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Competition Law Summary notes
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Compeition Law KCL full course summary notes
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Competition Cheat SheetAim of Competition Law
Market Power
Article 101
1) Undertakings
2) Jurisdiction
3) Conduct:
- Agreement
- Concerted Practice
- Decision by Association of Undertakings
4) Restriction of Competition
- Cartels
- Horizontal Agreements
- Vertical Agreements
5) Exemption/defence
6) Effect
Article 102
Predatory Pricing/ Rebates
- Predatory Pricing
- Exclusive Dealing
Refusal to Supply/ Margin Squeeze
- Margin Squeeze
- Refusal to supply
Enforcement
Mergers
Horizontal Mergers
Non-Horizontal Mergers
Digital Economy
,Competition Cheat Sheet
Aim of Competition Law
Theories
- Perfect competition – used as a benchmark. A model where efficiency is
maximalised. The price does not exceed marginal cost (the cost of producing one
extra unit). Unrealistic: lots of buyers and sellers with small market shares; no
barriers; no externalities; perfect information; homogenous products
- Monopoly – Price exceeds marginal cost. Deadweight loss
- Total Welfare = consumer surplus + producer surplus
- Consumer Welfare = the buyer’s wellbeing
- The Harvard School – structuralism, but now recognises markets can self correct
- The Chicago School – neoclassical price theory, holds that people are rational and
the market will self-correct, barriers to entry are more imagined than real. Purpose is
the maximalisation of consumer welfare
- Post- Chicago School - Purpose is the maximalisation of consumer welfare – BUT
recognises we cannot make oversimplified assumptions in the market
- Behavioural Antitrust – consumers do not act perfectly rationally
- Transaction costs economics – competition law should not be designed so as to
force firms to take less efficient options
- Workable competition - CJ referred to workable competition as (1977 Metro I )- ‘the
degree of competition necessary to ensure the observance of the basic requirements
and the attainment of the objectives of the EEC Treaty’
- contestable market = low barriers to entry and exit where the threat of entry does
significantly constrain the incumbent
- The Austrian School - Von Hayek- the market is only discovered through the rivalry
of firms competing for consumers’ custom, as information about what consumers
want only becomes known as they respond to firms’ efforts to do better than their
competitors. Intervention distorts the discovery process
- Ordoliberalism - originated in Germany in the 1930s – showed how monopolies
could undermine democracy. The role of competition law is ‘to protect
competition as a system within which individuals are free to make their choices on
the market’
EU Aims
- Judge Robert Bork - competition policy "...cannot be made rational until we are able
to give a firm answer to one question: what is the point of the law - what are its
goals? Everything else follows from the answer we give."
- No goals in Article 101 or Article 102
- There is a reference to fairness and to consumers in the exemption provision in
Article 101(3) (a ‘fair share’ of benefit to consumers)
- Commission –
o ‘The objective of Article [101] is to protect competition on the market as a
means of enhancing consumer welfare and of ensuring an efficient allocation
of resources. - (Guidelines on the application of Article 81(3) of the Treaty);
o The aim of the Commission's enforcement activity in relation to exclusionary
conduct is to ensure that dominant undertakings do not impair effective
competition by foreclosing their competitors in an anti-competitive way, thus
having an adverse impact on consumer welfare, whether in the form of higher
,Competition Cheat Sheet
price levels than would have otherwise prevailed or in some other form such as
limiting quality or reducing consumer choice.’ (Article 102 TFEU Enforcement
Priorities Guidance)
- Treaties/ preamble –
o EEC and EC – Article 3(1)(g)- ‘…the activities of the Community shall include
(…): ‘a system ensuring that competition in the internal market is not
distorted’.
o Lisbon Treaty- Article 3(3): ‘The Union shall establish an internal market.’
Protocol 27: ‘the internal market as set out in Article 3 of the Treaty on
European Union includes a system ensuring that competition is not distorted’
o Article 3(1)(b) TFEU - “The establishing of the competition rules necessary for
the functioning of the internal market”
- GlaxoSmithKline- the CJ confirmed that agreements limiting parallel imports have
the object of restricting competition contrary to Article 101(1)
- Modernisation = major reform in 2004 when Regulation 1/2003 came into force
- Economic approach (uses economic theories) which is effects based
- Servizio Elettrico- the Italian court specifically asked the CJ about the purpose of
Article 102: Reply - A competition authority could find a practice of a dominant
undertaking to infringe Article 102 if it could impair ‘an effective competition
structure, without it being necessary for that authority to prove that the practice
may also cause direct harm to consumers’
- Google Android,- the GC condemned as abusive practices restricting consumer
choice and depriving consumers of features of benefit to them, which ‘were also
necessary in order to ensure plurality in a democratic society’
- exclusion by Article 346 TFEU of the trade in arms where a Member State can take
protective measures in the interests of national security
- Cases Pre 2004 – public policy
o Ford/Volkswagen- Joint venture for MPV – creation of jobs and substantial
foreign investment in one of the poorest EU regions
o Exxon/Shell- New plant for producing linear polyethylene – reduction in
pollution
o CECED- Elimination of least energy efficient washing machines –
environmental benefits
o Metro I- Selective distribution – stability of labour market
o Wouters - - Rule of the Dutch Bar Association prohibiting partnerships
between lawyers and accountants with a view to guaranteeing the
independence of its members and their loyalty to their clients. (vs OTOC
where the restrictions were unreasonable)
- The Albany exception
- Townley: There is still room for non-economic goals in Article 101 cases.
o 3F v Commission[2009], para 58. - “...the Community has not only an
economic but also a social purpose, the rights under the provisions of the
Treaty on State aid and competition must be balanced, where appropriate,
against the objectives pursued by social policy...”
o Meca Medina 2006- confirms the Wouters reasoning and extends it to
include public health
, Competition Cheat Sheet
o BIDS judgement – ECJ implied that public policy issues should be considered
in relation to Article 101(3) (also in Laurent Piau 2005)
o “EU courts have consistently and clearly stated that public policy goals should
be considered in Article 81”
o Nothing in the recent treaty changes, or in the modernisation agenda has
changed my view on its relevance
o The Commission may be hoping that through its guidelines saying that
consumer welfare is Article 101’s sole goal, it can use its soft power to change
the rules of the game (guidelines are clearly contrary to the EU courts case
law) – this is inappropriate because it creates confusion and they should
instead use legitimate methods
- Odudu - argues that the legitimate task of European Union competition law is much
more modest than Townley envisions so that his version of competition law exceeds
the limited competences conferred on the Union and the limits of justiciability
o Judge Frank Easterbrook, writing that ‘When everything is relevant, nothing
is dispositive.’
o Competition law was rescued in the US by the Chicago School – advocating
anti-trust law which is only concerned with consumer welfare (efficiency)
o The Chicago approach takes efficiency to be a good measure of (or proxy for)
well-being, since it results in more and cheaper goods, and new and better
goods, which improve the standard of living.
o Townley argues that Article 101(3) TFEU, which enables the Article 101(1)
TFEU prohibition to be set aside, exists ‘for the separate assessment of the
agreement’s public policy implications’. - Despite acknowledging that ‘it is
unlikely that Article [101(3) TFEU] was originally designed with non-economic
objectives in mind’
o Recent - Commission v France, Commission v Austria and Commission v
Ireland cast considerable doubt. MS had fixed a minimum price for cigarettes
contrary to Article 9(1) of Directive 95/59. MS argued that the measures were
taken to pursue the public policy of protecting human health
o Court of Justice- Article 168(1) TFEU requires human health protection to be
considered when the Union legislates, rather than when Union legislation is
enforced
o suggests public policy objectives may only be considered to allow
derogation from a Union objective when there is a legal obligation on the
party infringing Union law to achieve the particular policy objective – the
policy-linking provision must have direct effect
o Townley is unable to show that policy-linking clauses are directly effective –
“his whole thesis turns on the assumption that ‘the policy-linking clauses are
probably directly effective”
o Townley’s approach thus fails to acknowledge that the Union is an entity of
limited competence. - Article 5 TEU provides that the Union may only act
within the limits of the competence that the Member States have conferred
o Townley- focuses primarily on public policy in cases between 1993 and May
2004 – the date range identified the impact of the first new regime (policy
linking clauses) but ignore the impact of a second new regime (modernization
process)
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