Case uitwerking
EU Competition Law Case Law
Cases based on EU Competition Law and Article 101 and 102 TFEU
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Week 1 – Lecture 1 & 2 Case Law:Consten & Grundig – Firms cannot create barriers to entry when the Treaty aims to reduce them:
- ‘The Treaty, whose preamble and content aim at abolishing the barriers between states, and
which in several provisions gives evidence of a stern attitude with regard to their
reappearance, could not allow undertakings to reconstruct such barriers’ (Consten &
Grundig, p. 340)
- Companies cannot create situation that the treaty wants to stop
- If Member States are not allowed to create barriers then why should firms be able to create
them
- G and C created fragments of the market because G gave C the exclusive right to import G
equipment in France and did something similar with the Dutch and Belgium importer
- Importers were not allowed to sell outside their territory
- Created 27 little markets and not 1 internal market
- Court did not allow this type of market
- Reconsider Consten and Grundig
o G sold these radios in some member states, e.g. Germany and France
o G sold in Germany and it depends on how many people sell radios or stuff that
competes with radios to set the price
o Setting the price depends on how many competitors that exist
o Depending on the specs of the technology, you may be willing to pay a higher price
o 2 technologies that have similar/same specs, however one of them has a special logo
on it and the other does not have that; the one with the famous logo will be more
expensive even though they do and perform the same way
o G sold products more expensive in Germany than in France because the brand was
not as well established in France which restricts competition because as a consumer,
you want to get the lowest possible price.
o Companies must be competitive in the internal market otherwise consumers will go
cross-border to buy it and this was ruled out in this case
o When you add value to a product, you can charge a higher price for it
o In the long run, it made it harder for distributors to set up a distributors network
because C invested in creating marketing to familiarise the French public and at the
end of the day, anyone could start parallel trading of radios
United Brand – Market Structure Definition:
- UB has the largest market share with the next largest being at 20%
- Commission stated that this is bad market structure because there are not a lot of companies
with similar market structure and UB is a monopoly
- UB argued there is no market for bananas, rather a larger market for fruits
- If there was a market for fruits, UB’s market share would relatively decrease because they
did not sell other types of fruits
A-G Wahl in Intel – Competition Law aims to prevent Anti-Competitive Measures and not
Inefficient Firms:
, - From the outset, EU competition rules have aimed to put in place a system of undistorted
competition, as part of the internal market established by the EU. In that regard, it cannot be
overemphasized that protection under EU competition rules is afforded to the competitive
process as such, and not, for example, to competitors. In the same vein, competitors that are
forced to exit the market due to fierce competition, rather than anticompetitive behavior,
are not protected. Therefore, not every exit from the market is necessarily a sign of abusive
conduct, but rather a sign of aggressive, yet healthy and permissible, competition. This is
because, given its economic character, competition law aims, in the final analysis, to enhance
efficiency. The importance placed on efficiency is also in my view clearly reflected in the case-
law of the EU Courts (para. 41)
- Intel had internal documents that stated they were losing competitiveness because
competitors chips were better
- Short term solution was to lower prices and kick competitors out of the market
- Commission saw this are infringement but not by final court which narrowed competition
law down
- All computer manufacturers had to promise to Intel that they would buy supplies from Intel
and there was a rebate
Metro I – Selective Distribution Agreement under Article 101 TFEU:
- Metro has a cash and carry formula
- They make it very expensive to be a Saba dealer (effect no 1)
- Metro could not qualify to become a dealer because they did not meet the quality standards,
which they argued affected the competition in the market (effect no 2)
- Selective distribution agreement restricted competition and Metro argued an infringement
of Article 101 TFEU
- Commission did not see an issue with this
- CJEU stated that yes this may make it harder to be a Saba dealer (affecting market structure)
and it may even result in rigidity of prices or higher prices (reduction of performance) but the
Court and Commission stated that price is not the sole competitive factor
- In return for a higher price, consumers are getting specialized, hifi shops that store
equipment and experience options which increased quality competition
- Court favored quality competition instead of price competition
- Balancing act of 2 forms of allocative and productive efficiency
- Even if there is a slightly higher price but we get lots of quality distribution, we are happy
- Rule:
o Distributor can be selected based on qualitative criteria (e.g. this product has to be
sold in a physical store that always has trained staff on site and the shop needs to be
attractive) but not quantitative criteria (e.g. no more than 2 distributors in NL)
GlaxoSmithKline – Pricing Fixing is an Abuse of Dominance; Limiting Parallel Trade Agreement;
Look at the Objective of the Agreement:
- GSK – Originator company that makes new drugs and does not copy drugs that have gone
out of patent protection
- GSK did R&D for new drugs and to recuperate this money, they charged different prices for
the same drug depending on the Member State
,- Different prices due to what the market can bear in the specific Member State
- In the digital market, it pays to have network of customers. To get them, you can even charge
a loss leading price as an investment and once you have the customers, you can raise prices
- GSK wanted to maximise profits by charging whatever the market could bear
- This could create parallel between different priced market and GSK wanted to stop this
because then they could not charge higher prices
- GSK concluded an agreement with the distributor making it harder to parallel trade
- Commission claimed infringement of Article 101 TFEU due to separation and fragmentation
of the market
- Infringement of Article 101(1) TFEU – GSK made it less attractive for Spanish resellers to sell
the medicines they have bought from GSK to other seller in other Member States
- Commission asked for a rejection of exemption under Article 101(3) TFEU
- GSK refuted by stating that Commission was wrong about competition being about
separation of markets; they argued that Commission cares about market structure but
structure does not matter, only performance does
- In this case, there was market conduct in the market of importing GSK pharmaceuticals
- GSK argued that the Commission failed because the Commission could not show any
negative effects on Consumer welfare
- Court stated that there is no necessity to prove negative effects on consumer welfare to have
breach of competition law
- Competition is defined differently depending on who you are, e.g. GSK defined it as a
reduction in consumer welfare
- The Commission would have to show the short term effects and then balance this with the
long term effects of the competition and innovation which is very difficult as the normative
assessment is not possible by the Competition Authority
- Court stated that competition law is easier to be applied when it is about consumer welfare
and the number of players in the market
- GSK’s approach is very difficult to apply by the competition authority
- Commission concluded infringement of Article 101(1) TFEU and no escape clause under
Article 101(3) TFEU
- Court of First Instance annulled the Commission’s decision because there was no evidence to
suggest that consumer welfare would be affected
- GSK stated that the Commission should not have found a violation under Article 101(1) TFEU
so no need for escape clause under Article 101(3) TFEU
- General Court – Yes an agreement may affect consumers by object but the agreement maybe
presumed to deprive final consumer of those advantages
- Litmus test – Condition tat final consumers are deprived of advantages of competition, e.g.
under SCP, efficiencies in performance – Harm to consumer welfare
- Commission must look at market performance, rather consumer welfare
- We are dealing with the object (does not have to look at the details of the offence,
Commission is ok to say without a risk of a false positive) part and not effect of Article 101
TFEU
- Findings of General Court:
o Object is a shortcut to find anti-competition by looking at the objectives of the
contract and the economic and legal context of which it forms a part
o GSK wants to limit parallel trade (objective) and many sellers signed this agreement
and GSK was able to convince Spanish importers (economic context) that it is a
, binding agreement and importers will have to pay a higher price if they want to sell it
elsewhere (legal context)
o With parallel trade, agreements aimed at prohibiting or limiting parallel trade have
as their object the prevention of competition (in principle)
o Restricting competition with object affects the internal market
o Article 101 TFEU aims to protect interests of competitors and consumers, structure
of market and competition as such (not a narrow theory of harm) – Applies not only
to consumer welfare but also structure of the market, which is the whole process of
competition
o Court of First Instance got their annulment wrong with an error of law
Carter Bancaires – High Bank Fees Breach Competition Law:
- CB in multi-sided platform market – Connects 2 different markets of electronic payment
systems (where consumers need a debit card and bank accunt with the bank and there may
be incentives to get debit cards) and the market for acquiring retailers and get pin terminals
so that those debit cards are widely accepted.
- Issuing market is very attractive because if you take a credit card, there is a higher chance
that you will take out a loan
- Acquiring market is not as attractive as the issuing market for banks because there is higher
power to retailers to negotiate tariffs
- Credit cards are worth more if they are accepted everywhere (indirect positive network
externality) – The bigger the network becomes for consumers and retailers, the more the
credit cards are worth
- Digital market cases because platform of CB connects banks and retailers to us, the final
consumers
- Commission argued CB breached competition law because the fees that banks were charging
to smaller banks was more which would have the effect of excluding smaller banks from the
market
- The higher fees would be passed down to consumers which the Commission argued
restriction by object for consumers
- Smaller banks are more likely to have a consumer base rather than a merchant base which
would affect the market structure
- CB made a barrier to entry that stated that if you wanted to enter the digital banking, you
had to be part of CB which restricted competition
- Commission must do a context test which only looked at consumers and issuing banks
- Error Costs – What if the Commission makes a mistake and there is actually no breach of
competition law? Hence, there was an accidental prohibition of the activities:
o The fees were intended to induce banks to not just issue cards but also to acquire
merchants
o Fees structure was made in a way that banks that were more consumer-oriented
were would pay more than those that were more merchant oriented
o Banks are interested in issuing cards to consumers because consumers are more
inclined to take loans and banks want us to use overdraft
o Banks want digital payment terminals and shops because the consumers have 0
bargaining power due to this
o If bigger companies go to the bank, there is more bargaining power for them
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