EU Competition Policy Article 101 TFEU

Anti-trust laws in the US The word "trust" had deviated widely from its original meaning to designate one of the most unique and highly beneficial devices of courts of equity-though it is probable that few of the laity had ever heard of this primary meaning-and had become a synonym for those monopolistic combinations which were believed to menace the normal economic development, and possibly the political freedom, of the country. As is quite generally known, the designation of these combinations by the term "trusts," was largely a historical accident. In the beginning of the development, a few of the most prominent of these organizations actually adopted the trust form, in that stock of constituent corporations was put into the hands of trustees who were to manage the entire enterprise. Later a holding corporation was more generally used and at times the constituent corporations were dissolved or became mere shells. But during the entire period the term "trusts" continued to be applied to these monopolies not merely by the public but by the legal profession, and the statutes enacted against them were frequently called "anti-trust laws.” (Brown, 1928)

Anti-trust law in the US Sherman Act, 1890 attacked the two most important behaviors against fair competition in the market: anti-competitive agreements between enterprises and monopolistic markets. EU competition law is shaped on the US legislation

Competition law in the EU It was conceived as a tool to avoid distortions in the common market. Chapter 1 of Title VII of the TFEU, divided into two sections: rules applying to undertakings and rules applying to States (State aids)

The four pillars of EU competition law Article 101: anti-competitive cartels Article 102: abuse of dominant position by an undertaking Regulation 139/2004 and implementing regulation 802/2004: mergers Articles 107, 108 and 109: State aids

Article 101 – Cartels. Notions “1. 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, and in particular those which: (a) directly or indirectly fix purchase or selling prices or any other trading conditions; (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 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. 2. Any agreements or decisions prohibited pursuant to this Article shall be automatically void. 3. The provisions of paragraph 1 may, however, be declared inapplicable in the case of: “

Article 101 – Cartels. Notions — 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 to improving the production or distribution of goods or to promoting technical or economic progress, while allowing consumers a fair share of the resulting benefit, and which does not: (a) impose on the undertakings concerned restrictions which are not indispensable to the attainment of these objectives; (b) afford such undertakings the possibility of eliminating competition in respect of a substantial part of the products in question.”

Article 101 – Cartels. Notions Prohibition of all collusions between undertakings that have the object or the effect of distorting competition in the common market Exonetration of those collutions that are justified for their positive effect on the EU economy Effect of anti-competitive agreements: they are automatically void

Undertakings ECJ: an undertaking is «every entity engaged in an economic activity, regardless of the legal status of the entity and the way it is financed». It is a functional definition that does not consider the form of the entity, that can change from State to State. Also, it can include natural persons and even public entities. Economic activity: ECJ: any activity consisting in offering goods or services on a given market is an economic activity»

Effect on trade between Member States Principle of subsidiarity : agreements must have an inter-state dimension in order fall within the jurisdition of article 101. Agreements concerning a single MS are not excluded if they affect inter- state trade. Networks of agreements: Delimitis case (1991). In this case, the agreement on beer supply between a local pub and the brewery Henninger was relevant for the common market because it was part of a network of similar agreements De minimis rule: only agreements that produce significant effects are covered by article 101

Collusions between undertakings Agreements between undertakings Decisions by associations of undertakings Concerted practices

Agreements: horizontal and vertical Any binding agreement, the contractual form is not necessary Horizontal: agreements between competitors (at the same commercial level) Vertical: agreements between undertakings at different levels of the commercial chain (for example, a producer and a distributor). In Consten and Grundig (1964), a case concerning a distribution agreement, the Court held that: «it is irrelevant whether the parties to the agreement are or are not on a footing of equality as regards their position and function in the economy. This applies all the more since, by such an agreement, the parties might seek, by preventing or limiting the competition of third parties in respect of the products, to create or guarantee for their benefit an unjustified advantage at the expense of the consumers or user, contrary to the general aims of article 101».

Agreements: tacit acquiescense or unilateral conduct? Ford case (1985). A unilateral imposition by Ford to limit orders from a dealer was considered by the Court as a part of the contractual relations between the undertaking and the dealer. In Bayer (2000), the Court specified that for an apparently unilateral measure to become part of a continuous relationship, the other party must at least tacitly acquiesce.

Concerted practices and parallel conducts Any form of coordination between undertakings, any practical cooperation between them that can be a threat to competition. Such a coordination can results from the behavior of the parties. A parallel behavior is acceptable when it responds only to market logic.

Cartel decisions through associations of undertakings Any anticompetitive decision adopted by associations of undertakings. An example are the Bar Councils.

Restrictions on competition: anti-competitive object or effect Inter-brand and intra-brand competition. A restriction of competition is a restriction between competitors (inter-brand). It can also be intr- brand, for example in the case of vertical agreements that affect competition between distributors of the same brand. In any case, the two dimensions of restrictions of competition must be evaluated and balanced.

Object Objective content of the agreement. Per se rules: restrictions that are presumed to be sufficiently deleterous to competition Horizontal agreements: price fixing rules; output-limiting clauses, market sharing clauses. Vertical agreements: fixed minimum resale price; absolute territorial protection; restriction of active and passive sales to end users by members of a selective distribution system operating at the retali level of trade Restrictions of parallel trade: absolute territorial protection

Effect Any agreement that has the effect of restricting competition falls within the prohibition of article 101. Rule of reason: an american doctrine that seeks to balance the anti- competitive effects of an agreement with its pro-competitive effects. This is excluded in European law because article 101, para. 3 explicitly provides exemptions. ECJ: doctrine of ancillary restraints, clauses that are restrictive, but necessary within an overall pro-competitive agreement. They must be subordinate (ancillary) to the main object of the agreement.

De minimis rule EU law does not take into account restrictions of competition that are minor with respect to the market share of the parties involved. According to the Commission, 10 % of the market for the parties to horizontal agreements and 15 % for vertical agreements.

Exemptions through pro-competitive effects of agreements (article 101, para. 3) Direct exemptions. Four cumulative criteria The agreement must contribute to improving the production or distribution of goods or to promoting technical or economic progress, while allowing consumers a fair share of the resulting benefits The agreement must be indispensable for the pro-competitive effects The agreement must not eliminate competition in respect of a substantial part of the product in question

Exemptions by category Block exemption regulations by the Commission, who however retains the power to withdraw the benefit of a block exemption from an individual agreement. Block exemption regulations contain a black list of prohibited restrictions and a market framework within which the agreement is exempted.