Law of the European Union Lecture 9: Anti-Competitive Coordination PDF

faculty of law department of european and economic law 30-09-2024 | 1 Law of the European Union Lecture 9: Anti-competitive coordination Justin Lindeboom Department of European and Economic La...

faculty of law department of european and economic law 30-09-2024 | 1 Law of the European Union Lecture 9: Anti-competitive coordination Justin Lindeboom Department of European and Economic Law  faculty of law department of european and economic law 30-09-2024 | 2 Overview of today 1. Why do we have competition law? 2. The goals of (EU) competition law 3. Key concepts 4. The structure of Article 101 TFEU 5. Horizontal agreements 6. Vertical agreements  Exclusive distribution faculty of law department of european and economic law 30-09-2024 | 3 Why competition law?  faculty of law department of european and economic law 30-09-2024 | 4 Why competition law? › “Competition” ≈ “rivalry” › Initial purpose: protection of economic freedom  Rise of trusts in the US in the late 19th century  Cartelisation of the German economy in 1930s (e.g. IG Farben) › Sherman Act 1890 › Similar competition rules included in EEC Treaty 1957  Article 101 TFEU: prohibition of anti-competitive collusion  Article 102 TFEU: prohibition of abuse of dominance  faculty of law department of european and economic law 30-09-2024 | 5 Possible goals of competition law › Structure of the market  The number of undertakings competing › Performance of the market  Efficiency  Consumer welfare › In the EU also market integration (Consten and Grundig)  faculty of law department of european and economic law 30-09-2024 | 6 Goals of competition law › Since late 1970s, US antitrust law strongly focuses on consumer welfare › Multiple goals in EU competition law  E.g.: “[Article 101 TFEU] aims to protect not only the interests of competitors or of consumers, but also the structure of the market and, in so doing, competition as such” (GlaxoSmithKline, para. 63) › Multiple goals frequently conflict in their application, e.g.  Market structure v. market performance  Market integration v. market performance  Market performance (efficiency) v. market performance (consumer welfare)  faculty of law department of european and economic law 30-09-2024 | 7 Overview of EU competition law › Article 101 TFEU: prohibition of anti-competitive coordination  Two or more undertakings involved  Not applicable to arrangements within one undertaking (“single economic unity” doctrine) › Article 102 TFEU: prohibition of abuse of a dominant position  Unilateral conduct by a dominant undertaking - Possibility for abuse of ”collective dominance” by two or more undertakings › Also:  Merger control (Regulation 139/2004) (not in this course)  Article 106 TFEU: competition law and state regulation (brief introduction tomorrow)  Article 107 TFEU: state aid rules (not in this course)  faculty of law department of european and economic law 30-09-2024 | 8 Key concepts I: the relevant market › Competition takes place on a “relevant market”, always consisting of: › Product market  Which goods or services are substitutable from the perspective of (i) consumers and (ii) producers? - Looking at: - Price differences (e.g. SSNIP test) - Qualitative differences › Geographical market  In which area are goods and services substitutable from the perspective of (i) consumers and (ii) producers? - Looking at e.g. transportation costs › Consumer perspective usually most important  faculty of law department of european and economic law 30-09-2024 | 9 Key concepts II: inter-/intra-brand › Two main types of competition: › Inter-brand competition: competition between different brands › Intra-brand competition: competition between sellers of the same brand  faculty of law department of european and economic law 30-09-2024 | 10 Key concepts III: horizontal and vertical agreements › Horizontal agreements: agreements between undertakings on the same relevant market › Vertical agreements: agreements between undertakings active on different levels of the supply chain, e.g.:  Manufacturer and distributor  Distributor and retailer › For vertical agreements, the market closest to the “end consumer” is called the downstream market and the market further away from the consumer the upstream market  faculty of law department of european and economic law 30-09-2024 | 11 Structure of Article 101 TFEU 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 Article 101(2) TFEU: nullity Article 101(3) TFEU: justifications  faculty of law department of european and economic law 30-09-2024 | 12 Structure of Article 101 TFEU 1. Applicability - Are the parties involved undertakings? - Is there coordination in the form of an agreement or a concerted practice? - Does the coordination affect trade between Member States? 2. Material scope - Does the coordination have as its object or effect the prevention, restriction or distortion of competition within the internal market? 3. Justification - Can the restriction of competition be justified by Article 101(3) TFEU?  faculty of law department of european and economic law 30-09-2024 | 13 Applicability: ”Undertaking” › Höfner and Elser: “Every entity engaged in an economic activity, regardless of its legal status and the way in which it is financed”  “Economic activity”: typically defined as offering goods or services on a market › Eurocontrol: Exercise of public authority not of an economic nature, e.g. airspace control › Also not economic: non-profit-making activities purely for public interest, e.g. social security systems, preventive anti-pollution surveillance, policing and public security, etc.  faculty of law department of european and economic law 30-09-2024 | 14 Applicability: “Agreement” or “concerted practice” › “Agreement”  Any concurrence of wills (Bayer) › Concerted practice  Coordination without agreement  Three elements (Anic): 1. Undertakings “concerting together” (exchanging sensitive information) 2. Subsequent parallel conduct on the market 3. Causal link between (1) and (2)  Imperial Chemical Industries: Parallel conduct on the market cannot be explained other than by concerting  Anic: Undertakings concerting together  presumption of subsequent parallel conduct and causal link  faculty of law department of european and economic law 30-09-2024 | 15 Applicability: “Effect on trade” › Is the coordination “capable of constituting a threat, either direct or indirect, actual or potential, to freedom of trade between Member States in a manner which might harm the attainment of the objectives of a single market between States”? (Consten and Grundig)  Delineation between EU and national law  Not necessarily a decrease in trade  faculty of law department of european and economic law 30-09-2024 | 16 Material scope: “restriction of competition” › “By object” or “by effect”  alternative conditions (Consten & Grundig)  Once an anti-competitive object has been established, no longer needed to ascertain actual anti-competitive effects › Why this distinction?  Cartes bancaires, paras. 50–51: certain types of coordination “by their very nature […] harmful to the proper functioning of normal competition”  faculty of law department of european and economic law 30-09-2024 | 17 Restriction of competition by object › Cartes bancaires: “Sufficient degree of harm to competition”, looking at:  Content of the agreement/concerted practice  Its objectives  Its economic and legal context - Seems close to an “effects analysis”, but more limited › Examples of by object restrictions  Horizontal price fixing (Article 101(1)(a))  Output limitations (Article 101(1)(b))  Market sharing (Article 101(1)(c)) › Non-exhaustive list  assessment in every individual case  faculty of law department of european and economic law 30-09-2024 | 18 Restriction of competition by effect › Step 1: analysis of the “relevant market” where competition takes place:  Product market: Which products compete?  Geographical market: In which area do products compete? › Step 2: analysis of detrimental effects on competition:  Usually specific tests for specific types of conduct, e.g.: - Ancillary restraints doctrine for (e.g.) non-compete clauses (Remia) - Three specific criteria for selective distribution systems (see Schütze, p. 744) › Step 3: are the anti-competitive effects “appreciable”?  De Minimis Notice  faculty of law department of european and economic law 30-09-2024 | 19 De Minimis doctrine › Only appreciable restrictions fall within the scope of Article 101 TFEU (introduced in Case 5/69 Völk / Vervaecke) › Restrictions of competition by object are by definition appreciable (Case C-226/10 Expedia) › Commission’s De Minimis Notice (not binding on the CJEU)  Horizontal agreements: