Antitrust Law (2): Collusion PDF

LESSON 4 ANTITRUST LAW (2): COLLUSION 1. General prohibition 2. More frequent collusive conducts 3. Sanctions for infringement 4. Exemptions 1 ...

LESSON 4 ANTITRUST LAW (2): COLLUSION 1. General prohibition 2. More frequent collusive conducts 3. Sanctions for infringement 4. Exemptions 1  Article 101 TFEU Article 101 TFEU. “1. The following shall be prohibited as incompatible with the internal market: all agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the internal market, and in particular those which: (a) directly or indirectly fix purchase or selling prices or any other trading conditions; (b) limit or control production, markets, technical development, or investment; (c) share markets or sources of supply; (d) apply dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage; (e) make the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts. 2. Any agreements or decisions prohibited pursuant to this Article shall be automatically void. 2  Article 101 TFEU 3. The provisions of paragraph 1 may, however, be declared inapplicable in the case of: - any agreement or category of agreements between undertakings, - any decision or category of decisions by associations of undertakings, - any concerted practice or category of concerted practices, which contributes to improving the production or distribution of goods or to promoting technical or economic progress, while allowing consumers a fair share of the resulting benefit, and which does not: (a) impose on the undertakings concerned restrictions which are not indispensable to the attainment of these objectives; (b) afford such undertakings the possibility of eliminating competition in respect of a substantial part of the products in question.” 3  Article 1 LDC (Spain) Article 1 LDC. Collusive conduct. “1. All agreements, collective decisions or recommendations, or concerted or consciously parallel practices are prohibited, which have as their object, produce or may produce the effect of prevention, restriction or distortion of competition in all or part of the national market and, in particular, those which consist of: a) The direct or indirect fixing of prices or any other trading or service conditions. b) The limitation or control of production, distribution, technical development or investment. c) The share-out of the market or sources of supply. d) The application, in trading or service relationships, of dissimilar conditions to equivalent transactions, thereby placing some competitors at a disadvantage compared with others. e) The subordination of the conclusion of contracts to acceptance of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of these contracts. 2. Any agreements, decisions and recommendations that, being prohibited by virtue of the provisions in Section 1, are not covered by the exemptions set out in this Act are automatically void. 4  Article 1 LDC (Spain) 3. The prohibition in Section 1 shall not apply to agreements, decisions, recommendations and practices that contribute to improving the production or the commercialisation and distribution of goods and services or to promoting technical or economic progress, without the need for any prior decision for this purpose, providing that: a) They allow consumers a fair share of its benefits. b) They do not impose on the undertakings concerned restrictions which are not indispensable to the attainment of these objectives, and c) They do not afford participating undertakings the possibility of eliminating competition in respect of a substantial part of the products or services in question. 4. The prohibition in Section 1 shall not apply to agreements, collective decisions or recommendations, or concerted or consciously parallel practices that comply with the provisions set out in the Community Regulations on the application of Article 81(3) of the EC Treaty for certain categories of agreements, decisions by associations of undertakings and concerted practices, including when the corresponding conduct may not affect trade between EU Member States. 5. The Government may also declare through Royal Decree the application of Section 3 of this article to certain categories of conduct, prior report by the Competition Council and the National Competition Commission.” 5  Articles 101 TFEU and 1 LDC Article 101 TFEU – Article 1 LDC: Almost identical wording à Same interpretation Structure of both rules: 1. General prohibition: 101.1 TFEU & 1.1 LDC 2. Sanction for infringement (voidness): 101.2 TFEU & 1.2 LDC 3. Exemption system: 101.3 TFEU & 1.3, 1.4, 1.5 LDC (either by auto-evaluation by undertakings, or by coverage by Block Exemption Regulations – BER) Main prohibition in all systems of Antitrust Law (e.g. section 1 Sherman Act, in the USA) collusion: agreements between undertakings that have a negative impact on competition in the market This is a nuanced prohibition in all systems: in the EU (Spain) à exemption system in the USA: “unreasonable restrictions of competition” à “rule of reason” (except for some limited “per se prohibitions”, “naked restraints”) 6  1. General prohibition A) The conduct: so-called “agreements” Article 101.1 TFEU: “The following shall be prohibited as incompatible with the common market: all agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the common market…” Art. 1.1 LDC: “All agreements, collective decisions or recommendations, or concerted or consciously parallel practices are prohibited, which have as their object, produce or may produce the effect of prevention, restriction or distortion of competition in all or part of the national market and…” The term “agreements” (generally used to shorten the reference) in fact covers 3 different conducts, that could negatively affect competition 7  1. General prohibition Three conducts: Agreements: more evident consensual element Decisions by associations of undertakings Concerted practices: more difficult to appreciate Common element: COLLUSION a common understanding as to how to behave in the market (same behaviour in the market) Covers both horizontal and vertical agreements: horizontal: between undertakings operating at the same level of the economic chain, that are therefore competitors (e.g., agreement between Ford and Toyota) vertical: between undertakings operating at different levels of the economic chain, that therefore are not competitors (e.g., agreement between Ford and its distributors) both can infringe art. 101.1 TFUE: Consten & Grundig vs EC Commission (1966 ECR 299) but vertical agreements are usually less problematic 8  1. General prohibition i) Agreements: more evident consensual element (“meeting of the minds”) E.g. contracts: very common in vertical relationships such as distribution contracts E.g. “gentleman agreements”: oral agreements (more common in horizontal relationships) à Cartels (next slide) ii) Decisions by associations of undertakings: very often those associations send some “instructions” to their members (the undertakings operating in this economic field) regarding the way to operate on the market some of these “instructions” may affect the competitive behaviour of these undertakings and would fall in this prohibition iii) Concerted practices: more difficult to appreciate; refers to a “coordinated course of actions” aimed to eliminate the uncertainty as to the way competitors will behave in the market, thus to eliminate the very risk of competing Commission vs ICI (1972 ECR 619) Suiker Unie vs. Commission (1975 ECR 1663) 9  1. General prohibition Cartel: specific type of restrictive agreement (horizontal and usually secret) EU Commission: “A cartel is a group of similar, independent companies which join together to fix prices, to limit production or to share markets or customers between them” OECD : “Cartel members may agree on such matters as prices, total industry output, market shares, allocation of customers, allocation of territories, bid-rigging, establishment of common sales agencies, and the division of profits or combination of these. Cartel in this broad sense is synonymous with "explicit” forms of collusion”. Fourth Additional Provision of LDC (Spain): “2. A efectos de lo dispuesto en esta ley se entiende por cártel todo acuerdo o práctica concertada entre dos o más competidores cuyo objetivo consista en coordinar su comportamiento competitivo en el mercado o influir en los parámetros de la competencia mediante prácticas tales como, entre otras, la fijación o la coordinación de precios de compra o de venta u otras condiciones comerciales, incluso en relación con los derechos de la propiedad intelectual e industrial; la asignación de cuotas de producción o de venta; el reparto de mercados y clientes, incluidas las colusiones en licitaciones, las restricciones de las importaciones o exportaciones o las medidas contra otros competidores contrarias a la competencia”. Hard-core infringement of antitrust law à heavily fined Secret nature à importance of the leniency policy 10  1. General prohibition B) The negative impact on competition: so-called “restrictions” Article 101.1: “… which have as their object or effect the prevention, restriction or distortion of competition within the common market …” Article 1.1 LDC: “… which have as their object, produce or may produce the effect of prevention, restriction or distortion of competition in all or part of the national market …” List of examples in letters a) to e) of both articles: they describe the most common restrictive practices 11  1. General prohibition “object or effect”: NOT cumulative, BOTH are independently prohibited Restrictive Object: starting point of the analysis Criteria: content and aims of the agreement, market context, parties’ behaviour in the market usually fits the conducts prohibited by BER: e.g., price fixing, production limitations, market sharing (in horizontal agreements); resale price maintenance, prohibition of passive sales (in vertical agreements) Restrictive effect: Criteria: nature of products or services, actual or potential competition “Restriction” includes 3 behaviours: Prevention (elimination of competition) Restriction (limitation of competition) Distortion (to put in place artificial competitive conditions) 12  1. General prohibition The restrictions must have an “appreciable impact on competition”: Commission Notice on agreements of minor importance which do not appreciably restrict competition under Article 101(1) of the TFUE (De Minimis notice) [2014/С 291/01]: 10% market share (all undertakings) for horizontal agreements 15% market share (each undertaking) for vertical agreements 5% for agreements having cumulative anti-competitive effects De Minimis Notice does not cover “restrictions by object” (according to ECJ ruling in case C- 226/11, Expedia, § 35, 36 and 37): Guidance on restrictions of competition "by object" for the purpose of defining which agreements may benefit from the De Minimis Notice (C(2014) 4136 final Agreements between Micro, Small and Medium Enterprises (SMEs): rarely capable of appreciably affecting trade/competition between Member States Commission Recommendation of 6 May 2003 concerning the definition of micro, small and medium-sized enterprises [2003/361/EC]: defines the 3 categories of SMEs by maximum number of employees (