GENERAL
1. Terminology and objectives
What is competition and what is competition law?
• Competition process of rivalry between firms, seeking to win customers’ business over time.
Rivalry + autonomy. If a market operates and no longer feels free to prices it is a sign that free
competiton is in danger. Free competition has to be opposed to monopoly power.
• Competition law protects the process of free competition. Economic considerations
Objectives of competition law. Competition law has always played in an important part in EU law → a number
of differing objectives can be pursued by competition policy.
Enhance efficiency: maximising consumer welfare and achieving the optimal allocation of resources.
o Traditional economic theory indicates that goods and services will be produced most
efficiently where there is perfect competition or, more realistically, workable competition.
o Certain agreements can have a deleterious impact on market efficiency.
Protect consumers and smaller firms from large aggregations of economic power, whether in the form
of monopolies, or through agreements whereby rival firms coordinate so as to act as one unit.
Facilitate the creation of a single European market, and to prevent this from being frustrated by
private undertakings.
Then why do we competition have/need compeition law?
Monopolies are disliked for economic and policy reasons. In EU we want to create an internal market
without boundaries, prevent or remove barriers, enhance consumer welfare
CL is not a goal but instrument to reach goals of peace, welfare, regional development, creation of
internal market, etc
Economist say there’s deadweight loss, a net loss for society if the monopoly prevails
Consumer welfare
o Intel case: id many things to block its competitors. Sometimes they paid manufacturers PC to
delay the processes; gave loyalty rebates and exclusivity rebates to manufacturers of PC if
they only bought from them. Intel has always argued that this is not per se an abuse of
dominance. Effects should be looked at, bc thanks for exclusivity rebates prices for consumers
went down. An exclusivity rebate is a per se violation, in words of the Commission, whether it
leads to lowering prices or not, and this is because it leads to lower choices for consumers.
This is not only about abuse of dominance; it is also about why are we doing this. Consumer
welfare is important, but we should care for something more than just lower prices for
consumers. Comepetion law is as much about setting limits
Free competition Monopoly
A large number of small suppliers One supplier
Homogenous products Unique product
Free entry and exit into the market Entry barriers to the market
Transparency with regard to prices and No transparency with regard to technology
technology
, Thus, one supplier cannot influence the price Thus, monopolist can set the price
Consequences
Higher prices
Lower quality products
No choice
Lower allocative efficiency
Consequences
o The producer has no incentive to
keep expanding his production
Lower prices
the output is lower consumers
Better products
cannot obtain the amount of goods
Wider choice
they require at the price they are
Greater allocative efficiency
prepared to pay
o The producer will expand his
o The producer will set a high price.
production for as long as he can earn
This will lead to an increase of his
more by producing one extra unit
welfare. However, the loss to the
than it costs to make that unit
consumers is larger than the benefit
consumers can obtain the amount of
to the monopolist, so there is a net
goods they require at the price they
loss for society (deadweight loss).
are prepared to pay.
Lower productive inefficiency
Greater productive efficiency
o The producer does not have to
Goods and services will be produced at the
compete with anyone, so he does
lowest cost possible, so producers will be as
not have an incentive to make his
efficiently as possible
production more efficient.
o X-inefficiency the average costs
are higher than they would have
been in free competition
o He will only invest to keep new
market players out
Policy considerations
Protection of consumers (consumer welfare) and competitors from concentrations of power
o Free competition lower prices, consumers can choose, products are produced efficiently
due to innovations
o Monopoly high prices, consumers cannot choose, products are produced inefficiently
Avoiding an uneven distribution of income
EU market integration
o Internal market prohibition for Member States to discriminate or restrict free movement
of goods, persons, services and capital.
o Competition law prohibition for undertakings to enter into cartels, abuse dominant
position, etc.
Negative impact on integration competition law prevents measures which
attempt to isolate one domestic market from another
Positive impact on integration by levelling the playing field and facilitating cross-
border transactions and integration, competition law encourages trade between
Member States.
, However, there is convergence between the internal market and
competition law they are increasingly working together
However, free competition is not a goal of the European Union; it is merely an instrument to achieve
other goals (i.e. internal market)
o For that reason, the goal is not ‘absolute’ competition but ‘balanced’ competition
competition law rules can be set aside if the forbidden practice is justified in the light of
another interest (e.g. environment, R&D)
Rules against State aid- US has no similar rules. It is specific for EU. This is bc in Europe we are traditionally less
opposed to State intervention + Member States have the budgetary means to grant States. State aid rules are
called mutual disarmament or common self-discipline. It is expressly stated that State aid is prohibited.
Member States made those State aid rules, however
Sources of EU CL
Primary legislation: treaties TFEU, Charter, Merger Regulation
Implementing legislation through Council Regulation 1/2003; Transparency Directive
Commission decisions
GC/ECJ judgments and orders
Reports, green papers, legal doctrine
Institutions
Commission is the think-tank. Has the exclusive right. In certain cases it adopts certain rules, in other
together with the Council (not Parliament!). Enforcement: examination of the case and decision
making. All the power is in the hands of one institution = European Commission
The Courts sees this as a broad area of economic choices and often in the past only marginally
controlled the Commissions’ decisions.
The Commission’s model is incredibly efficient. National judges are important bc of their direct effect.
National competition authorities (NCAs) are not competent in State aid matters, but they are in other
matters
Legal instruments: mainly regulations and decisions. In terms of judicial protection, it is the best
protection. Competition law is a laboratory.
Gaps in judicial protection found b/w MS, b/w individual company and individuals; b/w EU institution
and individual; and b/w company and EU institution
Link w/ internal market
Competition law does not only protect consumers or competitors but also internal market. In theory,
the difference btw competition law and internal market is that the former is the behavior of
undertakings of individuals and the latter regards undertakings of States. But this has changed lately.
On the other hand, we are more often using competition law rules against governments. Therefore,
gradual convergence. We can choose which tool to be used in a case.
History of competition law
Sherman Act 1890 invention of competition law
After World War II competition law is imposed in Europe
o In comparison, it was introduced in national systems much later (1986 in France, 1991 in
Belgium and 1997 and the Netherlands)
, Competition law in its current state is probably an American invention. After II WW US imposed
competition laws in those countries where it won. Industrial conglomerates that was time to break up
= first individual national regime to be introduced.
Also, changes after Lisbon Treaty = competition law has become somewhat of a dirty word in a treaty.
It was kind of demoted. Protocol no 27. Protocols have the same value than treaties
5 branches of CL
Restrictive agreement and practices = cartels, but not only. People fixing end prices to consumers.
Collusion.
Abuse of dominant position. If artificially using position of economic strength to get certain
advantages that would not be possible to obtain without that position = problematic
Concentration control (merger control) (Regulation 139/2004). Prevention of abuse of dominance by
checking all case of artificial growth = not growing bc you are the best, but by taking over. They are
called concentrations.
State aid.
Public undertakings, services of general economic interest. They translate de EU social model into
Competition law. This is how we fight exclusion. It is a service which we, as a society, deem to be so
important that everyone should have access at a reasonable price and quality. It is not a legal
question, but policy one. This can change over time, eg utilities energy, telecoms.
Doctrine of combined application = applying the rules which normally are applied to undertakings, to
Member States. Member States should no undo the effects of EUCL and should respect EUCL to some
extent. What is so unique about these rules is that the Commission can go after an individual directly.
This does not happen anywhere else in EU law
Not in isolation but in interaction! There is no hierarchy btw these branches. We choose which branch we will
apply. In the fight against monopolies, we’ll see combination of abuse of dominance + governments/holders of
monopolies.
2. Model
First line of defense does competition law apply? If yes, go to second line of defense
Second line of defense are the conditions of the applicable branch fulfilled? If yes, the undertaking/state
will be sanctioned, unless the third line of defense applies.
Branch1(101TFEU) restrictive agreements and practices (cartels, price fixing, collusion)
Branch2(102TFEU) abuse of dominant position monopoly, duopoly)
Branch3(R139/2004) concentration control (artificial growth: business that don’t grow because
they are the best, but because they take over other businesses)
Branch4(107TFEU) state aid
Branch5(106TFEU) public undertakings
Third line of defense the undertaking/state is not sanctioned if an excuse is applicable.
3. List of EU Member States
Austria Estonia Italy Portugal
