Article 101 TFEU Anti-Competitive Agreements PDF

Article 101 TFEU: Anti-Competitive Agreements EU Law Dr Jonathan O'Rourke ATU, Donegal Anti-Competitive Agreements Learning Objectives ◦ Students should have a better understanding of the following topic...

Article 101 TFEU: Anti-Competitive Agreements EU Law Dr Jonathan O'Rourke ATU, Donegal Anti-Competitive Agreements Learning Objectives ◦ Students should have a better understanding of the following topics: - ◦ The Background to EU Competition Law ◦ Abuse of a Dominant Position ◦ Anti-Competitive Agreements ◦ Don’t have to establish that they’re in a dominant position for article 101 Anti-Competitive Agreements Why should the EU (or any State) protect market competition? ◦ Adam Smith, "The Wealth of Nations" (1776) ◦ ‘It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages' ◦ Self-interest and the invisible hand Anti-Competitive Agreements Benefits of Competition in the Market ◦ The economic policy behind competition law is: ◦ To protect consumers by dissolving monopolies ◦ Disallow any-competitive agreements at consumer expense ◦ Protect downward price pressure ◦ Pressure the market to provide better goods and services Anti-Competitive Agreements EU Background to Competition Law ◦ The principal EU legislative provisions on competition are: ◦ Article 101 TFEU (which covers anti-competitive agreements) ◦ Article 102 TFEU (which covers abuse of a dominant position) Anti-Competitive Agreements Article 101(1) TFEU ◦ 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; Anti-Competitive Agreements Article 101(1) TFEU (continued) ◦ 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”. Anti-Competitive Agreements What is an ‘Agreement’? ◦ As noted by the Court in Case T-41/96 Bayer v. Commission, ◦ “the concept of an agreement within the meaning of Article 81(1)…centres around the existence of a concurrence of wills between at least two parties, the form in which it is manifested being unimportant, so long as it constitutes the faithful expression of the parties’ intention”. Anti-Competitive Agreements Vertical and Horizontal Agreements ◦ Competition law makes use of the distinction between vertical and horizontal relationships. ◦ In vertical cases, the agreement is between supplier and producer. E.g. Pepsi -> supervalu ◦ In horizontal cases, the agreement is between mutual producers / suppliers. E.g. coke ----> pepsi ◦ Question: What is the difference between these from the point of view of competition law? Anti-Competitive Agreements What is a ‘Concerted Practice’? ◦ Case 48/69 ICI v. Commission (Dyestuffs Case) ECR 619 ◦ Producers of dyestuffs in a number of EU countries simultaneously raised their prices, without any clear cause. ◦ There was no clear ‘agreement’ per se. ◦ The CJEU found that, as there was no causal element linking these markets, it required a ‘concerted practice’ within the meaning of Article 101 TFEU Anti-Competitive Agreements Case 48/69 ICI v. Commission ◦ As the Court defined this concept: - ◦ “a form of co-ordination between undertakings which, without having reached the stage where an agreement properly so called has been concluded, knowingly substitutes practical co-operation between them for the risks of competition.” Anti-Competitive Agreements Case C-49/92 Polypropylene ◦ A number of producers had engaged in meetings with a view to controlling prices and supply. ◦ The purpose of these meetings was to supply information to competitors. ◦ The Court held – this constituted a cartel. ◦ However, they noted that a ‘concerted practice’ implies causation. Anti-Competitive Agreements Case C-49/92 Polypropylene ◦ The Court noted: - ◦ “a concerted practice implies, besides undertakings’ concerting together, conduct on the market pursuant to those collusive practices, and a relationship of cause and effect between the two”. Anti-Competitive Agreements Article 101(1) TFEU ◦ 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: ◦ Question: What are agreements with the “object” of restricting competition? Anti-Competitive Agreements Examples of Anti-Competitive ‘Objects’ ◦ Horizontal Agreements: - ◦ e.g., Coke and Pepsi are horizontal competitors. What agreements would they be forbidden from making? ◦ Price Fixing ◦ Division of the Market ◦ Non-Compete Clauses Anti-Competitive Agreements Examples of Anti-Competitive ‘Objects’ ◦ Vertical Agreements: - ◦ e.g., Distribution agreements frequently raise questions of competition law. ◦ Minimum price fixing ◦ Excessive geographic restrictions ◦ Division of the Market Anti-Competitive Agreements Case 58/64 Consten and Grundig ◦ Grundig was a supplier of electronics to Consten, i.e., they had a distribution agreement. ◦ The agreement was exclusive in relation to France. ◦ In other words, Grundig would exclusively supply Consten in France. Consten would only sell in France. ◦ Is this anti-competitive? Anti-Competitive Agreements Case 58/64 Consten and Grundig ◦ As part of their agreement, Consten could also sue to protect Grundig’s IP against French competitors. ◦ Consten did precisely this against a German importer of Grundig’s products into France. ◦ Held by the Court: private agreements cannot divide the EU market to protect against competition. Anti-Competitive Agreements Case C-209/07 BIDS ◦ The Irish Government were of the view that the market for beef was too crowded. ◦ A proposal was put forward to compensate undertakings for leaving the market. ◦ 10 undertakings formed BIDS for this purpose. ◦ The agreement was challenged on the basis of Article 101 TFEU Anti-Competitive Agreements Case C-209/07 BIDS ◦ The CCPC argued that the arrangement had an anti- competitive object. ◦ BIDs argued that the aim was to conserve the beef industry as a whole. ◦ Is this anti-competitive? Anti-Competitive Agreements Case C-209/07 BIDS ◦ The Court held: - ◦ “That type of arrangement conflicts patently with the concept inherent in the EC Treaty provisions relating to competition, according to which each economic operator must determine independently the policy which it intends to adopt on the common market. Article [101 TFEU] is intended to prohibit any form of coordination which deliberately substitutes practical cooperation between undertakings for the risks of competition.” Anti-Competitive Agreements Case C-209/07 BIDS ◦ The Court held: - ◦ “In the light of the foregoing considerations, the reply to the question referred must be that an agreement with features such as those of the standard form of contract concluded between the 10 principal beef and veal processors in Ireland, who are members of BIDS, and requiring, among other things, a reduction of the order of 25% in processing capacity, has as its object the prevention, restriction or distortion of competition within the meaning of Article [101 TFEU].” Anti-Competitive Agreements Examples of Anti-Competitive ‘Effects’ ◦ Case T-374/94 European Night Services ◦ An agreement was formed between railway operators in Britain, Germany, the Netherlands, and France. ◦ The agreement had exclusivity clauses to form a railway service across Europe. ◦ Question: is this an agreement with the object or effect of distorting competition? Anti-Competitive Agreements Case T-374/94 European Night Services ◦ In defence, the companies argued: - ◦ National railway services are not in competition with one another. ◦ The existence of a cross-European rail service was not a reasonable possibility for other entities. ◦ Held: if no actual competition is being displaced, there is no ‘effect’ on competition under Article 101 TFEU. Anti-Competitive Agreements Exemptions from Article 101 TFEU ◦ Article 101(3) TFEU ◦ 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, Anti-Competitive Agreements Exemptions from Article 101 (continued) ◦ 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: ◦ impose on the undertakings concerned restrictions which are not indispensable to the attainment of these objectives ◦ afford such undertakings the possibility of eliminating competition in respect of a substantial part of the products in question. Anti-Competitive Agreements Summary of Exemption Criteria ◦ To be exempt under Art 101(3) TFEU, it must: ◦ a. Improve the production or distribution of the product, or promote technical or economic progress and ◦ b. Confer a fair share of the benefit to consumers ◦ c. Does not impose unnecessary restrictions ◦ d. Does not allow the undertaking to remove competition Anti-Competitive Agreements Block Exemptions – not important for exam ◦ Recall that 101(3) provides for ‘categories’ of agreements. ◦ This allows for block exemptions to certain types of agreements. ◦ Research and Development (2659/2000) ◦ Technology Transfer (772/2004) ◦ Franchising (4087/98) Anti-Competitive Agreements VBER 2022 ◦ Regulation (EU) 2022/720 provides a block exemption in respect of ‘vertical agreements.’ ◦ However, it specifies certain limits of this protection ◦ Creates two categories of restriction: - ◦ Hardcore restrictions (Art 4) ◦ Excluded restrictions (Art 5) Anti-Competitive Agreements VBER 2022 ◦ Art 3 (the Safe Harbour Provision) ◦ “The exemption provided for in Article 2 shall apply on condition that the market share held by the supplier does not exceed 30% of the relevant market on which it sells the contract goods or services and the market share held by the buyer does not exceed 30% of the relevant market on which it purchases the contract goods or services” Anti-Competitive Agreements VBER 2022 ◦ Art 4 (hardcore restrictions) ◦ If an agreement has a hardcore restriction, the entire agreement must be analysed ◦ Examples include: - ◦ Price fixing ◦ Exclusive distribution agreements Anti-Competitive Agreements VBER 2022 ◦ Art 5 (excluded restrictions) ◦ Non-compete obligations over 5 years ◦ Obligations not to sell particulars brands ◦ If an agreement has an excluded restriction – the provision does not benefit from VBER ◦ It needs to be individually considered