Discuss the rules of Competition law and how the European Commission enforces these Laws.

Which may affect trade between Member States.

National law will apply when the trade within only one member state is affect. See the case of Co-operative Stermsel en kleurselfabriek.

The de minimis Rule

The Treaty states that the effect on competition and trade between Member States is enough to start the procedures of Article 81.  In the case of Völk v Vervaecke the court said it must be “appreciable”. The Commission has now issued guidance of what is “appreciable” called Agreements of Minor Importance, 2001.

The Object or Effect of the agreement

The court has decided that the ‘object’ and the effect of the agreement must be looked at individually. See the case of Consten and Grundig above.  If the “object” has been found to be anti-competitive then the “effect” does not need to be looked at, the agreement will already have come under Article 81.

As you would expect if the “object” were not found to be anti-competitive then the “effect” will be looked at.

The “prevention, restriction or distortion of competition within the common market”

The Treaty tries to stop agreements that prevent, restrict or distort competition within the common market. Article 81 provides some examples of agreements so that it makes it easier for undertakings to view where they might go wrong. These agreements can be:

• Price fixing or other trading conditions
• Control or limit production, markets, technical development or investment
• Supply
• Conditions on transactions
• Contracts

Exemptions

Even though agreements at the start may look to have an anti-competitive effect.  Article 81(3) states that some agreements may be exempt because the may actually improve production or have an overall positive economic effect.  It may also give the end user a positive benefit due to access or cheap prices.  

Negative Clearance

The easy way for an undertaking to make sure that it complies with the Treaty is to ask the commission before it goes into an agreement.  They will get a formal notification that the agreement does not fall into the scope of Article 81 (1) this is called Negative Clearance.  It is not legally binding

For this to apply the undertaking must supply the Commission with true information, if they do not do so they may be fined or not get the exemption under Regulation 17/62.

Individual Exemptions

These exemptions are limited as to period, conditions can be applied and they can be extended or even revoked. These individual exemptions are given because of the agreement’s positive consequences.

Block Exemptions

These come under Article 81 (3) of the Treaty and give the commission power to give categories of agreements to be exempt.  

The commission has given block exemption for:

• Motor vehicle distribution (Regulation 238/85)
• Technology Transfer (Regulation 240/96)
• Specialisation (Regulation 2658/2000)

Comfort Letters

The workload of the Commission has always been a problem; block exemption goes along way to help this problem the fact that they do not have to be given to the Commission.  Another solution to the problem was comfort letters these are letters sent out to undertakings informing them that if the investigation had been done in full the exemption would be granted.  They are not legally binding in any court at home or in Europe. They are also open to judicial review see the case of Lancôme v Etos.

Article 82

Article 82 is very similar to Article 81 in the main reason is to stop undertakings from setting up anti-competitive agreements.  It stops undertakings that are in a dominant market position from abusing their position.  This does not mean that an undertaking cannot have a dominant position; it means that the undertaking cannot abuse this position.  Article 82 says “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 in so far as it may affect trade of the Treaty Article”.

The Commission believes that it is possible for a number of undertakings to have a dominant position this can be seen in the case of Italian Flat Glass Re;SIV and Others v Commission.  Other people have looked at the problem and decided that Article 82 will only come into force if they are not stopped in Article 81.

Dominant Position

It is not unlawful for the undertaking to have a dominant position, but it must be shown that the undertaking has a dominant position before it can be able to abuse this position. See the case of United Brands v Commission.

Relevant Market

The main issue is to find out what the relevant market is that the undertaking is working in.  Looking at certain criteria does this.  

• What the Product of the market is
• Geographical Boundaries
• Temporal changes

To find out what the product of the market is they looked at if a product could be exchanged for another then the market has not been affected.  See the case of Europemballage and Continental Can v Commission.  If there is a demand for alternatives to the product and they can be easily changed then there is no interference with the market.

The geographical boundaries are not as wide spread as you may think; it can be only a problem in one Member State for Article 82 to be started.  It does not have to affect the entire European Community.  See the cases of Michelin v Commission.

It is also fair that the temporal market be looked at for example in the case of United Brands it could have been said that in the summer time bananas have an increased competition with other summer fruits. The Commission has published guidance on how to define a market. ‘Defining of the relevant Market for the Purposes of Community Competition Law.

Dominance

Now that the market has been found, the dominants of an undertaking must now be found.  The European Court of Justice has defined dominance as “a position of economic strength enjoyed by an undertaking which enables it to prevent competition being maintained in the relevant market by giving it the power to behave to an appreciable extent independently of its competitors, customers and ultimately of its consumers”. This was later added to in the case of AKZO Chemie BV v Commission when the court said “the power to exclude competition…nay also involve the ability to eliminate or seriously weaken existing competition or to prevent potential competitors from entering the market”.  It is therefore easy to see that an undertaking may have a dominant position and be able to take such actions that will take into no consideration any problems for it competitors or future competitors.

 The undertaking may have done one of the following to be in this position

• Size of the market it is involved in
• Structure of the market
• Problems with entering that market

The undertaking does not have to working alone it may be that a few companies are involved this does not matter the rules stay the same see the case of Società Italiana Vetro SpA v Commission.

The next step is to find if the undertaking has abused its dominant position in the case of Michelin v Commission the court said that the undertaking that was in a dominant position “has a special responsibility not to allow its conduct to impair undistorted competition on the common market” other relevant cases in this area have been:

• Unfair pricing – Hoffman La Roche v Commission
• Predatory Pricing – AKZO Chemie BV v Commission
• Refusal of supply – Instituto Chemioterapico Italiano SpA and Commercial Solvents Corporation v Commission

When it comes to exemptions unlike in Article 81 where there are exemptions, there are No exemptions in Article 82.  But it can have Negative Clearance and a Comfort letter both of which were discussed above.

Enforcement

Articles 81 and 82 both have direct effect see the case of BRT v SABAM. This does not mean that the national courts of the Member States have the right to grant exemptions.

So that the national courts can all be equal the Commission has published guidance so the courts are in no doubt how to proceed. This was called Co-operation between National Courts and the Commission.

The commission can investigate complaints by Member States and also investigate complaints on its own accord if it feels that Community law is being broken.  This comes under Regulation 17/62.  

The Commission after receiving a complaint can start an investigation and may enter the premises of the undertaking to collect all information that it may require for the investigation. See the case of National Panasonic (uk) Ltd v Commission. This information can be documents and it can also ask questions.  Before doing so the Commission may take the steps of involving the authorities of the Member State that the undertaking is in.  The European Court of Justice has given the power that where necessary an interim order may be used. See the case of Camera Care Ltd v Commission. If the undertaking is found to have acted in an intentional or negligent way then a fine may be imposed.

Changes of Enforcement

The European Community is growing fast with many more countries wishing to join. This has cause a problem because the competition rules have not really changed that much for many years and are becoming very slow.  In May 2004 new legislation is being brought in to try and bring the rules more up to date. So that the following can happen:

• Less Red Tape
• Higher Efficiency
• National Enforcement Agencies

The new rules will try and get undertaking to make a more substantial effort in making sure that there agreements are not anti-competitive.

There will be a new structure of who will make sure that the undertakings have been keeping in line with Competition rules. These are:

• Commission
• European Competition Network (ECN)
• National Courts

Changes of Regulation 17/62

The Commission up to now is the only body that can grant exemptions. This will change with the new rules coming in from then on the ECN and national courts will be able to give exemptions to undertakings.  The Commission will take on the role of giving policy and making sure that the rules are being fair applied.

New Merger Legislation

The Commission is looking to introduce a Merger Regulation with the new reforms that will go through in May 2004; these will make it much easier to understand the rules when it comes to company mergers.  

Conclusion

In Conclusion it can be seen that the Commission has a very difficult task to perform when it comes to Competition law. On one hand it does not want to stifle companies from trying to invest and grow with the market it is within, but does not want to allow companies to become so powerful that there is no competition.  The main feeling I have is that in the days of huge multinational comes that don’t care about final end users but only that of shareholders.  People will want to look at see that there freely elected representative are doing as much as possible to curtail these companies from having to much influence in there daily life’s.  In the years to come if people feel that they rights are not being expressed we will find ourselves in a world full of festering hate and greed.

Word Count 2471

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Bibliography

Paterson J. Law Basics, European Community (2002) Edinburgh, W.Green/Sweet & Maxwell.

Dives K. Understanding European Union Law 2nd Edition (2003) London, Cavendish Publishing Limited.

Korah V. Cases & Materials on EC Competition Law (1997) Oxford, Hart Publishing.

Whish R. Competition Law 4th Edition (2001) London, Bitterworths.

Goyder D G. EC Competition Law 3rd Edition (1998) Oxford, Clarendon Press.

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