers to entry (United Brands – insurmountable costs
for competitors to adopt the same methods of production and
distribution)
5. Vertical integration – control over processes from production to sale –
high degree of control over all steps (transportation etc.) may give
dominance (United Brands)
6. Brand identification – brand name + product associated (United Brands)
© Liam Porritt 2020 11
Abusive Behaviour
1. Discounts, rebates and bonuses
o Intel Corporation – 70% dominance in computer chips + rebates to
computer manufacturers conditional on buying less or none of a
rival’s products = abusive, as made competitors unable to
compete
o Hoffmann – Fidelity rebates for only buying from Hoffmann = gave
incentive to only obtain all supplies exclusively from dominant
undertaking
o Michelin – complex system of rebates made it difficult to assess
whether a customer might be better off with another supplier
2. Refusal to supply a product to competitors, needed in production of
another product (Commercial Solvents Corporation v Commission)
o Monopoly over aminobutanol; required for antibiotic; refused to
supply to other companies producing this antibiotic so its own
subsidiary could have a monopoly on the drug = abuse
o Microsoft – Refusal to supply codes eliminated all effective
competition (so only small competitors in niches can persist) =
abuse
o United Brands – refusal to supply can be justified if legitimate
reason for doing so, and it is proportionate (here, it was not
proportionate)
3. Essential facility doctrine – dominant undertaking owns/controls
facility/infrastructure necessary for provision of services + refuses
competitors access to facility / charges more (B&I Line v Sealink
Harbours)
4. Predatory pricing – low pricing to drive competitors out of the market
(AKZO Chemie v Commission + TetraPak)
o Below average variable costs = only to eliminate competitors =
abuse
o Below average total costs, above average variable costs = abuse if
intention to eliminate competitors shown
5. Tie-in agreements and bundling – supply of one product conditional on
buyer agreeing to accept other products / obligations
o Hilti – cartridge strip purchase conditional on nail purchase, so
others could not sell nails as they could not provide the cartridges
o Microsoft – bundling of Windows Media Player with operating
system meant no competition between media players
§ Tying and tied goods in different product markets
§ Dominant in tying market (operating system)
§ No choice to accept tied product
§ Tying closes out competition
© Liam Porritt 2020 12
6. Excessive prices – charging a price with no reasonable relation to
economic value of product supplied = abuse (British Leyland Plc v
Commission – number plates more expensive for left hand drive cars)
7. Unfair terms
o BRT v SABAM – SABAM administered, managed and exploited
copyrighted materials; took all rights to existing and future
material of members + for 5 years after membership ended; not
necessary to aims of association + abuse of dominance
May affect inter-state trade
• Only have to be acting in a way liable to affect trade between MSs (British
Leyland)
• Trade affected must be between MSs (Hugin)
Fines and damages
• Reg 1/2003 applies to Art 102 as to 101 – fines
• Directive 2014/104 applies to Art 102 as to 101 – damages in national
courts available

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