European Union Competition Law Quiz

European Union Competition Law

• European Union Competition Law (EU competition law) is designed to protect free competition and address market imperfections in a free market economy.

• The two core rules in TFUE (Treaty on the Functioning of the European Union) govern:

  • Anti-competitive agreements (Article 101) between independent firms.
  • Abuse of dominant position (Article 102).

Article 101 TFUE - Agreements, Decisions, Concerted Practices

• Prohibits agreements, decisions by associations of undertakings, and concerted practices that may affect trade between member states and that prevent, restrict, or distort competition within the internal market.

• Prohibited practices include:

  • Fixing prices or trading conditions
  • Limiting production, markets, or technical development
  • Sharing markets or sources of supply
  • Applying dissimilar conditions
  • Making contract conclusion subject to acceptance of unrelated obligations

• Agreements and decisions found to violate this article are automatically void.

• Exceptions to the prohibition are possible if:

  • Agreements improve production or distribution or promote technical or economic progress.
  • Allowing consumers a fair share of the benefits
  • Not imposing any unnecessary restrictions

Article 102 TFUE - Abuse of a Dominant Position

• Prohibits any abuse of a dominant position in the internal market.

• Abuse may include:

  • Imposing unfair purchase or selling prices or trading conditions
  • Limiting production, markets, or technical development to the detriment of consumers
  • Applying dissimilar conditions to equivalent transactions
  • Making contract conclusion subject to acceptance of unrelated obligations.

How the European Court of Justice Defines the Objective of EU Law

• The European Court of Justice (ECJ) prioritizes maintaining the integration of the internal market, aiming to avoid conducts that resurrect national trade divisions.

Enforcement of EU Competition Law

• Article 101 and 102 enforced publicly through a network of competition authorities (including the EU Commission and national authorities) and privately through national courts.

Enforcement by the EU Commission

• Regulation 1/2003 grants significant powers to the EU Commission to:

  • Investigate violations of Articles 101 and 102
  • Issue decisions
  • Impose significant fines (up to 10% of worldwide turnover) on undertakings found in breach

• The Commission acts as an integrated decision-maker in individual cases, subject to review by EU Courts.

Private Enforcement

• Private parties (a claimant) can bring civil litigation in national courts to seek a declaration of nullity, injunction, or damages when they have been injured by conduct violating Article 101 or 102.

Undertakings

• The concept of "undertaking" applies similarly to both Articles 101 and 102 across the EU.

• It encompasses all entities engaged in an economic activity, irrespective of legal structure or financing.

Single Economic Entity Doctrine

• The single economic entity doctrine extends the concept of "undertaking" to corporate groups.

• Intra-undertaking agreements are not considered separate occurrences under the principle.

• Parent companies and subsidiaries form a single economic unit if the subsidiary does not practice independent economic activity and follows instructions from the parent company.

Influence of Case Law

• Cases have established that where a parent company holds 100% or majority shares in a subsidiary, there is a presumption it has decisive influence over the subsidiary's commercial conduct.

• Furthermore a finding of influence can be based on the evidence of management power exercised by the parent company.

Affecting Free Trade Between Member States

• For an agreement or conduct to fall under 101 or 102, it must significantly impact trade between member states.

• There needs to be an appreciable level of cross-border effects.

• The Court of Justice has stated that a conduct to considerably affect trade requires foreseeability.

Exclusions

• While Articles 101 and 102 do not explicitly exclude any cases, exclusions are considered based on EU case law and regulations, particularly public policy.

• Article 346(1)(b) TFEU allows a member state to take measures for its essential security interests related to arms and munitions.

The Albany Case

• Albany international BV contested the Dutch authority's requirement to contribute to a sectoral pension fund.

• The EU Court of Justice found that compulsory contributions from collective labor agreements, that aim at improving working conditions and social policy, were not related to competition rules.

Article 101 TFUE

• Article 101(1) prohibits collusive agreements between separate undertakings restricting competition.

• Article 101(3) provides exceptions for agreements that achieve offsetting benefits.

Meaning of an Agreement

• An agreement is a concurrence of wills between economic operators, expressing a joint intention to conduct themselves in a specific way or pursuing a market objective.

• The form or nature of the agreement is not important, as long as it represents the genuine intent of the parties.

Agreements

• Horizontal agreements include those formed between competitors on the same level.

• Vertical agreements include those formed between competitors at different levels.

• Agreements can be legally or non-legally binding, in written or oral form.

Article 101 TFUE Enforcement

• Heavy sanctions are imposed on undertakings found to have colluded if detected.

• They typically try to conceal such collusion rather than justify the practices under Article 101(3).

Examples of Cases

• European Truck Manufacturers Cartel (1997-2011)
• The Vitamins Cartel (1989-1999)
• The LCD Cartel (2001-2006)
• UK Sugar and Confectionery Market
• The Wood Pulp Case (1981-1985)
• The Container Shipping Case (2011-2016)

Concerted Practices

• Concerted practices are looser forms of collusion, where coordination leads to an influence on the market without an explicit agreement.

• Includes direct or indirect actions that remove strategic uncertainty regarding competitors future conduct or disclosing such information.

Decisions of Associations of Undertakings

• Decisions taken by associations of undertakings can hold the associations liable for their members' anti-competitive behaviour.

• This aims to prevent businesses from evading competition rules through collective agreements.

The Italian Motor Insurance Case (1994)

• The National Association of Insurance Companies (ANIA) in Italy issued guidelines recommending minimum premiums to its members.

• Resulting in an agreement that effectively restricted price competition in the market.

The Spanish Waste Management Market Case (2013)

• The Association of Spanish Waste Management Companies (FER) issued a directive for its members to standardize prices.

• This practice aimed to stabilize the market but effectively reduced price competition.

Belgian Architects Case

• The Belgian Association of Architects set a minimum fee scale for architectural services.

• This restriction prevented competitive pricing and limited new entrants.

Cases Not Liable Under Article 101 TFEU

• In the Bayer/Adalat case, EU Courts annulled a Commission decision that lacked sufficient evidence to prove an agreement or understanding with wholesalers designed to stop parallel trade.

The Adalat Case

• In the Adalat case involving Bayer and the distribution or wholesalers of its medication involved the Court of Justice ruling that the decrease in supplies by Bayer to certain markets did not amount to concerted practice. It therefore was a unilateral act and not in breach of Article 101(1).

The Wood Pulp II Case

• The European Commission accused producers of engaging in a concerted practice to fix prices and coordinate their behaviour.

• The EU Court of Justice found that the price announcements did not constitute a concerted practice as they were a common industrial practice to ensure transparency and weren't undertaken to negatively impact the market.

De Minimis Rules

• Established by the European Commission to set market share thresholds.

• This means agreements that have a low market share are unlikely to substantially affect competition and not be a priority for enforcement.

• No assumption of legality, rather it is less likely to have effect on competition.

Article 101(3) TFEU – Exceptions

• This article provides exceptions to the general prohibition on anticompetitive agreements.

• The four requirements for an agreement to fall under Article 101(3) are: an improvement in production or distribution, consumers to receive a fair share of the benefits, the agreement to not impose unnecessary restrictions, and no elimination of competition in a substantial market.

Categories of Analysis

• Presumption of illegality: Agreements containing provisions that restrict competition by object are presumed to be illegal.

• Full economic analysis: Agreements must be analysed individually to assess their effects on competition and if they fulfil the four 101(3) conditions.

• De Minimis: Agreements that do not appreciably restrict competition are excluded from the scope of Article 101(1) if below the market share thresholds.

• Safe Harbour: Block Exemption Regulations: Agreements that benefit from an EU block exemption are presumed compatible, with conditions based on efficiencies outweighing anti-competitive effects.

Agreements that Restrict Competition by Object

• These types of agreements are more likely than those based on effect to violate competition rules.

• Includes price fixing, market sharing, output limitation, bid rigging, collective boycotts, resale price maintenance (RPM), agreements to boycott new entrants, and predatory pricing agreements.

Agreements that Restrict Competition by Effect

• Requires proof that an agreement negatively affects prices, output, innovation, or product variety and quality in a meaningful manner.

• Other necessary criteria are whether the action hinders potential competition.

Examples of Cases concerning Article 102 TFEU

• Hoffmann-La Roche v Commission (Case 85/76)
• United Brands v Commission (Case 27/76)
• Google Shopping case (Case AT.39740)
• Google Android case (Case T-604/18)

Assessing Dominance

• A crucial first step is identifying relevant markets (product and geographic scopes).

Market Share

• Large market shares are typically seen as evidence of dominant market power, especially in the long run.

• Additional investigation is needed for shares below 50%, looking at rivals’ shares, rate of change over time and associated barriers to entry are necessary in such situations to assess dominance.

Barriers to Entry

• Legal barriers: tariffs or quotas.
• Advantages to dominant firms such as economies of scales, privileged access to essential inputs, distribution channels or established network of long term contracts.

Economies of Scale

• Dominant firms benefit from economies of scale, leading to lower average production costs that new competitors cannot match and thus a barrier to entry.

High Capital Investment

• High capital costs can be a deterrent for new competitors.

• Examples of such industries include energy, telecommunications, and pharmaceuticals.

Access to Distribution Channels

• Exclusive agreements with major retailers, providing the dominant firm preferential treatment, creates barriers to entry for new competitors.

Intellectual Property Rights and Patents

• Patents can create barriers to entry for competing firms.

Network Effects

• The value of a product or service increases as more people use it, making it difficult for new entrants to compete without a critical mass of users.

Brand Loyalty and Reputation

• A dominant firm's established brand can create strong loyalty, making it harder for new entrants to gain traction.

Switching Costs

• Existing customers face costs for changing providers that new entrants cannot eliminate, which makes the switch to them less appealing for customers.

Control over Essential Facilities

• Dominant firms controlling infrastructure crucial to competitor operations act as a barrier to market entry as others cannot reach customers.

EU Competition Law enforcement cases

These cases and examples showcase how EU law aims to ensure fair competition and prevent abuse of dominance. These notes are concise and only include the core information relevant for study notes.

Test your knowledge on European Union Competition Law, focusing on key articles such as Article 101 of the Treaty on the Functioning of the European Union (TFUE). This quiz explores anti-competitive agreements, prohibitions, and the essentials of maintaining free competition within the EU internal market. Challenge yourself to understand the intricacies of competition law in a free market economy.