1. UNFAIR COMPETITION LAWS
Satu Pitkänen

2. EU COMPETITION LAW EU Treaty Art 101 (former Art 81):
Controls the activities between parties affecting trade between the Member States through restricting or distorting competition
Art 102 (former Art 82):
Prohibition of abuse by one or more undertakings of a dominant position
Reg. 139/2004
Merger control
Art 107:
Prohibition of state aids granted to undertakings

3. ?
Companies X and Y are manufacturers of tyres for the wheels of road vehicles. They agree on a price scheme for their products.
Your comments?

4. AGREEMENTS RESTRICTING OR DISTORTING COMPETITION
ART 101(1):
“The following shall be prohibited... all agreements between undertakings, decisions... 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 common market...”
Case law:
Consten/Grundig (Cases 56 & 58/64), Bayer/GB ([1976]1 CMLR D98)

5. or concerted practices
SCOPE OF ART. 101
UNDERTAKINGS
Independent firms
undertake
=>
Caught by
ART 101
ACTIVITIES
agreements, decisions
or concerted practices +
TRADE
KRITERIA
which
may affect trade
between EU states +
and
COMPETITION
CRITERIA
affect competition
and +
GEOCRAPHIC
CRITERIA
have influence
within the EU

6. INTERPRETATION 1. Undertakings Independent companies and individuals
=>
Not included
Agents and principals
Parent companies and their subsidiaries
ACTIVITIES +
TRADE CRITERIA +
COMPETITION
CRITERIA +
GEOGRAPHIC
CRITERIA

7. Agreements, decisions Horizontal agreements Vertical agreements
UNDERTAKINGS
Agreements, decisions
Horizontal agreements
Vertical agreements
Also “gentlemen’s agreements”
Agreements may be literal or verbal, even implied
Unilateral decisions, promises, recommendations
ACTIVITIES +
TRADE CRITERIA +
COMPETITION
CRITERIA +
GEOGRAPHIC
CRITERIA

8. Agreements likely to breach Art. 101(1)
Price fixing
Fixing other trading conditions
Sharing markets or sources of supply
Applying dissimilar conditions of equivalent transactions with other trading parties
Making the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which have no connection with the subject of such contracts

9. Parallel behaviour Normal parallel market behaviour is acceptable
UNDERTAKINGS
Parallel behaviour
Normal parallel market behaviour is
acceptable
E.g. on oligopolistic market the companies must
respond to market conditions due to
Price changes in raw materials
Changes in their competitor’s prices
Concerted practices
Parallel behaviour without an acceptable reason, ‘conscious parallelism’:
Cooperation between undertakings without an explicit agreement or a concerted plan
It is enough that each party should have informed the other of the attitude they intended to take so that each could regulate his conduct safe in the knowledge that his competitors would act in the same way
ACTIVITIES +
TRADE CRITERIA +
COMPETITION
CRITERIA +
GEOGRAPHIC
CRITERIA

10. E.g. Obvious conscious parallelism:
UNDERTAKINGS
E.g. Obvious conscious parallelism:
Participation in a meeting
…dealing with the fixing of price and sales-volume targets
…during which information is exchanged between competitors about the prices which they intend to charge, their profitability thresholds, the sales volumes they judge to be necessary or their sales figures
=>
The participant undertakings could not fail to take account of the information thus disclosed in determining their conduct on the market
ACTIVITIES +
TRADE CRITERIA +
COMPETITION
CRITERIA +
GEOGRAPHIC
CRITERIA

11. APPLICATION CRITERIA 1. Trade criteria 2. Competition criteria
UNDERTAKINGS
APPLICATION CRITERIA
1. Trade criteria
May affect trade between the
Member States
2. Competition criteria
Restricting or distorting competition is
1) the object of the activity or
2) the effect of the activity
If the object is anti-competitive, it is not necessary to show that the effect is restrictive
ACTIVITIES +
TRADE CRITERIA +
COMPETITION
CRITERIA +
GEOGRAPHIC
CRITERIA

12. 3. Geographic criteria Effects theory:
UNDERTAKINGS
ACTIVITIES
3. Geographic criteria
Effects theory:
EU has authority over anti-competitive measures implemented in the EU
Anti-competitive measures of EU companies outside the EU are not caught by EC Law +
TRADE CRITERIA +
COMPETITION
CRITERIA +
GEOGRAPHIC
CRITERIA

13. DE MINIMIS DOCTRINE
Agreements having minimal effect do not fall within Art. 101
If the aggregate share of the parties to an agreement between competitors does not exceed 10% of the relevant markets, or
If in the case of an agreement between non-competitors, the parties’ market share doesn’t exceed 15 % of the relevant markets
However, if more than 30% of the relevant market is covered by parallel agreements, then the market share of the parties to one such agreement must not exceed 5 %
UNLESS the agreement contains clauses which amount to
price fixing, limiting on productions or sales, and territorial restrictions => they are always prohibited

14. Modified from: Joutsamo, Aalto, Kaila, Maunu 1996, 625
EXCEMPTIONS
ART. 101(3)
Improvements in
production or
distribution of
goods
CONSUMER
BENEFITS or +
Promoting
technical or
economic
progress
RESTRICTIONS
ARE
INDISPENSABLE +
COMPETITION
IS NOT ENTIRELY
ELIMINATED
EXCEMPTED FROM
ART. 101(1)
Modified from: Joutsamo, Aalto, Kaila, Maunu 1996, 625

15. BLOCK EXEMPTIONS Issued by the Commission in the form of regulations
Exclude a generic type of agreement from the ambit of Art. 101(1)
Normally automatically
In some cases opposing procedure: approved if not opposed by Commission within 6mths
Motive
Streamlining the service to customers, sharing risk, saving costs, pooling know-how, facilitating the launch of innovative products, promoting competition on an international scale

16. Mechanism of block exemptions
Application based on a market share test
Vertical agreements: 30%
Horizontal agreements: 20-25%
Not excempted:
Non-compete clauses in excess of 5 years
‘Hard-core restrictions’
Minimum and fixed resale price maintenance
Restrictions on active or passive selling by members of a selective distribution network
Agreements on output limitation
Territorial allocation

17. Examples of block exemptions
Vertical agreements (exclusive distribution, exclusive purchasing, franchising)
Vertical agreements in the motor vehicle sector
Specialisation agreements
Research and development
Technology transfer agreements

18. CONSEQUENCES IF AGREEMENT IS WITHIN ART. 101(1)
An agreement
Which is caught by Art. 101(1)
and
Not within a block exemption
Does not satisfy the conditions of Art. 101(3)
will be AUTOMATICALLY VOID

19. ABUSE OF A DOMINANT POSITION
ART. 102:
Any abuse by one or more undertakings of a dominant position within the common market or in a substantial part of it shall be prohibited as incompatible with the common market insofar as it may affect trade between Member States
Case law:
United Brands (case 27/76)

20. ABUSE OF A DOMINANT POSITION ART. 102
PRODUCT
MARKET +
GEOGRAPHIC
MARKET
DOMINANT
POSITION
TEMPORAL
MARKET + =
TRADE
CRITERIA ? = +
Case United Brands
ABUSE
PROHIBITED
BY ART. 102
Modified from: Joutsamo, Aalto, Kaila, Maunu 1996, 656

21. 1. Product market criteria
Interchangeability
Cross elasticity of demand / supply
2. Geographic market criteria
Substantial part of common market
Transport costs, potential customers
Consumer’s willingness to travel in search for substitutes
3. Temporal market criteria
Significance of a particular time of the year
4. Trade criteria
Affects trade between the Member States

22. DOMINANCE
Undertakings are in a dominant position when they have the power to behave independently without taking into account, to any substantial extent, their competitors, purchasers and suppliers (The Commission in case United Brands)
Relevant factors:
Relative market share
Brand loyalty
Superior technology
Economies of scale
Access to raw materials and outlets
Barriers to entry
Legal provisions

23. ABUSE Imposing unfair purchase or selling prices
Imposing unfair trading conditions
Tying in
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
Discriminatory treatment
Refusal to supply
Limiting production, markets, technical development to the prejudice of consumers
Predatory pricing
Exclusive reservation of activities
Import and export bans

24. ENFORCEMENT OF ART. 101 AND 102 European Competition Network
Comprises all the national competition authorities and the Commission
Aims at consistency in the application of EC competition rules
Cooperate and exchange information
Role of the Commission: Watchdog
Overrides national authorities
May take over, duty to consult
Parallel investigations are avoided
Duty to cooperate with national courts
May undertake “Dawn raids”
Companies may seek informal guidance from the Commission

25. The Commission may investigate companies
Suspected of
Abusing a dominant position or
Engaging in a conspiracy to restrict free trade
On its own initiative or
On request of Member States
On request of juridical or natural persons with legal standing
Undertakings
Must comply with the requests for information
Must admit Commission officials to their premises
Applied the presumption of innocence
Confidentiality must be guaranteed
Commission may ask a national competition authority to carry out an inspection on its behalf

26. Enforcement of competition provisions
If an act is caught by Art. 101(1)
It is prohibited without the need of a prior decision
unless it
Satisfies the conditions of Art. 101(3) or
Falls within a block exemption
If an act is within the scope of Art. 102
It is prohibited
The Commission may
Order termination of the infringement
Impose penalties 10% of the sum of the undertaking’s total turnover in the preceding business year
Leniency reductions
A company which provides evidence of a cartel to enable the Commission to pursue the case, can receive immunity or reduction from fines

27. CONCENTRATION Regulation 139/2004
Merger of two or more previously independent undertakings, or
Acquisition of one or more persons already controlling at least one undertaking, whether by purchase of securities or assets, by contract or by any other means, of direct or indirect control of the whole or parts of one or more undertakings
Control means:
Decisive influence on the composition, voting or decisions of the organs of an undertaking

28. Concentration has community dimension:If
a) The combined aggregate world-wide turnover of all the undertakings concerned is more than € 5,000 million, and
b) the aggregate Community-wide turnover of each of at least two of the undertakings concerned is more than € 250 million,
unless
each of the undertakings concerned earn more than 2/3 of its
aggregate Community-wide turnover within a single Member State
In certain cases the concentration has Community dimension on lower conditions

29. Control of concentrations
The Commission has a duty to require information and investigate suspected infringements of the competition provisions
Companies must make a notification to the Commission before measures potentially leading to concentration (fines up to 10% of the turnover)
The Member State is allowed to request that the Commission take action
The general principle: One-stop merger control
=> either the Commission or national authorities

30. Enforcement of Regulation 139/2004
The Commission or national authorities declare the concentration incompatible with the common market
If it as a result of the creation or strengthening of a
dominant position
Significantly impedes competition in common market or in a substantial part of it
The company may appeal to the ECJ or to a national court

31. US COMPETITION LAW Sherman Antitrust Act forbids
Contracts, agreements and conspiracies that restrain interstate or international trade
E.g. Price fixing, market division, joint refusals to deal
Monopolies and attempts to monopolize commerce or trade either between the states of the U.S. or in international commerce affecting the U.S.
E.g. discriminatory pricing, dumping, tying clauses