INTRODUCTION *Link every point to Q facts + Q) is this a relevant fact?
End paragraph on whether requirement was met / ask for more info
*Pick a side to essay Q
ARTICLE 101 TFEU “Prohibits agreements / decisions by associations of undertakings / concerted
practices which may affect trade between MSs + have as their object / effect the
prevention, restriction, or distortion of competition within the internal market”
AGREEMENTS BETWEEN UNDERTAKINGS
• Wide scope: Includes non-binding / oral / gentlemen agreements
Volkswagen
COMPETITION • Art 101 TFEU prohibits restrictive practices, which may harm competition within the EU - Manufacturer telephoned car dealers requiring them to comply w/ non-binding price recommendation
• Process of rivalry between firms in the marketplace b/c aim = make profit • We must consider the elements of Art 101(1) in order to determine whether a breach was established
• Competition requires free market economy ∴ freely enter/exit • We will prove “…“ will be automatically void under Art 101(2). However, X may rely on Art 101(3) / BER. ACF Chemiefarma
- Series of informal gentlemen’s agreement to market share for the Quinine cartel = agreement
Issues w/ competition ≠ best outcome for society • Achieves EU law aims: 1) Consumer welfare / economic efficiency: No price-fixing
• Natural monopolies: Economies of scale are so great that 1 firm serves the whole market = excludes rivals 2) Protect small / medium-sized firms: No disproportionate non-compete clauses • Meeting of the minds?
• Network effects: If ↑ customers use the good = ↑ value ∴ 1 firm dominates the market 3) Single market: No absolute territorial protection Bayer
o Direct: Telecommunications - If new subscriber, existing customers may contact ↑ people - B limited supply of pharmaceutical drug to French + Spanish distributors to prevent them from selling their
ARTICLE 101(1): PROHIBITION excess supply in UK
o Indirect: Software - If ↑ join, programmers will write new software = ↑ valuable to customers
o Two-sided market: Caters 2 or more groups 1) COLLUSION BETWEEN UNDERTAKINGS = interpreted broadly ∴ catches all agreements w/ harmful effects - CJEU: No concurrence of wills ≠ agreement
§ Newspapers: ↑ Readers = ↑ ability to sell advertising space UNDERTAKINGS
• Functional approach AEG Telefunken
• Inappropriate for particular sectors: Defence, agriculture, labour markets
Albany Höfner - Some distributors refused to accept AEG’s pricing policy ∴ AEG refused to contract w/ them
- Collective bargaining between unions + employers = outside Art 101 TFEU - Undertaking = “any entity engaged in an economic activity”, regardless of its funding / legal status - CJEU: AEG + existing distributors had tacit acceptance of this practice = agreement
∴ X + Y are undertakings involved in the provision of “…”
• Restricting competition = beneficial Ford
o Firms w/ low costs = at the expense of safety checks e.g. airlines - Ford’s right-hand-drive cars = cheaper in Germany > UK
• Doesn’t require profit motive / economic purpose
• Ethical issues: Cut-throat competition leads to insolvency = discredited FIFA - Ford notified German Ford dealers that right-hand-drive cars must be purchased from UK dealer
• Competitions should be won: Most innovative, respond to customer needs ∴ why condemn monopolists? - Despite no profit motive, FIFA engaged in an economic activity = undertaking - CJEU: Activity was part of ongoing relationship between Ford + its distributors = agreement
Perfect competition • Private bodies: Natural (artists, accountants) / legal persons (companies) Sandoz
• Infinite no of competing firms w/ homogenous goods, full info, no barriers = most efficient allocation of o NOT govt activities / public sector - Wrote “export prohibited” on all invoices ∴ continuing commercial relationship = agreement
economic resources
• Issues: Non-economic activities Complex cartels
o Unrealistic: Firms sell slightly differentiated goods + customer loyalty ∴ ↑P ≠ lose customers • Social activity may overshadow economic activity • If detailed arrangements / sub-agreements, Commission doesn’t need to establish exact level of participation by a
o Costs ≠ kept to a minimum b/c social costs, e.g. air pollution o But if economic activity prevails = undertaking for some of its activities cartel member b/c seen as a single overall agreement > looking at sub-agreements individually
FENIN o Even if firm only attended 1 meeting, but not all / involved in operation of agreement
Dynamic competition - Although SNS engaged in economic activity, they also provided free services + state-funded ∴ social Polypropylene
• Competition is a continuing process of innovation + technological advances ∴ firms should exploit this gain activity ≠ undertaking - Complex cartel arrangements = single overall agreement between 15 firms in petrochemical industry
- Proof of participation in overall agreement = all 15 were liable, despite some weren’t involved in every decision
COMPETITION LAW • Wouters: Activities linked w/ exercise of public powers ≠ economic activity
• Set of legal rules to protect competition from anti-competitive behaviour Eurocontrol Intention
o No obligation to compete - Collecting route charges = inseparable from other activities Tréfileurope
1) Firms have freedom to compete - As a whole, activities linked w/ performing public task of improving air navigation safety ≠ undertaking - If X doesn’t publicly distance itself from what was agreed = still liable for participating in cartel
2) Cannot constantly intervene in market - Other participants still believe X agreed + would comply w/ it
• Principle of solidarity: Social protection based on solidarity > economic activity
COMPETITION POLICY = Enforcing the rules o Pensions, social security, healthcare, insurance Westfalen
• Intervention ensures fair competition + prevents undesirable activities from being realised Poucet - “Public distancing” = write to competitors to not be part of cartel / participate in meetings > whistleblowing
• Workable competition: Only intervene if market failure - French body ran social security scheme based on national solidarity
∴ benefits ≠ proportionate to contributions ≠ undertaking DECISIONS BY ASSOCIATIONS OF UNDERTAKINGS
o Invisible hand (market forces) fail to deal w/ issues arising in market b/c market power
VS. • Trade association that regulates activities of their members
SYSTEM OF COMPETITION LAW Federation Française • Wide scope: Includes recommendations, resolutions, regulations, code of conduct
• Competition body created regime where all 3 operates as a whole - Paid benefits in proportion to contributions + financial results of investments based on solidarity IAZ International
• Art 3(3) TEU: Aim = achieve a “highly competitive social market economy” economic activity = undertaking - Association of water supply undertakings issued non-binding recommendation to only connect washing
machines w/ conformity label supplied by them = decision by association of undertakings
Aims of EU law = consumer welfare, protect process of competition, market integration Profession
Economic goals Commission v Italy (1998) Wouters
• Maximise consumer welfare: ↓ Prices / ↑ choice / ↑ product quality - Members of profession, e.g. Italian custom agents = undertaking - Netherlands Bar issued regulation to prevent lawyers acting in partnership w/ accountants
• Economic efficiency - Every NL lawyer = undertaking, b/c their economic activity: NL Bar = association of undertakings
o Productive efficiency: Firm produces at lowest possible cost, e.g. outsourcing, innovation, Wouters ∴ regulation = decision by association of undertakings
technology, cheap materials - General Council of Dutch Bar exercised regulatory functions + exclusively appointed by members of
the Bar > state economic activity = undertaking CONCERTED PRACTICES
o Allocative efficiency: Lowest price consumers are willing to pay
§ Resources allocated so that no customers are better off w/o making others worse off • Hard to prove existence of anti-competitive agreements b/c firms operate in secret + destroy evidence ∴ Art 101(1)
Single Economic Entity à Q) Wholly-owned subsidiary? has a safety net
o Dynamic efficiency: Stimulates innovation / quality / R&D = LR consumer welfare
• If undertakings linked to form a single economic entity (parent-subsidiary) = Art 101 doesn’t apply • Commission may rely on circumstantial evidence: Coordinated action by competitors may suggest collusion
§ Galbraith: Only monopolists carry out expensive R&D ≠ correct o But agreement between independent undertakings = within Art 101 ICI (Dyestuffs)
• But perfect competition ≠ exist IRL ∴ strives for effective competition • Test of control: Q of degree - Leading producers had 3 simultaneous uniform increases in price of dyes = concerted practice
o Are parties to agreement independent in their decision-making / does parent company exercise - CJEU: Concerted practice = form of coordination between firms w/o reaching the level of an agreement, but
Social goals
decisive influence lacks real freedom in determining its own course of conduct on market? knowingly coordinate actions + cooperate > compete
• Protect consumers + small firms from exercise of market power
o E.g. Parent’s shareholding in subsidiary / parent controls board of directors / influences policy or
o But Darwin’s theory: Protecting inefficient firms ≠ consumer welfare ∴ weak should disappear +
issues instructions to subsidiary • Easier task: Only requires proof of participation, not that concerted practice restricted competition
strong remain
Viho Hüls
• Protect democratic principles - Test to prove concerted practice:
- Parker Pen sold stationary products via its subsidiaries, which refused to supply Viho
• Public interest / equity, e.g. redistribute wealth, protect jobs, South Africa protects “black empowerment” 1) Undertakings concerted w/ each other
- PP controlled their sales + marketing activities subsidiaries lacked control = single economic entity
Political goals 2) Common conduct on market
• Even if parent party to anti-competitive activity, parent company liable for its wholly-owned subsidiary 3) Causal connection between (1) + (2)
• Single market objective: Remove barriers to trade + ↑ free movement
AKZO
• Specific sectors in national economy 1) Undertakings concerted
- Cartel activity involved subsidiaries, but Akzo Nobel had 100% shareholding subsidiaries lacked control
INSTITUTIONS - Despite no personal involvement, Commission fined AN • Direct/indirect contact between firms
§ But may rebut if parent can prove subsidiary acts independently on the market Suiker Unie
• European Commission empowered to enforce law at EU level
o Takes actions against breaches, impose penalties, adopt BER, investigate mergers, develop policies - EU sugar producers only imported into Holland w/ permission of 4 Dutch producers = less pressure to compete
Corporate reorganisation - No need for actual plan, but mental consensus w/ practical cooperation knowingly substituted for competition
o Why? • When one entity succeeds another, both legal entities = treated as same undertaking ∴ rights + liabilities
1) Lacks confidence in national judges / firms will apply EU competition rules correctly/in good faith • Includes (single) meeting where members informed each other of their future commercial moves
passed to the successor
2) Experienced legal / economic experts ∴ better qualified > national bodies Compagnie T-Mobile
3) Centralization = in line w/ aims of original Treaty of Rome - Change in name + legal form ≠ create a new undertaking = remains liable - Despite no explicit agreement to ↑P, merely attending meeting where pricing plans are disclosed = liable
• General Court: Specialist court reviews Commission decisions
• European Union Court of Justice: Highest EU judicial body = interprets/applies EU competition law • PVC: Q) Functional + economic continuity between original infringer + undertaking into which it was merged? • Exchange of information between firms: e.g. recent economic crisis
• National courts: Apply directly applicable EU competition law Autoritá v ETI o Horizontal Guidelines (2011): If exchange of info ↓ “strategic uncertainty” in market ∴ facilitates collusion
- AAMS involved in cartel + transferred activities to ETI Italian competition authority imposed fine on ETI = concerted practice
Relationship between EU + national competition law
• Walt Wilhelm: If clashes, EU law prevails over national law Sells business to 3 rd party 2) Common conduct
• Shared competence to apply Art 101/102 between Commission + NCAs / national courts • If undertaking responsible for business still exists = remains liable for infringement > acquirer • Parallel conduct = strong evidence
• Recital 8 Regulation 1/2003: Create a “level playing field” Zinc Phosphate o But if market conditions explain parallel conduct / competitors unilaterally adapted themselves to existing +
o If agreement ≠ prohibited by EU law, national bodies cannot apply stricter national law - Undertaking breached Art 101, then disposed assets + left market = remains liable expected conduct of competitors ≠ concerted practice
