Introduction to Antitrust Law PDF

LESSON 3 INTRODUCTION TO ANTITRUST LAW 1. Prohibited conducts v controlled conducts 2. Concept of “undertaking” 3. Relevant market 4. EU Merger control 5. Spanish Merger control...

LESSON 3 INTRODUCTION TO ANTITRUST LAW 1. Prohibited conducts v controlled conducts 2. Concept of “undertaking” 3. Relevant market 4. EU Merger control 5. Spanish Merger control 6. EU State Aids 7. Spanish State Aids 1  1. Prohibited conducts vs. controlled conducts Prohibited conducts: Collusion: art. 101 TFEU; art. 1 LDC Abuse of dominant position: art. 102 TFEU; art. 2 LDC Controlled conducts: Mergers: Regulation 139/2004; art. 7-10 LDC State aids: art. 107-109 TFEU; art. 11 LDC 2  2. Concept of undertaking Specific concept of Antitrust Law, defined by ECJ: Case C-41/90 Klaus Höfner and Fritz Elser v Macrotron GmbH, § 21: “It must be observed, in the context of competition law (…) that the concept of an 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…”. Also defined in Spanish LDC (in line with ECJ’s definition): Disposición adicional cuarta LDC: “1. A efectos de lo previsto en esta Ley, se entiende por empresa cualquier persona o entidad que ejerza una actividad económica, con independencia del estatuto jurídico de dicha entidad y de su modo de financiación” It’s an autonomous concept of EU law that has the same scope in All areas of competition law (collusion, dominant positions, mergers, state aids). In public enforcement (imposition of fines by administrative bodies) and private enforcement (actions for damages in court): case C-882/19 Sumal, S.L. v Mercedes Benz Trucks España, S.L. (Judgment of the Court of 6 October 2021). 3  2. Concept of undertaking CONCEPT: It’s an economic concept, linked to the performance of economic activities in the market: Case C-41/90 Klaus Höfner and Fritz Elser v Macrotron GmbH, § 21: “It must be observed, in the context of competition law (…) that the concept of an 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…”. It can include several persons (from the legal point of view): Case C-90/09P General Química SA and Others v European Commission, §35: “…the term ‘undertaking’ must be understood as designating an economic unit even if in law that economic unit consists of several persons, natural or legal…” Includes a variety of economic agents: Companies (including State-owned companies) Groups of companies Associations (associations of undertakings, cultural associations, sports associations...) 4  3. Relevant market Definition of the “Relevant market” for the specific case: Commission Notice on the definition of the relevant market for the purposes of Union competition law (C/2024/1645) Used also in national cases It is a tool that the Commission uses to identify and define the boundaries of competition between undertakings. Purpose: it enables identifying competitors (thus competitive constraints faced by the undertaking), and assessing the undertaking’s market power and the impact of the conduct on competition in that market, in all areas of competition law: In art. 101 TFUE cases: to assess if there is an appreciable restriction of competition and an eventual exemption In art. 102 TFUE cases: to assess whether a “dominant position” exists In merger cases: to assess the effect on competition of the concentration 5  3. Relevant market General principles of the market definition: § 12-21 of the Notice 1. The relevant market comprises a product (or service) and a geographical dimension (a) The relevant product market comprises all those products that customers regard as interchangeable or substitutable to the product(s) of the undertaking(s) involved, based on the products’ characteristics, their prices and their intended use, taking into consideration the conditions of competition and the structure of supply and demand on the market. (b) The relevant geographic market comprises the geographic area in which the undertakings involved supply or demand relevant products, in which the conditions of competition are sufficiently homogeneous for the effects of the conduct or concentration under investigation to be able to be assessed, and which can be distinguished from other geographic areas, in particular because conditions of competition are appreciably different in those areas. In some cases, temporal considerations may also be relevant: e.g. where factors such as seasonality or peak/off-peak time considerations substantially affect customer preferences or the structure of supply Examples of relevant markets that can be defined in a competition law case: truck manufacture in the EU; electricity distribution service in Spain… 6  3. Relevant market Relevant product (or service) market: Core concept: interchangeability / substitutability Criteria for determination: 3 basic criteria: characteristics, prices and intended use complementary criteria: structure of demand-side, consumer preferences, supply-side substitutability... Relevant geographical market: Criteria: available suppliers, customer preferences, price differences, transport costs, barriers to entry… Methodology: SSNIP-test (not obligatory) “Small-Significant-Non transitory-Increase-Price” Cross-elasticity of demand-side 7  3. Relevant market General principles of the market definition (cont.): 2. It is based on the facts of the case: relevant markets differ from sector to sector, at different levels of the supply chain and sometimes across geographic areas. 3. It considers various parameters of competition that customers consider relevant in the area and period assessed: e.g. price, innovation, quality in various aspects (such as sustainability, resource efficiency, durability, value and variety of uses, possibility to integrate with other products, image conveyed, security and privacy protection, availability...) 4. It is only one step in the Commission’s assessment and does not prejudge the outcome of the Commission’s assessment under Union competition law. 5. It allows for a distinction between competitive constraints from within and from outside the market: out-of-market constraints are more remote constraints 6. Markets defined are often the same across cases and assessments when the same economic activity in terms of products and geography is concerned, but the outcome of the definition can vary depending on the undertakings involved, the time period considered and the competitive concerns considered 8  3. Relevant market General principles of the market definition (cont.): 7. The concept of ‘relevant market’ in Union competition law is different from the use of the term ‘market’ in other contexts, in particular in business contexts. 8. The Commission is not obliged to reach a definitive conclusion on the precise scope of the market where the outcome would not change under various plausible market definitions. The Commission may leave the market definition open: in that, the Commission usually carries out the competitive assessment for all plausible alternative market definitions 9. The Commission may consider expected transitions in the structure of a market when the case calls for a forward-looking assessment (e.g. probability that new products will emerge) 9  4. EU Merger control A) Rules Council Regulation 139/2004; Commission Regulation 802/2004; Guidelines on the assessment of horizontal mergers (2004/C 31/03) B) Definition of concentration: art. 3.1 Reg. 139/2004: (a) merger (b) acquisition of control (including joint ventures, according to art. 3.4) Operations which are not a concentration: art. 3.5 Reg. 139/2004 (e.g. temporary holding of securities; proceedings of liquidation, insolvency…) C) Community dimension: art. 1.2 Regulation 139/2004 “A concentration has a Community dimension where: (a) the combined aggregate worldwide turnover of all the undertakings concerned is more than EUR 5000 million; and (b) the aggregate Community-wide turnover of each of at least two of the undertakings concerned is more than EUR 250 million, unless each of the undertakings concerned achieves more than two- thirds of its aggregate Community-wide turnover within one and the same Member State” 10  4. EU Merger control D) Procedure Prior notification: art. 4.1 Reg. 139/2004 Phase 1 (initial screening): art. 6.1. a) and b) à examination and Decision If the concentration does not fall within the scope of Reg. 139/2004, or If it falls within the scope of Regulation but does not raise serious doubts as to its compatibility with the common market à clearance (can be subject to conditions) If the concentration notified falls within the scope of Regulation and raises serious doubts as to its compatibility with the common market à Phase 2 (full proceedings): Commission will initiate proceedings ex. art. 6.1.c) Phase 2 closed by means of a Decision which may declare the concentration compatible / compatible under conditions / incompatible with the common market art. 2.2 and 2.3: decision based on whether the concentration would or would not significantly impede effective competition 11  4. EU Merger control Decision closing Phase 2: art. 2.2 and 2.3 If a concentration would not significantly impede effective competition in the common market or in a substantial part of it, in particular as a result of the creation or strengthening of a dominant position: it will be declared compatible with the common market. Sometimes a concentration is declared compatible under certain conditions and obligations If a concentration would significantly impede effective competition, in the common market or in a substantial part of it, in particular as a result of the creation or strengthening of a dominant position: it will be declared incompatible with the common market. Criteria (art. 2.1): the need to maintain and develop effective competition within the common market (structure of all the markets concerned, actual or potential competition) the market position of the undertakings concerned and their economic and financial power, the alternatives available to suppliers and users, their access to supplies or markets, any legal or other barriers to entry, supply and demand trends for the relevant goods and services, the interests of the intermediate and ultimate consumers, the development of technical and economic progress (provided that it is to consumers' advantage and does not form an obstacle to competition) 12  4. EU Merger control E) Commission’s powers (art. 8) Where the Commission finds that a concentration: (a) declared incompatible, has already been implemented or (b) has been implemented in contravention of a condition attached to a decision the Commission may: require the undertakings concerned to dissolve the concentration, order any other appropriate measure to ensure that the undertakings concerned dissolve the concentration or take other restorative measures as required in its decision 13  5. Spanish Merger control Art. 7-11 LDC Definition: art. 7.1 (= art. 3 of the Merger Regulation) a) La fusión de dos o más empresas anteriormente independientes (merger) b) La adquisición por una empresa del control sobre la totalidad o parte de una o varias empresas (acquisition of control) c) La creación de una empresa en participación y, en general, la adquisición del control conjunto sobre una o varias empresas (joint ventures) Operations which are not a concentration: art. 7.3 (= art. 3.5 of the Merger regulation, except in case a) of LDC which is not included in art. 3.5: it refers to redistribution of shares among companies belonging to the same group) National dimension: art. 8 Reaching 30% market share aggregate turnover in Spain of all undertakings more than 240 million Euros and at least one undertaking’s turnover in Spain more than 60 million Euros 14  5. Spanish Merger control Procedure: art. 9 LDC: Prior notification to CNMC Two phases at CNMC: Phase 1: Decision not to analyse (out of scope), to authorise, or to further examine Phase 2: Decision to authorise (with or without conditions/obligations), not to authorise If the concentration is not authorised or subject to conditions à Final decision by Consejo de Ministros 15  5. Spanish Merger control Appraisal of concentrations: Criteria in art. 10 LDC Art. 10.1 LDC: criteria from the economic point of view [letters a) to h)] a) the structure of all the relevant markets, b) the market position of the undertakings affected, their economic and financial power c) the real or potential competition of undertakings located either within or out of the national territory, d) the alternatives available to suppliers and consumers, their access to supplies or markets, e) any barriers to entry in these markets, f) supply and demand trends for the relevant products and services, g) the negotiating power of the demand or of the supply and their capacity to offset the position in the market of the undertakings affected, h) the economic efficiencies derived from the concentration operation and, in particular, the contribution that the concentration may make to improving the production or commercialisation systems and to business competitiveness, and the extent to which these efficiencies are transferred to the intermediate and ultimate consumers, specifically, in the form of a bigger or better supply and of lower prices 16  5. Spanish Merger control Additionally, art. 10.4 LDC establishes that the Council of Ministers may assess concentrations in light of criteria of general interest other than protecting competition. In particular: a) defence and national security, b) protection of public security or public health, c) free movement of goods and services within the national territory, d) environment protection, e) promotion of technological research and development, f) guarantee of adequate maintenance of the objectives of sectorial regulation 17  6. EU State Aids Art. 107-109 TFEU A) Concept Art. 107: “… any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States …” Commission Notice on the notion of State aid as referred to in Article 107(1) of the Treaty on the Functioning of the European Union, C/2016/2946 (OJ C 262, 19.7.2016, p. 1–50) Six elements: granted to an “undertaking” having a State origin granting of an advantage selectivity of the measure effect on competition affects trade between Member States 18  6. EU State Aids Existence of an “undertaking”: general Competition Law concept State origin: granted by the State: by public authorities, or private or public body designated by public authority (generally inferred if granted by public undertakings, although not automatically) financed through State resources: wide concept (direct grants, loans, guarantees, direct investment in the capital of companies and benefits in kind) Granting of an advantage: economic benefit that could not have been obtained under normal market conditions (i.e. in the absence of State intervention) Selectivity of the measure: only measures which grant an advantage in a selective way to certain undertakings or categories of undertakings or to certain economic sectors (≠ general measures) Effect on competition: when the measure is liable to improve the competitive position of the recipient compared to other undertakings with which it competes Affects trade between Member States: when the measure strengthens the position of an undertaking as compared with other undertakings competing in intra-[Union] trade (even if the recipient is not directly involved in cross-border trade: e.g. subsidy that makes entrance of foreign competitors more difficult) 19  6. EU State Aids B) Legal control: Art. 107.1: General rule Art. 107.2: Legal exemption Art. 107.3: Criteria for individual exemption Art. 108: Procedure for individual exemptions Art. 108.4 and art. 109: Block exemptions Regulations (BER) 20  6. EU State Aids B1) General rule Art. 107.1 TFEU : “Save as otherwise provided in this Treaty, any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the common market”. B2) Legal exemption Art. 107.2 TFEU: ”The following shall be compatible with the common market: (a) aid having a social character, granted to individual consumers, provided that such aid is granted without discrimination related to the origin of the products concerned; (b) aid to make good the damage caused by natural disasters or exceptional occurrences; (c) aid granted to the economy of certain areas of the Federal Republic of Germany affected by the division of Germany, in so far as such aid is required in order to compensate for the economic disadvantages caused by that division.” 21  6. EU State Aids B3) Criteria for individual exemptions Art. 107.3 TFEU: “The following may be considered to be compatible with the common market: (a) aid to promote the economic development of areas where the standard of living is abnormally low or where there is serious underemployment; (b) aid to promote the execution of an important project of common European interest or to remedy a serious disturbance in the economy of a Member State; (c) aid to facilitate the development of certain economic activities or of certain economic areas, where such aid does not adversely affect trading conditions to an extent contrary to the common interest; (d) aid to promote culture and heritage conservation where such aid does not affect trading conditions and competition in the Community to an extent that is contrary to the common interest; (e) such other categories of aid as may be specified by decision of the Council acting by a qualified majority on a proposal from the Commission” Exemption will be granted by the Commission 22  6. EU State Aids C) Procedure for exemption Individual exemptions by Commission: art. 108 EC Treaty Notification to Commission: art. 108.3 Procedure of examination: art. 108.2 Aid measures can only be implemented after approval by the Commission, and the Commission has the power to recover incompatible State aid. D) Block exemption Regulations (BER) Art. 109 EC Treaty (Council) and art. 108.4 (Commission) General BER: Commission Regulation 651/2014 (OJ L 187, 26.06.2014), as amended in 2023 by Commission Regulation 2023/1315 (OJ L 167, 30.6.2023) De minimis aids BER: Commission Regulation 2023/2831 (OJ, L 15.12.2023) 23  6. EU State Aids General block exemption Regulation: Commission Regulation 651/2014 (OJ L 187, 26.06.2014): exempts certain (different) amounts, for different categories of aids such as Regional aid, Aid to SMEs, Aid for access to finance for SMEs, Aid for environmental protection, Aid for research and development and innovation, Training aid, Aid for disadvantaged workers and for workers with disabilities, Aid to make good the damage caused by certain natural disasters, Social aid for transport for residents of remote regions, Aid for broadband infrastructures, Aid for culture and heritage conservation, Aid for sport and multifunctional recreational infrastructures, Aid for local infrastructures, Aid aid for regional airports, Aid for ports, Aid for European Territorial Cooperation projects; and Aid involved in financial products supported by the InvestEU Fund. De minimis aid: Commission Regulation 1407/2013 (OJ L 352, 24.12.2013) exempts aid amounts of up to €300 000 per undertaking over a three-year period 24  7. Spanish State Aids The CNMC has very limited powers related to state aids: Art. 11. 1 LDC: “The National Competition Commission, ex officio or at the instance of the Public Administrations, may analyse the criteria for awarding public aid in relation to its possible effects on the maintenance of effective competition in the markets with the aim of: a) Issuing reports regarding the systems of aid and individual aid. b) Addressing to the Public Administrations proposals leading to the maintenance of competition” Art. 11.2 LDC: The CNMC shall issue an annual report on public aid awarded in Spain, which shall be public in nature. Art. 11.5 LDC: “The competition bodies of the Autonomous Communities may, likewise, draft reports on public aid awarded by the autonomous or local Administrations in their respective geographical areas, to the purposes laid down in Section 1 of this article. These reports shall be forwarded to the National Competition Commission for the purposes of their incorporation in the annual report. (…)” Art. 11.3 LDC: Public bodies granting an aid and having to inform the EU Commission about it, are obliged to inform also the CNMC 25