Competition Law - Collusion
Terms in this set (19)
Article 101 (1)
Prohibits anti-competitive agreements, decisions and concerted practices between undertakings which may affect inter-state trade, and have as their object or effect the prevention, restriction or distortion of competition in the common market.
Article 101 Structure
• Article 101(1) prohibits anti-competitive agreements and concerted practices by undertakings and decisions by associations of undertakings.
• Article 101(2) sets out the legal effect of the prohibition: any agreement or decision in breach of Article 101(1) is automatically void. This Article has retrospective effect so that an agreement or decision that is already in operation and is found to breach Article 101(1) is void.
• Article 101(3) provides that Article 101(1) is not applicable if agreements, decisions or concerted practices have certain pro-competitive effects. An agreement, decision or concerted practice which would infringe Article 101(1) will nevertheless be held to be lawful if it satisfies the conditions in Article 101(3).
'...the concept of an undertaking encompasses every entity engaged in an economic activity, regardless of the legal status of the entity and the way in which it is financed and, secondly, that employment procurement is an economic activity'.
Hofner & Else v Macroton Gmb
Article 101(1) - 3 elements
Article 101(1) contains three elements, each of which needs to be satisfied before the prohibition takes effect.
(i) There must be some sort of collusion (i.e. a meeting of minds) between two or more undertakings in the form of an agreement or a concerted practice or a decision by an association of undertakings.
(ii) Any agreement, decision or practice must have an actual or potential effect on trade between Member States.
(iii) Any agreement, decision or practice must have as its object or effect the prevention, restriction or distortion of competition within the single market.
Types of Collusion
Article 101(1) identifies three forms of collusion that are described as incompatible with the internal market when they prevent, restrict or distort competition. They are:
• Agreements between undertakings;
• Decisions by associations of undertakings; and
• Concerted practices.
Agreements between undertakings:
Tepea v Commission - covers more formal, written or oral agreements
Hercules Chemicals v Commission - includes 'gentlemen's agreements'
Bayer AG v Commission - Requires two companies to be anti-competitive, or one company to be anti-competitive and the other to acquiesce. Unilateral behaviour or conduct by a single undertaking will not be considered an agreement.
"Decisions by associations or undertakings"
Non-binding recommendations will constitute a decision if two conditions are satisfied - Vereninging van Cementhandelaren v Commission:
1. Previously, recommendations have generally been followed by an association of undertakings' member; and
2. The recommendation will have a significant impact on the competition within the relevant market should it be implemented.
Recommendations may refer to a variety of subject matters;
2. Stock Volumes
3. Market Strategies (e.g. Transocean Marine Paint Association v Commission)
"A form of coordination between undertakings by which, without it having reached the stage where an agreement....has been concluded, practical cooperation between them is knowingly substituted for the risks of competition agreements" ICI v Commission (DyeStuffs)
Such Practices can be identified by meeting between competitors and the adoption of parallel behaviours by competitors.
"Affect inter-state trade"
Distortion of normal patterns of production and distribution of good and services, which can happen through:
Consten v Grundig - Exclusive distribution agreements
Vereniging v Commission - Trade Associations
Pronuptia de Paris - Franchise exclusivity
Brasserie de Hoecht - Network agreements where parties hold more than 15% of the market (NAOMI 2014)
"Object or effect to prevent, restrict or distort competition"
An agreement must have the "object or effect to prevent, restrict or distort competition" within the internal market.
This applies both vertically & horizontally:
Vertically - United Brands
Horizontally - ICI (Polypropylene)
The purpose of an agreement is judged objectively and such agreement must have the ability to affect appreciably - STM v Maschinenbau
Art 101(1)(a)-(e) provides examples of potential horizontal agreements - price fixing, limiting or controlling production or sources of supply, dissimilar trading conditions and supplementary obligations.
Potential vertical agreements - passive selling, bans on parallel imports, or minimum resale price fixing agreements.
If the purpose of an agreement is not to restrict competition, it can still be caught under art. 101(1) if it actually has an appreciable effect (STM v Maschinenbau) on interstate trade.
The agreement must be considered in the economic context - European Night Services; Brasserie de Haecht.
Article 101 (2)
Article 101(2) has the legal effect of making such agreements legally void, and, consequently unenforceable in courts.
Defences to an undertaking
For an agreement which falls under art 101(1), there are 3 possible defences:
- the de minimis rule;
- art 101 (3); or
- a block exemption under regulation 1/2003
The de minimis rule
The defence an undertaking may have where its actions have no appreciable effect on the inter-state trade (Volk Vervaecke).
Horizontal agreements between undertakings having an aggregate market share not exceeding 10% do not appreciably affect competition within the meaning of Article 101(1).
Vertical agreements will not appreciably affect competition where the market share of each undertaking does not exceed 15%.
Article 101 (3)
Provides individual exemptions from Article 101(1).
any agreement or category of agreements between undertakings,
any decisions by associations of undertakings,
any concerted practice or category of concerted practices.
To satisfy Article 101(3), an agreement, decision or concerted practice must:
1. Improve the production or distribution of goods, or promote technical or economic progress; and
2. Allow consumers a fair share of the resulting benefit. The term 'resulting benefit' means such things as a wider choice of goods or better living conditions. The term 'consumer' is interpreted in the broad sense (i.e. not just the ultimate user but all parties down the manufacture/distribution chain).
Further, the agreement, decision or concerted practice must not:
3. Contain dispensable restrictions (this means that the agreement must restrict competition only to the extent and in ways that are necessary to achieve the relevant pro-competitive ends); and
4. Substantially eliminate competition in the relevant market.
Both sets of conditions must be fulfilled in order for Article 101(3) to apply.
Regulation 330/2010 - a block exemption
The principal provisions are as follows:
- Article 2(1) — The exemption
- Article 3(1) — Market share threshold
- Article 4 — 'Hardcore' restrictions
- Article 5 — 'Excluded' restrictions
Courage Ltd v Crehan - the Court of Justice held that damages can be awarded by a national court for losses caused by a contract or by conduct which infringed Article 101 TFEU.
Regulation 1/2003 empowers the Commission to impose the following fines:
- For infringing Article 101 TFEU or Article 102 TFEU Under Article 23(2)
- For failing to co-operate with an investigation