1. LUMSA – International Commercial Law 30 October 2014 Prof. Avv. Roberto Pirozzi Email: robertopirozzi13@hotmail.com

2. 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;

3. 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.

4. 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.

5. 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.

6. 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.

7. 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.

8. LUMSA – International Commercial Law COMPETITION LAW – Assessing dominance (Art. 102) The geographic market The relevant geographic market is an

9. 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.

10. 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.

11. 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).

12. LUMSA – International Commercial Law COMPETITION LAW – GENERAL PRINCIPLES (Art. 102) What is an abuse? To be in a dominant position is not in itself illegal. A dominant company is entitled to compete on the merits as any other company. However, a dominant company has a special responsibility to ensure that its conduct does not distort competition. Examples of behaviour that may amount to an abuse include:

13. LUMSA – International Commercial Law COMPETITION LAW – GENERAL PRINCIPLES (Art. 102) What is an abuse? Examples: 1) requiring that buyers purchase all units of a particular product only from the dominant company (exclusive purchasing); 2) setting prices at a loss-making level (predation); 3) refusing to supply input indispensable for competition in an ancillary market; charging excessive prices.

14. LUMSA – International Commercial Law COMPETITION LAW – GENERAL PRINCIPLES (Art. 102) Investigation The Commission's investigative powers to enforce Article 102 are detailed in Regulation 1/2003 (the Antitrust Regulation). The Commission is empowered, for example, to: – Send information requests to companies; – In the context of an inspection:  enter the premises of companies;

15. LUMSA – International Commercial Law COMPETITION LAW – GENERAL PRINCIPLES (Art. 102) Investigation The Commission's investigative powers to enforce Article 102 are detailed in Regulation 1/2003 (the Antitrust Regulation). – 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.

16. LUMSA – International Commercial Law COMPETITION LAW – GENERAL PRINCIPLES (Art. 102) Investigation Statement of objections and Article 7 prohibition decision Following the investigation, the Commission may issue a statement of objections (SO). This document informs the parties of the Commission's objections raised against them. It gives the companies the possibility to exercise their rights of defence.

17. LUMSA – International Commercial Law COMPETITION LAW – GENERAL PRINCIPLES (Art. 102) Investigation Statement of objections and Article 7 prohibition decision Rights of defence: To ensure an objective outcome, the parties are given certain 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.

18. LUMSA – International Commercial Law COMPETITION LAW – GENERAL PRINCIPLES (Art. 102) Investigation Statement of objections and Article 7 prohibition decision 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, it is submitted to the College of Commissioners which adopts the decision.

19. LUMSA – International Commercial Law COMPETITION LAW – GENERAL PRINCIPLES (Art. 102) Investigation Article 9 commitment decisions Alternatively, 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 prove an infringement of the antitrust rules and imposes no fines. It voices its 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. The commitments are usually valid for a specific period of time but if the companies breach them they can be fined.

20. LUMSA – International Commercial Law COMPETITION LAW – GENERAL PRINCIPLES (Art. 102) Investigation Fines A firm that has engaged in anti-competitive behaviour and so infringed competition law may be subject to fines imposed by the Commission under Regulation 1/2003. The Commission's fining policy is aimed at punishment and deterrence. The fines reflect the gravity and duration of the infringement. They are calculated under the framework of a set of Guidelines last revised in 2006.

21. LUMSA – International Commercial Law COMPETITION LAW – GENERAL PRINCIPLES (Art. 102) Investigation Fines The starting point for the fine is the percentage of the 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. The fine can be increased (e.g. repeat offender) or decreased (e.g. limited involvement). The maximum level of fine is capped at 10% of the overall annual turnover of the company.

22. LUMSA – International Commercial Law COMPETITION LAW – GENERAL PRINCIPLES (Art. 102) Investigation Victims' claims for damages Any citizen or business which suffers harm as a result of a breach of the EU competition rules should be 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.

23. LUMSA – International Commercial Law COMPETITION LAW – GENERAL PRINCIPLES (Art. 102) Investigation Joint/collective dominance It should also be noted that groups of companies can also be held to be collectively dominant on a particular market, but this is less frequent in practice.

24. 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.

25. 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")

26. 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")

27. 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.

28. 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.

29. 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.

30. 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.

31. 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.