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Summary European Union (EU) Law Masters (LLM) Competition Law Notes: Collusive Behaviour €4,99
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Summary European Union (EU) Law Masters (LLM) Competition Law Notes: Collusive Behaviour
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In depth Masters module notes on European Union (EU) Competition law on collusive behaviour Including a step-by-step guide on how to answer a legal problem question for exams.

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  • 4 oktober 2020
  • 46
  • 2019/2020
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COLLUSIVE BEHAVIOUR

The Function of Competition law
- Ensuring a level playing field of business
- Builds on the fundamental belief that undistorted competition and the underlying ideal of
a free market economy should be promoted (or at least preserved).
- The translation of particular economic policy preferences into enforceable legal
standards.
- Common objective of Anti-Competitive collusion: set prices and conditions in their
allocated territories without fear of competition → competition law seeks to
prevent such behaviour.

Beginning in the US with the Sherman Act 1890
- To combat the power of the trusts (cartels) = antitrust
- Populist instrument: redistribution of power and wealth.
- Not an end in itself, but a means to ensure that a society based upon a free market
economy functions properly
- Narrow conception of objectives (outcome)
- Promoting efficient markets and maximising consumer welfare (chicago school)
- Broad conception of objectives (structure and process)
- Including protecting rights of individuals to participate in the market
(ordoliberalism); fairness.

EU Competition law
- Treaty of Rome: activities of EEC includes ‘a system to ensure that competition in the
internal market is not distorted.
- Since Treaty of Lisbon: Protocol No 27 on the Internal market and Competition,
annexed to EU and TFEU.
- EU competition law as an instrument of single market integration = unique.
- Consten and Grundig v Commission [1996]
- An “agreement which might tend to restore the national division in trade
between MS might be such as to frustrate the most fundamental objective of
the Community” [8]

Relationship free movement - competition rules
- Complementary character
- Free movement rules tackle primarily state measures (market access)
- Competition rules address foremost private behaviour (functioning of the market)
- Overlap
- Issue of horizontal direct effect of free movement rules
- Public undertakings also subject to competition law (106 TFEU)
- Free movement and competition rules can apply.

,EU Competition Rules
- Five Branches (Articles 101-109 TFEU)
- Competition rules applicable to private market operators (undertakings)
- Art. 101 TFEU: prohibition of restrictive agreements or other collusive practices
between independent market operators (Collusive behaviour)
- Art. 102 TFEU: prohibition of abuse of a dominant economic position (Unilateral
Behaviour)
- European Merger Control Regulation: prohibition of mergers and acquisitions
that would significantly impede effective competition in the internal market.
- Competition rules applicable to state measures (Unique to the EU)
- Art. 106 TFEU: public undertakings, undertakings granted special or exclusive
rights, undertakings entrusted with services of general economic interest (SGEI)
- Articles 107-109 TFEU: state aid control

Oligopoly

- Where a small number of producers/suppliers in a market → leads to
‘interdependence’ between the members, making it very difficult for any new producer
to enter.

- Results in ‘price following’, where the ‘price leader’ raises its prices and the
others immediately follow suit. → price increases are not evidence of collusion,
but merely a rational response to the market structure (‘conscious parallelism’)

- Parallel behavior: (undertakings acting identically on the market) → doesn’t in
itself constitute a concerted practice but it provides strong evidence

- Tacit coordination – may lead to uncompetitive conditions prevailing on the market as the
companies can establish supra-competitive prices or limit output

Cartels
- A group of independent but similar undertakings which work together to reach agreements
which have anti-competitive effects. e.g. reveal info about each companies plans and
agreements may be made regarding pricing, marketing, and market-sharing (damaging
customers and potential competitors))

- Members of a cartel that are willing to cooperate with the Commission may be entitled to
substantial benefit in terms of reductions in, and sometimes even total immunity from fines.

ARTICLE 101 TFEU

- Art. 101(1):

, - Prohibits agreements between undertakings, “concerted practices”, decisions by
associations of undertakings with the object or effect to prevent, restrict or distort
competition and affect trade between Member States (General Prohibition)

- Art. 101(2):
- Sanction = Nullity
- Art. 101(3):
- Legal exception = declaration of inapplicability

ARTICLE 101(1)

- Prohibits: Agreements or Decisions
- Companies are prohibited from cooperation or collusion.

Four constituent elements that must be met:
- Collusion (agreement; decision; concerted practice)
- Between two or more ‘undertakings’ or ‘association of undertakings’
- Which restricts competition (‘have as their object or effect the prevention,
restriction or distortion of competition)
- And ‘may affect trade between member states’

Agreements that are in breach of Art. 101(1) are void unless they can be exempted.

UNDERTAKINGS:

- The Treaty does not define an undertaking, it has been up to the EU courts to define.

- Hofner and Elser (C-41/90):
- “The meaning of undertaking encompasses every entity engaged in an economic
activity regardless of the legal status of the entity and the way in which it is financed.”
[8]
- Functional approach: looking at the activities carried out by the body in question
rather than its legal or institutional structure
- e.g. corporations, partnerships,individuals, trade associations, the
liberal professions, state-owned corporations, cooperatives → does
not cover bodies that pursue an exclusively social objective
- Profit intention is not required.

Entity

- Legal form irrelevant: includes natural persons, public bodies, legal persons,
profit and nonprofit entities → establishment with the EU is not required.

, - Single Economic Unit Doctrine: if a subsidiary has no real autonomy to determine its
course of action on the market (merely carries out instructions issued by the parent
company controlling it) (see AKZO Nobel)

Parent and Subsidiary Companies

- Centrafarm v Sterling Drug
- Parents and subsidiaries within the same corporate group are regarded as ‘Single
Undertaking’.

- Viho v Commission (Parker Pen) (C-73/95 [1996])
- Held that “Parker and its subsidiaries formed a single economic unit within which the
subsidiaries do not enjoy real autonomy in determining their course of action in the
market, but carry out the instructions issued by the parent company controlling them”
[63]
- Parker Pen had established an integrated distribution system for Germany, France,
Belgium, Spain and the Netherlands, where it used subsidiary companies for the
distribution of its products.
- The Commission concluded that Art.101 had no application to this allocation of tasks
within the Parker Pen group. This finding was challenged by a third party, Viho, which
had been trying to obtain supplies of Parker Pen’s products and which considered
that the agreements between Parker Pen and its subsidiaries infringed Art.101.
- The EU Courts upheld the decision of the Commission that Art.101 had no
application. The Court of Justice noted that Parker Pen held 100 per cent of the
shares in the subsidiary companies, it directed their sales and marketing
activities and it controlled sales, targets, gross margins, sales costs, cash
flow and stocks → constituting a single economic unit.

- Akzo Nobel NV v Commission (C-97/08 [2009])
- Where a parent company has a 100% share in its subsidiaries, there is rebuttable
presumption that the parent company exercises a decisive influence over the conduct
of the subs
- The Commission can address a decision to a parent company that it was liable for a
breach of Art. 101 when it was a subsidiary which had participated in a cartel.
- Legally enforceable agreements will not fall within Art.101 if the relationship
between the firms within the same corporate group is so close that economically
they form a single economic entity, that is to say that they ‘consist of a unitary
organisation of personal, tangible and intangible elements, which pursue a
specific economic aim on a long-term basis, and can contribute to the
commission of an infringement of the kind referred to in [Article 101 TFEU]’.

- Coty Germany Gmbh (C-230/16 [2017])
- Article 101(1) TFEU must be interpreted as not precluding a contractual clause ,
such as that at issue in the main proceedings, which prohibits authorised

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