Week 5: EU Competition Law
Law of the European Union | LLB International and European Law | Year 2 | Block 1
Lecture 1: Anti-Competitive Collusion
Why does Competition law exist?
● Competition law is all about maintaining the rivalry between companies and their
products / services.
○ Initially, it was put as the protection of economic freedom.
○ E.g, Sherman Act 1890 → a US law that prevented companies from colluding (=
cooperating secretly or unlawfully) or merging in order to gain a monopoly over
the market; as that would destroy competition entirely.
● It is important to have several companies — none all-powerful — who are trying to
outperform each other, rather than being ruled by one ultimate person / company.
● Thanks to competition law, not only is there competition and innovation on the side of
companies, but also benefits for the consumers in form of a large variety of products, as
well as constant development for new ones.
● E.g, the technical innovation of the mobile phone is a result of competition law.
Ensures companies keep trying to make new products, improve products, and
find ways to sell them for less to ensure people continue buying from them.
● Competition law in EU law
● 101 TFEU: prohibition of collusion that has as its intention or effect “the
prevention, restriction or distortion of competition within the internal market”
● 102 TFEU: prohibition of abusing dominance / a dominant position. (see lecture
2)
(Possible) Goals of Competition Law
● An example of a monopoly: Dutch railways, which are fully controlled and managed by
NS. This situation leads to very little incentive to improve on their services to improve
customer experience (e.g. buy trains that have toilets, more comfortable seating etc)
because regardless of whether those innovations were to be done or not, the customers
remain stuck with this one company. Therefore, it becomes much more appealing to
simply cut costs.
● Competition law has three particular goals:
○ Ensuring good market structure — there must be a good number of
undertakings that are competing in order to ensure that there is effective
competition and innovation.
○ Performance of the market — making sure the process of rivalry and efficiency
is effective, e.g. companies trying to keep costs as low as possible, trying to
maintain consumer welfare and satisfaction, innovating at a lower price. This all
falls within the performance of a market.
, ○ Market integration — the EU in particular is also working towards bringing the
markets of different member states closer together (alongside ensuring free
movement rights).
■ Consten and Grundig: see lecture 2.
The State of These Goals Today
● GlaxoSmithKline: 101 TFEU aims to protect not only the players, but the game itself: all
competitors, consumers, and even the structure of the market. Thus, these multiple
goals remain a large driving force. (para 63)
○ EU law has very overarching goals, e.g. compared to US antitrust law: for the last
40-50 years it has been strongly based in ensuring consumer welfare, and
perhaps disregarding competition itself.
● In applying 101 TFEU, there are a number of key concepts that must be reviewed
(somewhat as a result of these broad goals):
○ Market structure vs market performance: Market structure may be
monopolistic, but market performance remains good?
○ Market integration vs market performance: Market integration is low, but
market continues to perform well?
○ The efficiency vs the consumer welfare element of market performance
■ Efficiency, e.g.: the company makes just enough to cover costs, therefore
how can they afford an R&D office?
● Note: additional provisions that are relevant, but not a large part of the course: 106 + 107
TFEU.
The Relevant Market
● Competition always takes place in the relevant market. This is a market consisting of two
characteristics or parts: a product market and a geographical market.
● Product market = the products that make up the market.
○ To determine what the product market is, one must use the Interchangeability
test: what goods / services can be substituted by consumers and producers, and
what is the substitution?
■ Qualitative differences: by assessing the location this and other
products are sold from, the specific experience customers get with the
product, and how substitutable it is.
■ Quantitative differences: via the SSNIP test to check price differences
→ if the price of the product would increase by 10%, would consumers
stick to it anyway or substitute it with another product? If they substitute it,
the two products are competing. If not, they are not in competition with
each other, and thus not in the same market.
○ United Brands (C-27/76): The Commission brought a fine against UBC for
infringing 102 TFEU (see lecture 2). In order to resolve this, the court had to
assess the product market to see if bananas compete with other fruits, or not. In
, order not to be, the banana market would have to be sufficiently homogeneous
and distinct from other fresh fruit products. (para 10, 12)
■ CJEU found that they do not compete with other fruits: given the specific
shape, texture, and softness of bananas, it is always required and in
demand for elderly people, babies and the sick, and which also makes it
impossible to substitute other fruits for it. (20, 31) Thus, in applying the
SSNIP test, it would be clear that buyers would not switch to a different
fruit.
■ The CJEU also assessed the geographic market, having found the market
of The Netherlands, Germany, Denmark, Ireland and Benelux applicable.
(36, 57)
■ UNC’s market share in the banana market was 40-45%. (108) This
strength allowed them to adopt a flexible strategy against new
competitors. (121) UNC argued that they do not make many profits as a
result — but the CJEU stated that economic strength of an
undertaking is not measured by its profits and profitability. This led
the court to determine they do have a dominant position on the market.
■ Ultimately, in considering whether the prices were unfair, the CJEU sided
with UNC, stating that the Commission did not submit sufficient evidence
to prove / point to an infringement of 102 TFEU by UNC. (267)
● Geographical market = the location the market is in.
○ In what AREA can given goods / services be substitutable for consumers and
producers?
○ E.g., transportation costs must be considered, as well as the lifespan of the
product / time that it can still be used for.
■ Asphalt, for instance, has a very small geographical market, as it can only
last a limited time in a liquid-esque form while being transported to where
it is to be poured. If the truck does not arrive on time, the asphalt may
begin to harden on the truck, unable to be poured out and resulting in new
asphalt being needed. This drives up transportation costs.
Inter-Brand and Intra-Brand
● Inter-brand: competition occurring between DIFFERENT brands.
○ E.g. Apple vs Android. Different companies that produce the same product are
competing for customers by innovating original elements that can be marketed as
‘better’ than that of the other brand.
● Intra-brand: competition occurring between sellers of the SAME brand.
○ The presence of this competition varies on the product: for instance, there is very
little intra-brand competition regarding fast food chains like McDonalds, given the
menus and prices are very similar (particularly within one country). This leads to
increased inter-brand competition, e.g between McDonalds and KFC.
Horizontal / Vertical Agreements + Upstream / Downstream Markets
