LUMSA – International Commercial Law
30 October 2015
Prof. Avv. Roberto Pirozzi
Email: robertopirozzi13@hotmail.com
LUMSA – International Commercial Law
COMPETITION LAW– GENERAL PRINCIPLES (Art. 101)
A coincidental increase in prices will not in itself prove a
concerted practice, there must also be evidence that the
parties involved were aware that their behavior may prejudice
the normal operation of the competition within the common
market.
This latter subjective requirement of knowledge is not, in
principle, necessary in respect of agreements.
LUMSA – International Commercial Law
COMPETITION LAW– GENERAL PRINCIPLES (Art. 101)
As far as agreements are concerned the mere anticompetitive
effect is sufficient to make it illegal even if the parties were
unaware of it or did not intend such effect to take place.
Exemptions to Article 101 behavior fall into three categories.
LUMSA – International Commercial Law
COMPETITION LAW– GENERAL PRINCIPLES (Art. 101)
Firstly, Article 101(3) creates an exemption for practices
beneficial to consumers, e.g., by facilitating technological
advances, but without restricting all competition in the area.
In practice the Commission gave very few official exemptions
and a new system for dealing with them is currently under
review.
LUMSA – International Commercial Law
COMPETITION LAW– GENERAL PRINCIPLES (Art. 101)
Secondly, the Commission agreed to exempt 'Agreements of
minor importance' (except those fixing sale prices) from
Article 101.
This exemption applies to small companies, together holding
no more than 10% of the relevant market. In this situation as
with Article 102 (see below), market definition is a crucial, but
often highly difficult, matter to resolve.
LUMSA – International Commercial Law
COMPETITION LAW– GENERAL PRINCIPLES (Art. 101)
Thirdly, the Commission has also introduced a collection of
block exemptions for different contract types.
These include a list of contract permitted terms and a list of
banned terms in these exemptions.
LUMSA – International Commercial Law
COMPETITION LAW – GENERAL PRINCIPLES (Art. 102)
Article 102
Any abuse by one or more undertakings of a dominant position
within the internal market or in a substantial part of it shall be
prohibited as incompatible with the market in so far as it may
affect trade between Member States. Such abuse may, in
particular, consist in:
(a) directly or indirectly imposing unfair purchase or selling
prices or other unfair trading conditions;
(b) limiting production, markets or technical development to the
prejudice of consumers;
LUMSA – International Commercial Law
COMPETITION LAW – GENERAL PRINCIPLES (Art. 102)
Article 102
(c) applying dissimilar conditions to equivalent transactions with
other trading parties, thereby placing them at a competitive
disadvantage;
(d) making 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.
LUMSA – International Commercial Law
COMPETITION LAW – GENERAL PRINCIPLES (Art. 102)
Article 102 of the TFEU is aimed at preventing undertakings who
hold a dominant position in a market from abusing that position.
Its core role is the regulation of monopolies, which restrict
competition in private industry and produce worse outcomes for
consumers and society.
LUMSA – International Commercial Law
COMPETITION LAW – GENERAL PRINCIPLES (Art. 102)
Dominance
First it is necessary to determine whether a firm is dominant, or
whether it behaves to an appreciable extent independently of its
competitors, customers and ultimately of its consumer.
Under EU law, very large market shares raise a presumption that
a firm is dominant, which may be rebuttable.
Where a firm has a dominant position, it has a special
responsibility not to allow its conduct to impair competition on
the common market.
LUMSA – International Commercial Law
COMPETITION LAW – GENERAL PRINCIPLES (Art. 102)
Market definition
Market shares are determined with reference to the "relevant
market" in which the firm and product in question is offered.
Market definition refers to the delineation of this relevant
market. It is an essential part of a competition case under Art.
102. If the market is defined too widely then it will contain more
firms and supposedly substitutable products, preventing a
finding of a dominant position. If the market is defined too
narrowly then there might be an incorrect presumption that the
company is dominant. There are various ways to define whether
a company is dominant.
LUMSA – International Commercial Law
COMPETITION LAW – GENERAL PRINCIPLES (Art. 102)
The product market
What other products or services might consumers switch to?
There is the 'hypothetical monopolist' test which is whether a
small but significant increase in price is likely be allowed by the
hypothetical monopolist company to profit from this. If
consumers can and would move away from the hypothetical
monopolist's product and onto other products then their market
is more widely defined.
There is also the 'intuitive approach', which focuses on brand
loyalty and the use of the products.
The Commission's Notice on the Definition of the Relevant Market
is a mixture of the two above approaches, with the hypothetical
monopolist having more importance.
LUMSA – International Commercial Law
COMPETITION LAW – GENERAL PRINCIPLES (Art. 102)
Defining the relevant market is essential for assessing dominance,
because a dominant position can only exist on a particular
market.
Product market: the relevant product market is made of all
products/services which the consumer considers to be a
substitute for each other due to their characteristics, their prices
and their intended use.
Geographic market: the relevant geographic market is an area in
which the conditions of competition for a given product are
homogenous.
LUMSA – International Commercial Law
COMPETITION LAW – GENERAL PRINCIPLES (Art. 102)
Market shares are a useful first indication of the importance of
each firm on the market in comparison to the others. The
Commission's view is that the higher the market share, and the
longer the period of time over which it is held, the more likely it is
to be a preliminary indication of dominance. If a company has a
market share of less than 40%, it is unlikely to be dominant.
LUMSA – International Commercial Law
COMPETITION LAW – GENERAL PRINCIPLES (Art. 102)
The Commission also takes other factors into account in its
assessment of dominance, including the ease with which other
companies can enter the market – whether there are any barriers
to this; the existence of countervailing buyer power; the overall
size and strength of the company and its resources and the extent
to which it is present at several levels of the supply chain (vertical
integration).
LUMSA – International Commercial Law
COMPETITION LAW – PROCEEDINGS RE Art. 101
Article 101 cases can originate in: 1) a complaint, 2) opening of an
own–initiative investigation, or 3) a leniency application from one
of the participants to a cartel. Under the Commission's Leniency
programme, the first firm to submit evidence that is sufficient for
the Commission to either launch an inspection or enable it to find
an infringement receives full exemption from its fine (total
immunity).
Firms that approach the Commission later and that contribute a
real added value to the investigation are eligible for a fine
reduction, subject to the same on-going cooperation as for
immunity applicants.
LUMSA – International Commercial Law
COMPETITION LAW – PROCEEDINGS RE Art. 101
The Commission is empowered, for example, 1) to send
information requests to companies;
In the context of an inspection:
– enter the premises of companies;
– examine the records related to the business;
– take copies of those records;
– seal the business premises and records during an
inspection;
– ask members of staff or company representatives
questions relating to the subject-matter and purpose of
the inspection and record the answers.
LUMSA – International Commercial Law
COMPETITION LAW – PROCEEDINGS RE Art. 101
At the end of the initial investigative phase, the Commission can
take the decision to pursue the case as a matter of priority and to
conduct an in-depth investigation, or to close it. In cartel cases, if
the case is to be pursued, the Commission decides whether or not
the case is suitable for the settlement procedure (see
"Settlement" below).
LUMSA – International Commercial Law
COMPETITION LAW – PROCEEDINGS RE Art. 101
Statement of objections and prohibition decision
If the in-depth investigation confirms the Commission's
competition concerns, a statement of objections (SO) detailing
the Commission's concerns is sent to the companies concerned.
Rights of defence: They are entitled to have access to the file –
this means they can see all non-confidential documents from the
Commission's investigation. The parties may then reply to the SO
in writing within a certain delay. They may also request an oral
hearing, which is conducted by an independent Hearing Officer.
After examining the parties' arguments, the Commission reviews
and sometimes abandons (part of) its initial objections and may
decide to close the case.
LUMSA – International Commercial Law
COMPETITION LAW – PROCEEDINGS RE Art. 101
If the Commission's concerns are not – or only partly dispelled – it
drafts a decision prohibiting the identified infringement
(according to Article 7 of the Antitrust Regulation). The draft is
then submitted to the Advisory Committee composed of
representatives of the Member States' competition authorities.
This provides a final check of the draft decision. If fines are
proposed in the draft decision, the Advisory Committee meets a
second time to specifically discuss them. Finally, the draft is
submitted to the College of Commissioners which adopts the
decision.
LUMSA – International Commercial Law
COMPETITION LAW – PROCEEDINGS RE Art. 101
Article 9 commitment decisions
Alternatively to a prohibition decision the Commission may take a
commitment decision under Article 9 of Regulation 1/2003. This is
a quick way of restoring effective competition to the market.
Under commitment decisions, the Commission does not have to
conclude on the existence of an infringement of the antitrust
rules and imposes no fines. It voices its competition concerns and
parties can come forward with commitments to address these
concerns. If the Commission, after consulting market participants,
finds these commitments sufficient, it takes a decision to make
them legally binding.
LUMSA – International Commercial Law
COMPETITION LAW – PROCEEDINGS RE Art. 101
Fines
A company that has participated in an anti-competitive agreement and
so infringed competition law may have to pay a fine. The Commission's
fining policy is aimed at punishment and deterrence. They are
calculated according to the Guidelines last revised in 2006.
• The starting point for the fine is the percentage of a company's annual
sales of the product concerned in the infringement (up to 30%). This is
then multiplied by the number of years and months the infringement
lasted. Certain aggravating circumstances (e.g. repeat offender) or
attenuating circumstances (e.g. limited involvement) may increase or
decrease the fine. In cartel cases, the fine is increased by a one-time
amount equivalent to 15-25% of the value of one year's sales as an
additional deterrent. The maximum level of fine is capped at 10% of the
overall annual turnover of a company.
LUMSA – International Commercial Law
COMPETITION LAW – PROCEEDINGS RE Art. 101
Right of appeal
The addressees of a Commission decision have the right to appeal
to the EU General Court, to amend or annul the decision. The
Court can cancel, increase or reduce the fine imposed by the
Commission.
• Judgments of the General Court can be appealed before
the European Court of Justice (ECJ) by the unsuccessful party (so
the Commission can also be an appellant). However, these
appeals to the ECJ are limited to questions of law only.
LUMSA – International Commercial Law
COMPETITION LAW – PROCEEDINGS RE Art. 101
Settlement
In cartel cases, the Commission or the parties may propose a
settlement. The Commission may reject the settlement route for
cases that are not suitable. In settlement cases, the parties
acknowledge upfront their participation in the cartel, resulting in
a speedier procedure and an up to 10% reduction in the fines. The
Commission presents parties with the evidence and notifies them
of its conclusions as to duration, seriousness, liability and likely
fine. The parties must make an oral or written submission
acknowledging their liability and stating that they accept the
Commission's statement of objections. The settlement procedure
allows the Commission to adopt a faster, more streamlined
decision and to allocate resources to other cases.
LUMSA – International Commercial Law
COMPETITION LAW – PROCEEDINGS RE Art. 101
Victims' claims for damages
Any citizen or business which suffers harm as a result of a breach
of the EU competition rules is entitled to claim compensation
from the party who caused it. This means that the victims of
competition law infringements can bring an action for damages
before the national courts. If the Commission has taken a
prohibition decision regarding the infringement, this decision can
be used before national courts to prove that the behaviour took
place and was illegal.
LUMSA – International Commercial Law
COMPETITION LAW – Compliance with competition rules
Compliance means respecting the law. In the competition field, it
means business proactively respecting competition rules.
Why is it important?
It is the prime responsibility of large, medium and small
companies alike to comply with these rules. Companies need to
be aware of the risks of infringing competition rules and how to
develop a compliance strategy that best suits their needs. An
effective compliance strategy enables a company to minimize the
risk of involvement in competition law infringements, and the
costs resulting from anti-competitive behaviour.
LUMSA – International Commercial Law
COMPETITION LAW – Compliance with competition rules
The Commission welcomes and supports efforts by the business
community to ensure compliance with EU competition rules. If an
infringement is found, however, the mere existence of a
compliance strategy will not be taken into consideration when
setting the fine: the best reward for a good compliance strategy is
not to infringe the law. This standing policy has been confirmed
publicly (see speeches "Compliance and competition policy" and
"Cartels: the priority in competition enforcement")
LUMSA – International Commercial Law
COMPETITION LAW – Victims claim for damages
Towards more effective antitrust damages actions in Europe
Infringements of the EU competition rules, such as price cartels
and abuses of a dominant position in the market, are not only
negative for the economy and consumers as a whole: they also
cause direct harm to the infringer's customers and competitors
(e.g. higher prices, lost profits).
The European Court of Justice held that any citizen or business
who suffers harm as a result of such breaches is entitled to
compensation from the infringers.
LUMSA – International Commercial Law
COMPETITION LAW – Victims claim for damages
However, most victims of antitrust infringements, particularly
SMEs and consumers, rarely obtain reparation for the harm
suffered. The exercise of the right to compensation is governed by
national rules. These often make it costly and difficult to bring
actions, so that compensation is not available for victims in all
Member States.
LUMSA – International Commercial Law
COMPETITION LAW – Victims claim for damages
That is why on 11 June 2013 the Commission proposed a Directive
on antitrust damages actions to remove the main obstacles
standing in the way of effective compensation, and guarantee a
minimum protection for citizens and businesses, everywhere in
the EU.
On 17 April 2014, the European Parliament adopted a text the
Directive which was agreed between the European Parliament
and the Council during the ordinary legislative procedure. The
agreed text of the Directive has been sent to the EU Council of
Ministers for final approval.
LUMSA – International Commercial Law
COMPETITION LAW – Victims claim for damages
The proposal follows up on earlier policy initiatives in this field, in
particular a 2005 Green Paper and a 2008 White Paper.
The Commission also took initiatives on two other issues relevant
to antitrust damages actions:
1) A recommendation on collective redress which concerns all
breaches of EU law, and thus is also relevant for harm suffered by
victims of breaches of EU competition law, particularly victims
who individually suffered low-value damage.
2) A Communication and a Practical Guide on the quantification of
harm in antitrust infringements.
LUMSA – International Commercial Law
COMPETITION LAW – Victims claim for damages
Aside from these specific policy initiatives, the Commission is
committed to providing assistance to national courts in the
application of Articles 101 and 102 TFEU. This includes a funding
programme for training of national judges in EU competition law
and judicial cooperation between national judges.