European Competition Law (V)2017

Housekeeping

• None?

• Main texts and references in this lecture taken from: Whish and Bailey and Ezrachi

Objectives

1. Generally examine the elements of Article 101 TFEU;

o General understanding of the definition of theelements of Article 101 TFEU;

o Understand the jurisdiction of the European rulesand the de minimis limits.

Reading The following reading is essential:

Article 101 TFEU

Richard Whish, David Bailey, Competition Law (8th Edition), pages 84-158

Alison Jones, Brenda Sufrin, EU Competition Law: Text, Cases, and Materials (6th Edition), Chapter 3

The following cases are essential:

– C-41/90 Hofner and Elser v Macrotron GmbH (Must read)

– C-113/07 SELEX Sistemi Integrati SpA v Commission (Must read)

– T-41/96 Bayer v Commission (Casebook)

– C-48/69 ICI v Commission (Dyestuffs) (Casebook)

– C-204/00 etc Aalborg Portland A/S and others v Commission (Must read)

– T-325/01 Daimler Chrysler AG v Commission (Casebook)

– Case C‐67/13 Groupement des cartes bancaires (CB) v European Commission (Must read)

– T-328/03 O2 (Germany) GmbH & Co OHG v Commission (Casebook)

– T-374/94 etc European Night Services Ltd and others v Commission (Casebook)

– C-56/64 etc Consten and Grundig v Commission (Must read)

Lecture VARTICLE 101(1) TFEU

Introduction

Article 101 TFEU

This part of the course is concerned with Article 101(1)TFEU which prohibits agreements, decisions byassociations of undertakings and concerted practices thatare restrictive of competition.Article 101(1) may be declared inapplicable where thecriteria set out in Article 101(3) are satisfied.An agreement which is prohibited by Article 101(1) andwhich does not satisfy Article 101(3) is stated to beautomatically void by virtue of Article 101(2)2.

Article 101(1) TFEU

The following shall be prohibited as incompatible with the internal market: allagreements between undertakings, decisions by associations of undertakings andconcerted practices which may affect trade between Member States and whichhave as their object or effect the prevention, restriction or distortion of competitionwithin the internal market, and in particular those which:

(a) directly or indirectly fix purchase or selling prices or any other tradingconditions;

(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 the acceptance by other parties ofsupplementary obligations which, by their nature or according to commercialusage, have no connection with the subject of such contracts.

Article 101(2) TFEU

2. Any agreements or decisions prohibited pursuant to this Article shall be automatically void.

Article 101(3)TFEU

3. The provisions of paragraph 1 may, however, be declared inapplicable in thecase 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 toimproving the production or distribution of goods or to promoting technical oreconomic progress, while allowing consumers a fair share of the resulting benefit,and which does not:

(a) impose on the undertakings concerned restrictions which are notindispensable to the attainment of these objectives;

(b) afford such undertakings the possibility of eliminating competition in respectof a substantial part of the products in question.

Article 101(1) TFEU

Article 101(1) is made up of a number of elements:

1. the meaning of ‘undertakings’ and ‘associations ofundertakings’;

2. the terms ‘agreements’, ‘decisions’ and ‘concerted practices’;

3. ‘have as their object or effect the prevention, restriction ordistortion of competition’;

4. the de minimis doctrine;

5. the requirement of an effect on trade between MemberStates.

Lecture VUNDERTAKINGS AND ASSOCIATIONS OF UNDERTAKINGS

Undertakings

The term ‘undertaking’ identifies the addressees of theEuropean competition provisions. As such, it is central tothe analysis of Article 101 TFEU, Article 102 TFEU and theEuropean Merger Regulation, as only ‘undertakings’ maybe subjected to these regulatory instruments. (Ezrachi)

Undertaking

• A European Union notion, therefore the interpretation of the concept remains with the Union.

• To ensure the full effectiveness of the competitionprovisions the Courts adopted a functional approach,applying the term to entities engaged in economicactivities regardless of their legal status and the way inwhich they are financed.

• This functional approach focuses on the commercialnature of activities and not on the type of entity engagedin them. Consequently, it may capture individuals, tradeassociations, partnerships, clubs, companies and publicauthorities.

C-41/90 Hofner and Elser v Macrotron GmbH

A preliminary reference to the Court of Justice by the German court seekingadvice on, among other things, whether a monopoly of employment procurementgranted to a public employment agency constituted an abuse of a dominantposition within the meaning of Article 102 TFEU.

Held

In the context of competition law, the concept of an undertaking encompassesevery entity engaged in an economic activity, regardless of the legal status of theentity and the way in which it is financed. (para 21)

‘The fact that employment procurement activities are normally entrusted to publicagencies cannot affect the economic nature of such activities. Employmentprocurement has not always been, and is not necessarily, carried out by publicentities. That finding applies in particular to executive recruitment.’ (para 22)

It follows that an entity such as a public employment agency engaged in thebusiness of employment procurement may be classified as an undertaking for thepurpose of applying the Union competition rules. (paras 21–3)

C-113/07 SELEX Sistemi Integrati SpA v Commission

The General Court held that the European Commission was wrong to rely on itsdecision in a previous Court of Justice judgment in which Eurocontrol was held notto constitute an undertaking. (Case C-364/92 SAT Fluggesellschaft) It stated that,‘since the Treaty provisions on competition are applicable to the activities of anentity which can be severed from those in which it engages as a publicauthority,… the various activities of an entity must be considered individually.’(para 54, General Court judgment)

Associations of undertakings

In Wouters the Court of Justice held that the GeneralCouncil of the Dutch Bar was an association ofundertakings, and rejected the argument that this was notso in so far as it was exercising its regulatory functions. TheCourt reached a similar conclusion in OTOC. In API vMinistero delle Infrastrutture e dei Trasporti the Court heldthat a body, established by law with responsibilities, amongothers, for ensuring road safety in Italy, was an associationof undertakings in the sense of Article 101 where it wascomposed principally of representatives of private operatorsand where no state official had a right of veto over itsdecisions.

Parent and subsidiary

Firms within the same corporate group can enter intolegally enforceable agreements with one another. Howeversuch an agreement will not fall within Article 101 if therelationship between them is so close that economicallythey form a single economic entity, that is to say that they‘consist of a unitary organisation of personal, tangible andintangible elements, which pursue a specific economic aimon a long-term basis, and can contribute to the commissionof an infringement of the kind referred to in [Article 101TFEU]’. (Whish and Bailey)

Lecture VAGREEMENTS, DECISIONS AND CONCERTED PRACTICES

Agreements, Decisions and Concerted Practices

The policy of Article 101 is to prohibit collusion betweenundertakings which restricts competition. In particularArticle 101 is concerned with the eradication of cartels, thatis to say agreements between competitors.However it is important to bear in mind that Article 101 canalso apply to agreements between firms at different levelsof the market. (Whish and Bailey)

Horizontal agreements

Horizontal agreements are those concluded betweenundertakings operating at the same level of production ordistribution. These agreements may reduce competitionwhen they involve price fixing, sharing of markets or otherrestrictions on business operations. They may also reducecompetition when they involve softer forms of cooperationwhich increase the transparency in the market and reduceuncertainty concerning the competitors’ conduct. (Ezrachi)

T-Mobile Netherlands BV and others v Raad van bestuur van deNederlandse Mededingingsautoriteit

A reference for a preliminary ruling which was made in proceedings between T-Mobile Netherlands BV and the Netherlands competition authority. Theproceedings at national level concerned a decision by the Netherlands competitionauthority in which five mobile operators were fined for exchanging confidentialinformation at a single meeting with the aim of restricting competition.

Held

With regard to the exchange of information between competitors, it should berecalled that each economic operator must determine independently the policywhich he intends to adopt on the internal market.

Undertakings are strictly precluded from direct or indirect contact which caninfluence the conduct on the market of its actual or potential competitors ordisclose decisions or intentions concerning conduct on the market where theobject or effect of such contact is to create conditions of competition which do notcorrespond to the normal conditions of the market in question. (paras 32–3)

Vertical agreements

Vertical agreements are agreements entered into betweencompanies operating at different levels of the production ordistribution chain. These agreements differ in their potentialanticompetitive effect from horizontal agreements. Whereasthe latter may eliminate competition between competingundertakings, the former concerns the relationship betweenupstream operator and downstream distributor or retailer.As a result, vertical agreements often generate positiveeffects and would raise concerns predominantly when thereis some degree of market power at the upstream and/ordownstream levels.

Miller International SchallplattenGmbH v Commission

Miller International Schallplatten GmbH (Miller) producedsound recordings (records, cassettes and tapes) whichwere sold chiefly on the German market. As part of itsdistribution strategy, Miller required its distributors to refrainfrom exporting its products outside their allocated territory.These restrictions allowed Miller to charge its Germancustomers prices differing sharply from the export prices,the latter being lower than the prices charged towholesalers and department stores.

Agreement - definition

A legal contract of course qualifies as an agreement, including acompromise of litigation such as a trade mark delimitationagreement or the settlement of a patent action. ‘Gentleman’sagreements’ and simple understandings have been held to beagreements, though neither is legally binding; there is norequirement that an agreement should be supported byenforcement procedures. A ‘protocol’ which reflects a genuineconcurrence of will between the parties constitutes an agreementwithin the meaning of Article 101(1). Connected agreements maybe treated as a single one. An agreement may be oral. TheCommission will treat the contractual terms and conditions in astandard-form contract as an agreement within Article 101(1).(Whish and Bailey)

Concerted practice

‘According to the Court’s judgment in Suiker Unie … aconcerted practice refers to a form of coordination betweenundertakings which, without having been taken to the stagewhere an agreement properly so-called has beenconcluded, knowingly substitutes for the risks ofcompetition practical cooperation between them. … theCourt added that the criteria of coordination andcooperation must be understood in the light of the conceptinherent in the provisions of the Treaty relating tocompetition that each economic operator must determineindependently the policy which he intends to adopt on the[Internal] Market.’ (para 63)

T-41/96 Bayer v Commission

Bayer AG (Bayer), the parent company of one of the main European chemical andpharmaceutical groups, manufactures and markets a range of medicinal products under thetrade name ‘Adalat’. The price of Adalat is fixed by the national health authorities in mostMember States. Between 1989 and 1993, the prices for Adalat in Spain and France were, onaverage, 40 per cent lower than prices in the United Kingdom. These price differencesprovided a business opportunity to wholesalers in Spain and France that started exportingAdalat to the United Kingdom. The parallel imports lead to a sharp drop in sales of Adalat andloss of revenue by Bayer’s British subsidiary. In an attempt to stop the parallel imports theBayer group began to cease fulfilling all of the increasingly large orders placed by wholesalersin Spain and France with its Spanish and French subsidiaries. Some of the wholesalersconcerned complained to the Commission. Following its investigation, the Commission foundthat Bayer France and Bayer Spain identified wholesalers who engaged in export to theUnited Kingdom and applied successive reductions in the volumes delivered to them. The twosubsidiaries imposed an export ban as part of their continuous commercial relations with theircustomers and were therefore found to enter an agreement contrary to Article 101(1) TFEU.Bayer appealed to the General Court, claiming, among other things, that its conduct wasunilateral.

T-41/96 Bayer v Commission

‘[I]n order for there to be an agreement within the meaning of [Article101(1) TFEU] it is sufficient that the undertakings in question shouldhave expressed their joint intention to conduct themselves on the marketin a specific way (Case 41/69 ACF Chemiefarma v Commission [1970]ECR 661, paragraph 112).’ (para 67)

‘As regards the form in which that common intention is expressed, it issufficient for a stipulation to be the expression of the parties’ intention tobehave on the market in accordance with its terms (see, in particular,ACF Chemiefarma, paragraph 112, and Van Landewyck, paragraph 86),without its having to constitute a valid and binding contract under nationallaw (Sandoz, paragraph 13).’ (para 68)

Lecture VTHE OBJECT OR EFFECT

Object or effect

Article 101(1) prohibits agreements that have as their objector effect the prevention, restriction or distortion ofcompetition. It is clear that these are alternative, and notcumulative, requirements for a finding of an infringement ofArticle 101(1). (Whish and Bailey)

The boxes

Object and effect

In Société Technique Minière v Maschinenbau Ulm theCourt of Justice stated that the words ‘object or effect’ wereto be read disjunctively; this means that where anagreement has as its object the restriction of competition itis unnecessary to prove that it will produce anti-competitiveeffects: only if it is not clear that the object of an agreementis to restrict competition is it necessary to consider whetherit might have the effect of doing so. (Whish and Bailey)

By object

The essential legal criterion for ascertaining whethercoordination between undertakings restricts competition byobject is the finding ‘that such coordination reveals in itselfa sufficient degree of harm to competition’. The term‘object’ in Article 101 means the objective meaning andpurpose of the agreement considered in the economiccontext in which it is to be applied. It is not necessary toprove that the parties have the subjective intention ofrestricting competition when entering into the agreement.(Whish and Bailey)

Groupement des Cartes Bancaires v Commission

Groupement des Cartes Bancaires (CB) was a consortium managed by severalleading French banks. The group adopted several price measures which includedmembership fees and charges on the use of payment cards. The tariffs wereapplied in a way that distinguished between the major banks which managed theCB and other banks and new members. The scheme also included ‘sleepermember fees’ charged to members that did not develop significant payment cardbusiness. In October 2007 the Commission reached a decision finding that themeasures were anticompetitive by object and effect. They resulted indiscriminatory high payments by small operators, which in turn undermined theirability to issue cards at competitive rates in France. CB applied for annulment ofthe Commission’s decision and contested, among other things, the finding that thetariff measures were anticompetitive by object. The group argued that themeasure had a legitimate objective of combating free riding.

Groupement des Cartes Bancaires v Commission

The Court of Justice annulled the finding of the General Court that thefee structure restricted competition by object on the basis that it haderred in law and remitted the matter to it to consider whether there was arestriction by effect. The Court of Justice rehearsed well-established law:

• certain types of coordination between undertakings can be regarded,by their very nature, as being harmful to the proper functioning ofcompetition

• some collusive behaviour, such as horizontal price fixing by cartels, isso likely to have negative effects that it is redundant to prove that it hasactual effects on the market

• the essential criterion for ascertaining whether coordination betweenundertakings involves a restriction by object is the finding that suchcoordination ‘reveals in itself a sufficient degree of harm to competition’(Whish and Bailey)

Lecture VTHE DE MINIMIS DOCTRINE

De minimis

The de minimis doctrine was first formulated by the Court ofJustice in Völk v Vervaecke: agreements that affectcompetition within the terms of Article 101(1) willnevertheless not be caught where they do not have anappreciable impact either on inter-state trade or oncompetition.

Franz Völk v SPRL Est J Vervaecke

‘[T]he prohibition in [Article 101(1) TFEU] is applicable only if theagreement in question also has as its object or effect the prevention,restriction or distortion of competition within the [internal] market. Thoseconditions must be understood by reference to the actual circumstancesof the agreement. Consequently an agreement falls outside theprohibition in [Article 101(1) TFEU] when it has only an insignificant effecton the markets, taking into account the weak position which the personsconcerned have on the market of the product in question. Thus anexclusive dealing agreement, even with absolute territorial protection,may, having regard to the weak position of the persons concerned on themarket in the products in question in the area covered by the absoluteprotection, escape the prohibition laid down in [Article 101(1) TFEU].’(para 7)

European Night Services Ltd and others v Commission

‘[I]t must be borne in mind that, according to the case-law, anagreement may fall outside the prohibition in [Article 101(1)TFEU] if it has only an insignificant effect on the market, takinginto account the weak position which the parties concerned haveon the product or service market in question… . With regard tothe quantitative effect on the market, the Commission has arguedthat, in accordance with its notice on agreements of minorimportance, cited above, [Article 101(1) TFEU] applies to anagreement when the market share of the parties to the agreementamounts to. … However, the mere fact that that threshold may bereached and even exceeded does not make it possible toconclude with certainty that an agreement is caught by [Article101(1) TFEU].

The Commission’s Notice on Agreements of Minor Importance

The main provision in the Notice is contained in Part II, at paragraph 8. It provides as follows:

The Commission holds the view that agreements between undertakings which affect tradebetween Member States and which may have as their effect the prevention, restriction ordistortion of competition within the internal market, do not appreciably restrict competitionwithin the meaning of Article 101(1):

(a) if the aggregate market share held by the parties to the agreement does not exceed 10 %on any of the relevant markets affected by the agreement, where the agreement is madebetween undertakings which are actual or potential competitors on any of these markets(agreements between competitors); or

(b) if the market share held by each of the parties to the agreement does not exceed 15 % onany of the relevant markets affected by the agreement, where the agreement is madebetween undertakings which are not actual or potential competitors on any of thesemarkets (agreements between non-competitors).

(c) In cases where it is difficult to classify the agreement as either an agreement betweencompetitors or an agreement between non-competitors the 10 per cent threshold isapplicable.

Expedia Inc v Autorit. de la concurrence and Others

Reference for a preliminary ruling concerning the legality of an agreementbetween Expedia Inc, which specialises in the sale of travel over the internet, anda French train operator (SNCF), which operated a website dealing with traintravel. The agreement in question concerned the creation of a joint subsidiary(Agence VSC) for the marketing of train travel online. The French CompetitionAuthority found that Expedia and SNCF were competitors in the market for onlinetravel agency services and that the creation of Agence VSC infringed competitionlaw. The Competition Authority found that the market shares of the two companiesexceeded 10% and that, consequently, the de minimis notice was not applicable.Following two appeals, the case reached the French Cour de cassation whichreferred a question to the Court of Justice on the applicability of the European deminimis notice in national proceedings.

Expedia Inc v Autorit. de la concurrence and Others

‘The de minimis doctrine establishes that an agreement would falloutside the competition provisions if it has only an insignificanteffect on the market. … Accordingly, if it is to fall within the scopeof the prohibition under Article 101(1) TFEU, an agreement ofundertakings must have the object or effect of perceptiblyrestricting competition within the common market and be capableof affecting trade between Member States.’ (paras 16–17)

‘An agreement that may affect trade between Member States andthat has an anticompetitive object constitutes, by its nature andindependently of any concrete effect that it may have, anappreciable restriction on competition.’ (para 37)

Lecture VEFFECT ON TRADE BETWEEN MEMBER STATES

Scope of EU competition law

The application of Article 101 is limited to agreements,decisions or concerted practices which may affect tradebetween Member States. The scope of Article 102 issimilarly limited. The inter-Member State trade clause isvery important in EU competition law, since it defines ‘theboundary between the areas respectively covered by [EU]law and the law of the Member States’

• Commission Guidelines on the Effect on Trade ConceptContained in [Articles 101 and 102 TFEU], [2004] OJC101/81

Trade between member states

The concept of ‘trade’ is not limited to traditional exchangesof goods and services across borders: it is a wider conceptand covers all cross-border activity, including theestablishment by undertakings of agencies, branches orsubsidiaries in other Member States. The concept of tradealso covers situations where the competitive structure ofthe market is affected by agreements and/or conduct.There can be an effect on trade between Member Stateswhere parts only of those states are affected: the effectdoes not need to extend to their entire territories. (Whishand Bailey)

The notion ‘may affect’

The Court of Justice has often said that the notion that anagreement or practice ‘may affect’ trade between MemberStates means that it must be possible to foresee, with asufficient degree of probability on the basis of a set ofobjective factors of law or fact, that the agreement orpractice may have an influence, direct or indirect, actual orpotential, on the pattern of trade between Member States.

NB: Subjective intent to affect trade is not required; and it issufficient that the agreement or practice is capable ofhaving an effect: it is not necessary to prove that it actuallywill do so. (Whish and Bailey)

The concept of appreciability

Any effect on trade must be appreciable. The stronger themarket position of the undertakings concerned, the likelier itis that any effect will be appreciable. An undertaking’smarket share, and the value of its turnover in the productsconcerned, are relevant to the appreciability of any effect.An assessment of appreciability must be considered in thelegal and economic context of any agreement or practiceincluding, in the case of vertical agreements, the cumulativeeffect of parallel networks. (Whish and Bailey)

Lecture VCONCLUDING REMARKS