Law & Competition PDF

LESSON 1 LAW & COMPETITION 1. Competition as an economic system 2. Competition Law fields 3. Spanish constitutional framework 4. Competition in the European Union 5. Competition Law enforcement  1. Competition as an economic system...

LESSON 1 LAW & COMPETITION 1. Competition as an economic system 2. Competition Law fields 3. Spanish constitutional framework 4. Competition in the European Union 5. Competition Law enforcement  1. Competition as an economic system A) Economic system: Market Economy Classical Economics: Prices are determined by Supply and Demand (the “invisible hand” of Adam Smith) à Perfect competition Basic assumptions of this model (among many others…): high number of buyers and sellers, identical products, symmetry of information… But real markets do not match these assumptions: For example: monopolies (one seller) and monopsonies (one buyer), differentiated products, asymmetries of information… à real markets do not work as well as theoretical models (“market failures”) à different degrees of competition: Perfect competition Monopolistic (imperfect, workable) competition Oligopolies Monopolies 2  1. Competition as an economic system But… Why regulation specifically about competition? B) Competition as a basic principle for the correct functioning of Markets Advantages of competition according to economic theory: Fosters low prices Allocative efficiency (situation where resources are allocated in a way that maximizes the net benefit attained through their use) Incentive for innovation à Public interest in the maintenance of competitive (and fair) markets à Competition Law 3  1. Competition as an economic system C) Competition needs protection against enterprises Market power: motivation of undertakings Monopolistic benefits: higher benefits that in a competitive market, similar to those gained by a monopolist Undertakings tend to avoid competition è competition needs protection against undertakings’ conducts which harm competition: 2 types of problematic conducts Conducts that eliminate/restrict competition Conducts that reflect an incorrect (unfair) competitive standard 4  2. Competition Law fields TWO FIELDS: UNFAIR COMPETITION LAW: Deals with competitive conducts that do not meet a correctness standard: establishes certain limits as to the way economic agents compete E.U. regulation is by way of Directive, thus only for harmonisation (Directive 2005/29/CE) State members’ Unfair competition Law: in Spain, Ley 3/1991, de Competencia desleal (as modified by Ley 29/2009) ANTITRUST LAW: Deals with anticompetitive conducts, i.e. conducts of undertakings that harm competition E.U. Antitrust Law: Treaty on the Functioning of the European Union (TFEU) & Merger regulation State members’ Antitrust Law: in Spain, Ley 15/2007 de Defensa de la competencia 5  3. Spanish constitutional framework Art. 38 of the Spanish Constitution states that the Spanish economic system is a “market economy”. Competition is one of the basic principles of market economy, thus this is the constitutional background for the protection of competition: the State has to protect competition. Art. 38 of the Spanish Constitution also states the “freedom of enterprise” (i.e. freedom for individuals to start an economic activity). This freedom is one of the main assumptions of free competition and this is the reason why it is protected by Spanish Constitution. Therefore, there are 2 important aspects: Competition Law (objective meaning): protects the existence of Competition as an institution necessary for the correct functioning of Market economy à Antitrust Right to free competition (subjective meaning): based on the freedom of enterprise, recognised by the Spanish Constitution to all citizens à Unfair Competition 6  3. Spanish constitutional framework — Based on this constitutional framework, the following rules have been enacted: — A) Antitrust Law: in Ley 15/2007 de Defensa de la competencia — Art. 1: Collusion — Art. 2: Abuse of a dominant position — Art. 3: Unfair acts with antitrust relevance — Art. 7-10: Merger control — Art. 11: State aids — B) Unfair competition Law: in Ley 3/1991 de competencia desleal (as modified by Ley 29/2009) — Art. 4: general clause — Art. 5-18: specific unfair acts prohibited by Law (B2B) — Art. 19-31: commercial acts directed to the consumers (B2C) 7  4. Competition in the European Union A) E.U. Antitrust Law: Aims Protection of competitive process: main objective from the economic point of view related to the process not to the competitors; competitive harm, if not unfair or against antitrust rules, is permitted Market integration: political objective of the EC Treaty The creation of a single market was the main objective of the EC Treaty Therefore, need for state markets to open up to foreign undertakings: only way to reach a territory where all European undertakings could compete in equal terms (no protection of national undertakings) Protection of small and medium enterprises (SME): Market integration increases the risk for SME not to be able to compete with big firms SME considered the main source of employment, thus protected for political & social reasons 8  4. Competition in the European Union A) E.U. Antitrust Law: Basic Rules Collusion: art. 101 TFEU Abuse of dominant position: art. 102 TFEU Merger control: Regulation 139/2004 State aids: art. 107-109 TFEU 9  4. Competition in the European Union — A) E.U. Antitrust Law: Other rules — Council Regulation 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty (101 and 102 TFEU) — Commission Regulation 773/2004 of 7 April 2004 relating to the conduct of proceedings by the Commission pursuant to Articles 81 and 82 of the EC Treaty (101 and 102 TFEU) — Block exemption regulations: — Vertical agreements: field of distribution in general — Horizontal agreements: R&D + specialization agreements — Licensing agreements for the transfer of technology — Specific sector legislation: Motor vehicles, Agriculture, Postal services, Professional services, Transport, Telecommunications … 10  4. Competition in the European Union Vertical agreements in general: Commission Regulation (EU) 2022/720 of 10 May 2022 on the application of Article 101(3) of the Treaty on the Functioning of the European Union to categories of vertical agreements and concerted practices (Text with EEA relevance), C/2022/3015 (OJ L 134, 11.5.2022, p. 4–13) Communication from the Commission: COMMISSION NOTICE Guidelines on vertical restraints 2022/C 248/01, C/2022/4238 (OJ C 248, 30.6.2022, p. 1–85) 11  4. Competition in the European Union Horizontal agreements: Commission Regulation (EU) 2023/1066 of 1 June 2023 on the application of Article 101(3) of the Treaty on the Functioning of the European Union to certain categories of research and development agreements (Official Journal L 143/9, 2.6.2023) Commission Regulation (EU) 2023/1067 of 1 June 2023 on the application of Article 101(3) of the Treaty on the Functioning of the European Union to certain categories of specialization agreements (Official Journal L 143/20, 2.6.2023) Guidelines on the applicability of Article 101 of the Treaty on the Functioning of the European Union to horizontal cooperation agreements (Official Journal C 259/1, 21.7.2023) (…) Transitional regime from 1 July 2023 to 30 June 2025: For agreements in force on 30 June 2023 which do not satisfy the conditions for exemption established by the previous Regulations on the matter but which satisfy the conditions for exemption established by current Regulations. 12  4. Competition in the European Union Technology transfer agreements: Commission Regulation (EU) No 316/2014 of 21 March 2014 on the application of Article 101(3) of the Treaty on the Functioning of the European Union to categories of technology transfer agreements (OJ L93, 28.03.2014, p. 17-23) Communication from the Commission — Guidelines on the application of Article 101 of the Treaty on the Functioning of the European Union to technology transfer agreements (OJ C89, 28.03.2014, p.3-50) Regulation will expire on 30 April 2026: Currently under review by the Commission to decide whether to let it expire, prolong its duration, or revise it. 13  4. Competition in the European Union B) Unfair Competition in the E.U Directive 2005/29/EC concerning unfair business-to-consumer commercial practices in the internal market: harmonizes State legislation on Unfair Competition in B2C relationships Directive 2006/114/EC concerning misleading and comparative advertising: harmonizes State legislation on misleading and comparative advertising both in B2B and B2C relationships (…) also, specific rules for the agricultural and supply chain: Directive 2019/633 on unfair trading practices in business-to-business relationships in the agricultural and food supply chain [OJ L 111, 25.4.2019, p. 59–72] 14  5. Competition Law enforcement A) E.U. Antitrust Law Scope of application criterion: ”effect on trade between Member States” Commission Notice “Guidelines on the effect on trade concept contained in Articles 81 and 82 of the Treaty” (2004/C 101/07) “trade”: wide concept, covering all cross-border economic activity including establishment "may affect”: the agreement or practice may have an influence, direct or indirect, actual or potential, on the pattern of trade between EU countries "appreciability": quantitative element that depends on the circumstances of each individual case (EC: 5% aggregate market share; aggregate annual EU turnover of EUR 40 million for horizontal agreements) EU Antitrust Law can be applied both by the European Commission and by Member States 15  5. Competition Law enforcement A1) Application of EU Competition Law by the European Commission: Decisions decision finding and terminating an infringement decision ordering interim measures decision making commitments binding decision finding that Articles 101 and 102 TFEU are inapplicable Powers: conduct sector inquiries; request information; take statements; conduct inspections… Penalties: fines; periodic penalty payments Judicial Review: the European Court of Justice reviews the Commission's decisions 16  5. Competition Law enforcement A2) Application of EU Competition Law by Member States: Art. 3 Regulation 1/2003: Relationship between Articles 81 and 82 of the Treaty and national competition laws Art. 3.1: if national competition authorities or national courts apply national competition law they shall also apply EU competition law Art. 3.2: Converge rule for anticompetitive agreements but not for abuse of dominance Art. 3.3: Not for mergers or other matters Application by national competition authorities: Commission Notice on cooperation within the Network of Competition Authorities [OJ C 101 of 27.4.2004] Application by national courts: Commission Notice on the cooperation between the Commission and the courts of the EU Member States in the application of Articles 81 and 82 EC [OJ C 101 of 27.4.2004]. 17  5. Competition Law enforcement B) Spanish Antitrust Law Ley 15/2007 de Defensa de la Competencia (LDC) Applied by Comisión Nacional de los Mercados y de la Competencia (CNMC: the Spanish antitrust authority) Judicial Review by Audiencia Nacional (cont.adm.) & Tribunal Supremo (casación) Applied by the Antitrust authorities of the Comunidades Autónomas if the conduct is only at Comunidad Autonoma level Exception: Merger control, by Consejo de Ministros Private enforcement (private cases, i.e. damages resulting from the infringement of antitrust law) application by Juzgados de lo mercantil (Civil Law Courts specialised in commercial matters) only cases related to art. 1 & 2 of LDC as far as they affect civil law matters (actions for damages) 18  5. Competition Law enforcement C) Spanish Unfair Competition Law Ley 3/1991 de Competencia desleal Applied by Juzgados de lo Mercantil: Judicial review by Audiencias Provinciales (apelación) & by Tribunal Supremo (casación) 19