EU Business Law: Anticompetitive agreements (Art. 101 TFEU) Dr. Agata Jurkowska-Gomułka

Anticompetitive practices Collective practices: anticompetitive agreements (agreements restricting competition) – Art. 101 TFEU Unilateral practices: Abuse of a dominant position – Art. 102 TFEU

Conditions for applying Art. 101 Agreements (3 forms) Agreements between undertakings (undertaking in a broad sense) Competition restriction as object or effect Prevention, restriction or distortion of competition Appreciability of competition restriction (de minimis rule) Appreciability of impact on intra-EU trade (NAAT rule)

Forms of agreements  Agreements sensu stricto (oral and written agreements; binding or non-binding)  Decisions of associations of undertakings (professional organizations; trade associations; etc.)  Concerted practices (co-ordinated behaviour of undertakings oriented for achieving anti-competitive object) – not parallel behaviour (matching enterprise’s own strategy to its competitors’ actions

Undertakings  Undertaking – each entity active on a market (a possibility to identify a market)  Special status of agreements between enterprises who are members of one capital group (holding) single economic unit doctrine

Holding (capital group) Leader (Directly) controlled undertaking (Indirectly) controlled undertaking Even indirectly controlled underatkings have no autonomy in taking business decisions.

Single economic unit doctrine Assumptions: Undertakings belonging to one capital group (1)cannot take decisions on market strategy independently, they have to respect guidelines of dominating (holding a control) undertaking (2)do not compete with each other

Single economic unit doctrine Conclusions: Prohibition of cartels is not applied to a conduct of undertakings beleonging to one capital group. Such a conduct is considered as an internal division of tasks inside the group.

Object or effect Agreements are prohibited if a restriction of competition is: object or effect of agreement only object of agreement (no anticomptitive effect) only effect of agreement (no anticompetitive object)

Anticompetitive object Agreements with anticompetitive object (hardcore cartels) Price-fixing agreements Output-limiting agreements Market-sharing agreements Tender agreements per se prohibited

Restriction of competition Effect on competition assesed with a reference to relevant market Prevention (elimination) of competition Restriction of competition Distortion (infringement) of competition otherwise

Relevant market  Product relevant market a market of goods, which by reason of their intended use, price and characteristics, including quality, are regarded by the buyers as substitutes SSNIP test (Small but Significant and Non-Transitory Increase of Price)

Relevant market  Geographical relevant market a market of goods offered in the area in which, by reason of their nature and characteristics, the existence of market access barriers, consumer preferences, significant differences in prices and transport costs, the conditions of competition are sufficiently homogeneous

List of exemplary prohibited agreements Horizontal and vertical agreements Price-fixing and condition-fixing agreements Output-limiting agreements Market-sharing agreements Discriminatory agreements Tying agreements

Price-fixing agreements  direct or indirect price fixing (bulk, retail prices) or fixing elements of prices (e.g. rebates) Indirect price fixing – possible through exchange of information!  price fixing oriented for an increase, decrease or freezing of prices

Output-limiting agreements  Agreeing on sales strategy  Limiting or controlling a number of manufactured or sold products (fixing a particular number or indicators of changes in a level of production or sales)  Agreeing on a number of customers served by enterprises, a range of offered products or a number of distribution channels

Market-sharing agreements  sharing of demand or supply markets according to geograpical, product or subject criteria !eligibility of market-sharing clauses in some distribution agreements! e.g. attributing some territories to certain distributors

Discriminatory agreements  Applying to equivalent transactions with third parties onerous or not homogenous agreement terms and conditions, thus creating for these parties diversified conditions of competition (creating better conditions of competition for some entities)

Tying agreements  making conclusion of an agreement subject to acceptance or fulfilment by the other party of another performance, having neither substantial nor customary relation with the subject of such agreement

Other agreements not listed in Art TFEU …. e.g.  information agreements  crisis cartels  bid rigging

Exemptions from a prohibition of cartels Agreements of minor importance (de minimis) Agreements meeting conditions settled in Art.101(3) Legal exemptions

De minimis rule  Prohibition of cartels does not concern agreements having no appreciable impact on competition (de minimis agreements; agreements of minor importance)  quantitative and qualitative criteria of de minimis

Agreements of minor importance  quantitative criteria: market share threshold 10% for horizontal agreements (cumulative share of all parties) 15% for vertical agreements (share of whichever party)  qualitative criteria: agreements of minor importance cannot concern price-fixing, quotas, market-sharing

4 conditions for exemption [Art. 101(3)] Positive conditions Agreements… 1. contribute to improvement of the production, distribution of goods or to technical or economic progress 2. allow the buyer or user a fair share of benefits resulting thereof Negative conditions Agreements… 3. do not impose upon the undertakings concerned impediments which are not indispensable to the attainment of these objectives 4. do not afford these undertakings the possibility to eliminate competition in the relevant market in respect of a substantial part of the goods in question

Exemptions  group (block) exemptions – on the basis of a regulation from the Commission: specialization agreements R&D agreements vertical (mainly distribution) agreements technology transfer agreements insurance co-operation agreements  ex lege exemption – agreements meeting criteria from Article 8(3), but not covered by block exemption (self-assesment of undertakings)

Sanctions Administrative sanctions  a duty to bring a practice to the end  a financial penalty (up to 10% of turnover from the previous accounting year) Leniency Programme (whistleblowers, undertakings eager to co-operate)

Sanctions Civil sanctions  nullity of legal activities connected to a prohibited practice [Art. 101(2)]  damage & other civil sanctions (private enforcement) !No criminal sanctions for infringing competition rules in EU!