Voelk v Vervaecke Sprl: “an agreement escapes the prohibition of art 81(1) where it has only an insignificant effect on the market, taking into account the weak position which the persons concerned have on the market of the product in question”.
The concept of appreciability is distinct from the requirement that the agreement should restrict competition.
Cf. De minimis Notice. The Notice introduces a market share threshold for networks of agreements producing a cumulative anticompetitive effect. It contains the same list of hard-core restrictions, which cannot benefit from the Notice as the Vertical and Horizontal Block Exemption Regulations. It also confirms that agreements between small and medium-sized enterprises are in general ‘de minimis’.
Within the Common Market
Art. 81 may be applied to agreements concluded outside the territory of the Community which produce effects within the Community or a re implemented through a subsidiary situated within it.
Object or effect the prevention, restriction or distortion of competition
The term ‘object or effect’ has been given a expansive interpretation. The phrase is to be read disjunctively rather than cumulatively (STM).
Societe Miniere:
- First the very object of the agreement has to be considered in the light of the economic context in which it is to be applied.
- Where an analysis of the said clauses does not reveal a sufficient degree of harmfulness with regard to competition, examination should then be made of the effects of the agreement .
- The competition in question should be understood within the actual context in which it would occur in the absence of the agreement in question.
A number of clauses, such as price-fixing (Dyestuffs), market-sharing (Quinine), information-exchange (Italian Flat Glass) and export restrictions (Consten and Grundig), have been held to have as their object the restriction of competition. In these circumstances the effect of the agreement on the market does not have to be assessed. Such restrictions may be weighed against any pro-competitive effects only in the context of 81(3) with a view to obtaining an exemption.
Anti-competitive behaviour does not exist in the abstract and, where the ‘object’ element is not satisfied, the Court has emphasised the importance of conducting a full market analysis to ascertain whether the agreement has prevented, restricted or distorted competition within the meaning of Art. 81(1).
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Brasserie Haecht SA v Wilkin:
- “regard must be had to such effects in the context in which they occur, i.e. the economic and legal context of such agreements, decision or practices and where they might combine with others to have a cumulative effect on competition.
- An Agreement cannot be examined in isolation form the above context. The existence of similar contracts may be taken in to consideration.”
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Delimits v Henninger Braeu:
- Necessity of analysing the effects of a beer supply agreement, taken together with other contracts of the same type, on the opportunities of competitors to gain access to the market or to increase their market share.
- … it is further necessary to examine the nature and extent of those agreements in their totality, comprising all similar contracts tying a large number of points of sale to several national producers.
- Account must be taken of the conditions under which competitive forces operate on the relevant market. It is necessary to know not only the number and the size of producers, but also the degree of saturation of that market and customer fidelity to existing brands, for it is generally more difficult to penetrate a saturated market with loyal consumers.
- A beer supply agreement is prohibited by art 81(1) if two cumulative conditions are met (i) having regard to the overall context it is difficult for competitors to gain access to the national market for the distribution of beer and (ii) the agreement in question must make a significant contribution to the sealing-off effect brought about by the totality of those agreements in their overall context.
In the context of horizontal agreements cf. also European Night Services: “ The examination of conditions of competition is based not only on existing competition between undertakings already present on the relevant market but also on potential competition, in order to ascertain whether, in the light of the structure of the market and the economic and legal context within which it functions, there are either concrete possibilities both for the undertakings concerned to compete among themselves, or for a new competitor to penetrate the relevant market.
Rule of reason and Art 81
[summarise!]
The Commission has stated in its White Paper that it is 81(3), not 81(1), which contains all the elements of the rule of reason and which is ideally suited for the weighing of the pro- and anti-competitive aspects of the agreement.
The Sherman Act and provides no exemption for contracts found to be in restraint of trade, thus it is of great importance that the provision is interpreted sensibly and reasonably.
The Court has not adopted a ‘rule of reason approach similar to that adopted by US courts. It has, however, handed down ‘reasonable’ judgments which do not support the rigid view associated with the Commission. Different types of cases can be distinguished. E.g. where the Court has accepted clauses which are objectively necessary for the performance of an agreement (‘ancillary restraints’) and those in which clauses were necessary to induce a producer into a market (‘commercial risk cases’).
Over the years the court has adopted a rule of reason approach. E.g. restraints in an agreement do not restrict competition within he meaning of art 81(1) If they are necessary or ancillary to a pro-competitive agreement (Remia), are essential to induce a distributor to make a substantial investment necessary to ensure the commercial viability of the venture (STM, Nungesser) or are generally essential to the proper working of a selective distribution system (Metro).
Cf. p. 203 – 205 Wouters.
Rule of reason has a particular resonance in the context of distribution agreements and is discussed alongside the Commission’s Green Paper on Vertical Restraints.
Consequences of infringement: Art 81(2)
The important civil consequence is the automatic voidness of the agreement unless the provisions infringing 81(1) are severable and are not sufficiently serous to render the whole agreement void. The prohibited clauses are unenforceable although the parties may be required to implement the remainder of the agreement, subject to the possibility of severance. An agreement may move ‘in and out’ of the prohibition of 81(1).
Cf. Courage v Crehan.
Exemptions: Art. 81(3)
Two types of exemptions: (a) individual exemption decision by the Commission or (b) exemption for a ‘category of agreements’, under a Commission Block Exemption Regulation.
Individual exemptions
At present, the Commission is the sole determinant of the art. 81(3) criteria. All four criteria, two positive and two negative, must be met.
Agreements which may qualify for an exemption are those which
- contribute to the improvement of production or distribution of goods or to promoting technical or economic progress,
- allow the consumer a fair share of the resulting benefit,
and do not
- impose on the undertakings concerned restrictions which are indispensable to the attainment of the above objectives, and
- afford such undertakings the possibility of eliminating competition in respect of a substantial part of the products in question.
In Matra, for example, the Court has given non-competition criteria a lot of weight and was criticised for it.
Cf. also Metro (No 1): contracts of a relatively short duration allowing for a certain flexibility, enabling production to be adapted to the changing requirements of the market, thus ensuring a more regular distribution [to the benefit of everyone involved].
The Commission’s White Paper on Modernisation rejected the consideration of non-economic concerns as part of the balancing test to be carried out under art 81(3) which is intended to provide a legal framework for the economic assessment of restrictive practices and not to allow the application of the competition rules to be set aside because of political considerations (cf. para. 56).
Block exemptions
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Vertical Agreements (2790/99)
- Art 2(1): Applies to agreements between undertakings operating at a different level of the production chain (‘vertical agreements’)
- Combined market share: 30%
- Art 7: Member State may withdraw the BE where it has effects incompatible with 81(3), where that territory has the features of a distinct geographic market
- Art 8: Commission has the power to withdraw BE from an entire sector, where parallel networks of similar vertical restraints cover more than 50 % of the market.
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Specialisation agreements (2658/2000)
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Applies to (i) unilateral specialisation agreements, (ii) reciprocal specialisation agreements and to (iii) joint production agreements and their ancillary clauses
- market share does not exceed 20 %.
- Recital 12 requires supply and purchase obligations for (i) and (ii) “to ensure that the benefits of specialisation materialise without one party leaving the market downstream”.
-
Technology transfer (240/96 [under review])
Exempts pure (i) patent licensing or (ii) know-how licensing agreements or (iii) mixed patent and know-how licensing agreements granting sole or exclusive licenses ( Art 1(1-3)) or restrictions on the licensee (incl. active and passive sales ).
Art 2 contains white list, Art 3 black list.
Contains an ‘opposition procedure’ (Art 4) whereby certain agreements which do not satisfy the terms of a block exemption can nonetheless benefit from an accelerated exemption procedure.
Parties wishing to invoke the opposition procedure, notify the agreement. Unless the Commission takes objection within a specified period, the agreement will qualify for exemption.
- Motor vehicle distribution (1400/2002)
Horizontal Agreements
The Commission has tended to adopt a strict approach to horizontal cooperation agreements; any efficiency gains are considered only under 81(3). This approach attracted criticism for much the same reasons as vertical agreements – undertakings were required to notify agreements to the Commission in order to be considered for an exemption, or tailor their agreement in order to meet the narrow and formalistic requirements of the block exemption.
Joint Venture agreements
Possible concerns raised by Joint Ventures:
- JV may make it easier for parties to collude
- relevant market may become foreclosed to third parties
- agreement may be more restrictive than is necessary to achieve the objectives achieved
-
loss of actual or potential competition between the competitors (collusion in matters outside the actual JV ‘spill-over effects’).
European Night Services: Where an agreement does not contain obvious restrictions of competition, the actual conditions in which an agreement functions must be taken into account. Not only the actual but also potential competition had to be considered in order to asses the possibilities for the undertakings concerned to compete among themselves or for a new competitor to penetrate the relevant market.
Distinction between concentrative and co-operative joint ventures has been given up with the amendment of the Merger Regulation. The crucial question is now: Is there a full-function joint venture (cf. Art 3(2) Merger Reg)? If so this amounts to a concentration.
Joint Ventures under Art 81
Non full-function joint ventures remain to be assessed under art 81.
R & D agreements, Specialisation agreements and the Block Exemptions
Block Exemption on R & D agreements
Block Exemption on specialisation agreements
Vertical restraints
Commission’s approach towards vertical agreements has been considerably stricter than those in the US. The Commission believes that the appointment of exclusive distributors on a Member State basis contributes to the partitioning of the single market, as well as creating barriers to entry for a new producer to enter the market (“foreclosure”) (Consten and Grundig).
By contrast the Court has shown more of a readiness to consider economic justifications for vertical restriction (e.g. Nungesser).
The Commission’s hostile attitude has been almost universally criticised by industry, economists and legal practitioners.
Vertical restraints can
- restrict intra-brand competition (particularly in selective and exclusive distribution systems where such restraints can lead to a reduction in consumer choice and higher prices)
- stimulate inter-brand competition, encouraging the entry of new products on the market and enhancing consumer welfare.
Proponents of the Chicago School (Bork and Posner) advocate a non-interventionist approach on the free rider rationale.
Vertical restraints and Article 81(1)
81(1) provides the basic framework for the treatment of vertical restraints in Community law (82 has a limited role in this field). Consten & Grundig illustrates the Community’s concern to preserve parallel trade at the expense of economic and pro-competitive considerations.
Court has held that only two types of clauses will be considered to have as their object the restriction of competition:
-
those granting a distributor absolute territorial protection (Consten) and
- those imposing a minimum resale price on the distributor.
In all other cases, an examination of the agreement’s effects is necessary.
Exclusive distribution agreements now fall under the umbrella of block exemption 2790/99.
The Court developed its “ancillary restraints doctrine” countenancing some restrictions based on an economic analysis of the effects of an agreement, provided the restrictions did not go beyond what was necessary to secure the commercial viability.
In Nungesser ……….
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Franchise agreements are now covered by Regulation 2790/99.
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Selective distribution agreements tends to be limited to branded products which are either highly technical and require qualified staff to advise customers or are luxury goods which demand protection. The legal framework applicable to selective distribution was established in Metro (No 1); they are now covered by Regulation 2790/99.
Metro: “Although price competition is so important that it can never be eliminated it does not constitute the only effective form of competition or that to which absolute priority must in all circumstances be accorded.”
- Regulation 2790/99 contains a black-list instead of defining what is exempted which bolstered up the “straitjacket effect”. A key aspect is the introduction of market-share thresholds.
- See also Guidelines on Vertical Restraints.
- The relationship between the BER and the de minimis notice is complex. According to the Notice agreements between undertakings with a market share of less than 10 % fall outside the scope of 81(1) altogether. However 81(1) may still apply below the 10 % threshold with respect to hard core restrictions provided there is an appreciable effect on trade between Member States.
Withdrawal of block exemption
Art 7 of the BER provides for the benefit of a block exemption to be withdrawn if a vertical agreement, considered either in isolation or alongside similar agreements enforced by competing suppliers o buyers, falls within the scope of 81(1). The Guidelines on Vertical Restraints explain the circumstances in which this might happen (paras 71 – 87).
Article 82
The protection of competition through art 82 can be seen as supporting the four freedoms in the Single Market project from the damaging effects which may be caused by the use, and abuse, of the power wielded by business within the Community.
The elements of art 82
Undertakings
Cf. Art 81.
Effect on trade between Member States
Because of the particular features of art 82, there is much greater focus on the structure of markets within the 82 jurisprudence in this area.
Cf. Commercial Solvents
- the existence of a large market participant may, in itself, hamper the proper development of the Single Market.
- Art 81 and 82 must be interpreted in the light of art 3(f).
Dominant position (“market power”)
Continental Can: The definition of the relevant market is of essential significance, for the possibilities of competition can only be judged in relation to those characteristics of the products in question by virtue of which those products are particularly apt to satisfy an inelastic need and are only to a limited extent interchangeable with other products. In order to be regarded as constituting a distinct market, the products in question must be individualized not only by the mere fact that they are used for packing certain products but by particular characteristics of production which make them specifically suitable for this purpose.
Cf. Notice on Market Definition.
Notice breaks new ground by adopting the so-called SSNIP test developed in the US in the early 1980s and now applied worldwide, since the Notice declares that product characteristics and intended use are insufficient to show whether two products are demand substitutes.”
Constitutional difficulties with “notices” are to be borne in mind [p. 306].
-
Cf. United Brands deciding whether the banana market is a market in its own right. Key factor was interchangeability.
-
Cf. Hilti whether PAF nail guns, nails and cartridge strips were separate markets.
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Cf. Michelin (tyres; retreads etc.)
Geographic market
Cf. United Brands.
Temporal market
Example was the 1970s oil crisis.
Dominance
- a dominant position enables an undertaking to prevent effective competition being maintained on the relevant market by giving it the power to behave to an appreciable extent independently of its competitors, customers and ultimately of its consumers.
- In general a dominant position derives from a combination of several factors which, taken separately, are not necessarily determinative.
-
Hoffmann-La Roche v Commission:
- Such a position does not preclude some competition, which it does where there is a monopoly or a quasi-monopoly, but enables the undertaking which profits by it, if not to determine, at least to have an appreciable influence on the conditions under which that competition will develop, and in any case to act largely in disregard of it so long as such conduct does not operate to its detriment.
- Although the importance of the market shares may vary from one market to another the view may legitimately be taken that very large shares are in themselves, and save in exceptional circumstances, evidence of the existence of a dominant position.
-
AKZO Chemie BV v Commission: AKZO sets out the rebuttable presumption that a market share of 50 % gives rise to a presumption of dominance.
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United Brands: UBC had a market share between 40 and 45 % which did not permit the automatic conclusion of dominance, however, regard had to be had to the strength and number of competitors. UBC had a market share several times greater than that of its closest competitor, the others coming far behind.
Rule of thumb:
Barriers to entry
For an undertaking to have true market power, it must be in a position to protect that strength over time. One of the key aspects of establishing dominance is not the pressure from existing competitors, as that will be indicated by market share over time, but potential, competition from undertakings which are not currently active on the market. Therefore any barrier which makes entry to a market difficult is very important in establishing if an undertaking has true dominance.
The definition of ‘barriers to entry’ is controversial.
-
Bork would define barriers to entry very narrowly, and would only accept that a true barrier exists where a cost is borne by a new entrant which was not borne by the incumbent market players. He would favour a more limited role for the competition authorities.
- The Court takes the view that any factor which would discourage entry, no matter whether the incumbent faced the same problems, is a barrier which can be used to support a finding of dominance
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Hilti: 70 – 80 % market share plus Hilti holding patents and copyright protection in relation to the cartridge strips designed for use in its own tools which strengthens its position in the markets for Hilti-compatible consumables.
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Hoffmann-La Roche: Factors put forward by the Commission were partly rejected others accepted.
- Rejected: Fact that (i) Hoffmann produced a wide range of vitamins and that (ii) it was the world’s largest vitamin producer.
- Accepted: (i) Technical lead that Hoffmann had, (ii) existence of a developed sales network, (iii) absence of potential competition because of the capital investment required to enter the market and the market’s existing overcapacity.
All of the court’s accepted barriers of entry would fail to meet Bork’s and Posner’s definition.
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United Brands: Court sets out a number of barriers to entry it considers important to UBC’s ability to retain its dominant position.
(i) UBC’s vertical integration, it has control over every stage of production from R&D to final ripening and distribution to retailers. (ii) UBC’s expertise developed through its R&D facilities. (iii) ‘Product differentiation’ through advertising (heavy branding of “Chiquita” which created brand loyalty).
Especially the taking into account of brand promotion was criticised by commentators.
Abuse
Once dominance has been established, the undertaking’s behaviour has to be investigated with regard to possible abusiveness. Art 82 contains an indicative list of abusive behaviour.
For the purpose of categorisation it is useful to split the abuses into two, partly overlapping, categories.
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Exploitative abuse: dominant undertaking uses its position of power to exploit the market and make a supra-competitive profit.
Most obvious manner is to charge an excessive price through creating an artificial scarcity. Major problem is deciding what an excessive price is.
General Motors: Abuse might lie, i.a., in charging a price which is excessive in relation to the economic value of the service provide.
In United Brands the Commission had not adduced enough evidence to show that the price charged by UBC was indeed excessive. The Court suggests to take a complex “cost-plus” approach which is difficult to use in practice.
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Exclusionary abuses are problematic and can result in a dominant undertaking strengthening their position in the market. In Michelin the Commission took action against a system of selective and discriminatory discounts.
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Exclusionary pricing: main concern is that pricing is aimed at driving competitors out of the market or make it difficult for them to compete with the dominant player.
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Predatory pricing: In AKZO one of the abuses concerned systematically providing products to customers of ECS at unreasonably low prices designed to damage ECS. The Court developed the “AKZO-formula”:
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Pricing below average variable costs (AVC) must be regarded as abusive, as an undertaking has no interest in applying such prices except that of eliminating competitors.
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Pricing below average total costs (ATC) must be regarded as abusive if they it is part of a plan for eliminating a competitor.
However, the categorisation of fixed or variable costs is difficult!
In Irish Sugar the “border rebates” which were not below ATC (and therefore not within the AKZO-test) were considered abusive as IS was unable to establish an objective economic justification for the rebates. The firm in a dominant position has a special responsibility not to diminish further the degree of competition remaining on the market.
However: there may be objective justification for below-cost pricing, e.g. (a) market launch of a new product, (b) selling off technically obsolete products, (c) cash-flow reasons during a down-turn of the business.
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Discounts and rebates can be used by firms to tie customer to them and stifle the development of competition.
Hoffmann-La Roche granted fidelity rebates which are designed to prevent customers from obtaining their supplies from competing producers. Their effect is to apply dissimilar conditions to equivalent transactions. The English Clause only produced apparent relief as it allowed Hoffmann to gain information about market conditions which it would not have otherwise.
Michelin was offering target rebates which are awarded when customers reach targets in their purchases for the supplier. They put pressure on the customer to stay with the supplier and will be discriminatory if, as usually the case, customers are given different targets to reach in order to obtain the discount.
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Refusal to supply and essential facilities: Refusal to supply a potential customer can be problematic in relation to dominant undertakings. However, to compel an undertaking to trade with another is a breach of their basic freedom of contract.
In Commercial Solvents it has been held that an dominant undertaking manufacturing the raw material, thus able to control the supply to producers of derivatives cannot, just because it decides to start manufacturing these derivatives, act in such a way as to eliminate their competition.
The Magill judgment (attempt to publish comprehensive TV guide) made clear that an undertaking may be required to supply a new customer with a product or service, especially when that refusal to supply would spot the creation of a new product for which there is a demand, or deserve a secondary market to the supplier.
In Oscar Bronner the ‘essential facilities’ doctrine, where by a competitor should be given access to a facility owned and operated by a dominant undertaking, was restricted to a limited number of circumstances where it is not practicable to replicate the facility. This tends to limit its application to situations where there is a ‘natural monopoly’, in that the market will only bear one such facility and it does not make economic sense to require a competitor to invest in replicating that which is currently operated by the dominant undertaking.
Cartels and Oligopoly
Cartels: Express and tacit collusion
Markets prone to express and tacit collusion may display the following features: Inelastic demand, market concentration, barriers to entry, homogenous goods, depressed conditions, dispersed buyers, stable demand patterns.
Typical forms of cartels (all expressly prohibited by Art 81 (1))
- Selling prices
- Target prices and indirect price fixing
- Buying prices
- Output restrictions
- Market sharing
- Collusive tendering
- Restrictions on non-price trading, uniform terms and conditions, customer services, product quality,
- Restrictions on advertising and promotion
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Distinction between agreement and concerted practice: The concept of a concerted practice requires, in addition to concertation between the undertakings, subsequent conduct on the market , and a relationship of cause and effect between the two. However, once the Commission has proved concertation it is for the undertaking to establish that not conduct on the market had followed (Polypropylene).
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Direct or indirect contact: Parties agreeing to let competitors know in advance of their anticipated future business moves may well may be found to have engaged in concerted practices.
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Participation in meetings: Any participant to a cartelistic meeting would have to prove that it did not subscribe to the initiatives agreed. Art 81(1) contains the object-requirement, thus cheating on a cartel is not a defence.
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Oligopoly problem: Undertakings acting on a market on which there are only a few players may align their conduct as a rational response to the market circumstances as their awareness of each other’s presence is automatically heightened.
Can the Commission rely on economic evidence alone to prove the existence of concertation? Ahlstrom Oy v Commission (Wood Pulp II):
Court annulled much of the Commission’s decision.
- Tacit co-ordination is not prohibited by Art 81(1).
- Parallel behaviour may furnish proof of explicit collusion; it will do so only if it cannot be explained by the conditions of competition on the market, e.g. oligopolistic interdependence; proof only if it is the only plausible explanation for such conduct: however, i.c. the announcements served the need of customers desiring the information to plan the cost of their paper products.
See also Dyestuffs (up-front price announcements had rendered the market transparent and eliminated all uncertainty between the operators as regards risks inherent in an independent change of conduct; oligopoly defence failed because of too many participants) and Suiker Unie.
Oligopoly
Oligopoly and Art 81
Cf. Woodpulp
Oligopoly and Art 82
Collective Dominance
Two stage process: First establish collective entity, then establish that collective entity holds dominant position.
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Flat Glass: Two or more entities can be united by such economic links that together they hold a dominant position vis a vis the other operators on that market e.g. where undertakings have through agreements or licences a technological lead affording them the power to behave to an appreciable extent independently etc…).
Example was criticised as these are precisely not just economic, but rather structural, links.
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Compagnie Maritime Belge: A joint dominant position (Art 82) may be held by two or more undertakings independent of each other, provided that from an economic point of view they present themselves or act together on a particular market as a collective entity. In order to establish this it is necessary to ascertain the existence of economic links which enable the undertakings to act together independently of their competitors [etc.].
(Joint) Dominance entails a special responsibility not to allow one’s conduct impair genuine undistorted competition on the common market.
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Irish Sugar: a joint dominant position consists in a number of undertakings being able together, in particular because of factors giving rise to a connection between them, to adopt a common policy on the market and act to a considerable extent independently [etc].
Concept of collective dominant position (cdp) is of enormous importance. The Merger Regulation may be applied (ex ante) to prevent concentrations which lead to the creation or strengthening of a cdp. Art 82 may be used (ex post) to control abuses of an existing cdp. Although not explicitly stated the concept of cdp seems to be the same in both cases.
Mergers
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The motives for and advantages of mergers: efficiency, barriers to exit, failing undertakings and unemployment, single market integration through cross-border mergers.
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Adverse consequence of mergers: Damaging effect on competitive structure of the market, especially in case of horizontal mergers, the predominant fear with vertical mergers is the foreclosure of the market or of a source of supply to competitors.
Merger Regulation
The nature of a concentration
Commission Notice on the Concept of a Concentration
Commission Notice on the Concept of a Full Function Joint Venture
Advantage for a transaction to be treated under the Merger Regulation rather than under Art 81 because of the strict time limits.
Commission Notice on a simplified procedure for treatment of certain concentrations sets out a simplified procedure under which the Commission intends to treat certain concentrations that do not raise competition concerns.
Appraisal
Determination whether or not the concentration
- Creates or strengthens a dominant position
Merger Task Force has to go through the same tests as under Art 82 to identify the relevant markets and establish the potential of the combined undertakings to create or strengthen a dominant position.
While Art 82 dominance focuses on structure leading to abuse, the Merger Regulation focuses on the future structure of a market alone, and the potential for competition continuing to operate effectively on the market following the concentration.
as a result of which
-
effective competition would be significantly impeded in the common market or a significant part of it.
Dominant position
Cf. art 82.
Relevant market
Notice on Market Definition, SSNIP test.
-
relevant product market: SSNIP test on demand side; ability to switch production on supply side
-
relevant geographic market comprises the aria in which the conditions of competition are sufficiently homogenous and which can be distinguished from neighbouring areas because the conditions of competitor are appreciably different tin those areas. → in view of the single market project many markets will arguably be rather EC-wide than national.
Horizontal mergers
Vertical mergers
Conglomerate mergers/portfolio power
Collective dominance
Countervailing benefits
Merger Regulation and Collective Dominance
Gencor: [p. 687] No doubt that the relationship of interdependence existing between parties to a tight oligopoly constitutes an economic link sufficient for a finding of collective dominance within the meaning of the Merger Regulation. The important factor appears to be whether or not the market structure will provoke the undertakings to align their conduct on the market.
Modernisation
White paper
Proposal to (a) improve the authorisation system or to (b) abolish it.
With respect to (a) four potential improvements are put forward
- broadening the scope of art 4(a) Regulation 17
- procedural simplification
- decentralising the application of Art 81(3)
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allocation the power to provide exemptions to the appropriate national competition authority on the basis of a centre of gravity test or
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allocating the exemption cases to the national competition authorities on the basis of turnover thresholds
both solutions are not viable because of the danger of re-nationalisation and challenges to the uniform application of E.C. competition law
- revising the Commission interpretation of Art 81(1)
Wesseling
The Commission’s favourite solution, abolishing the authorisation system requires numerous flanking measures to ensure uniformity.
Shift to direct applicability of Art 81(3) and the abolition of the Commission’s monopoly are the cornerstones of the modernisation and mark a “revolution in the Commission’s thinking. However, the case law is not as straightforward as the Commission suggests in its White Paper.
Revision of interpretation of Art 81:
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Application of an ‘economic rule of reason’ under art 81(1) and of a ‘policy rule of reason’ under 81(3). Only agreements for which a “policy exemption” would be sought would require notification.
Does Art 81(3) lend itself to direct application?
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81(1) and (3) have been declared by the Court as indivisible and to be applied as a whole (De Geus v Bosch). On the other hand the Court has said that the Commission has a monopoly over the granting of exemptions (BRT v Saban).
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Until now: National courts may declare agreements infringing 81(1) void (81(2)), if they are manifestly incapable of fulfilling the conditions of art 81(3) (Delimitis).
Courts may examine whether an agreement fulfils the conditions of block-exemptions and thus apply 81(3) indirectly to agreements which fall within the block exemption.
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Court held that 81(1) prohibits agreements which upon a comprehensive assessment of the effects have a “net” negative effect on competition (Voelck v Vervaeke).
_____________________________________________
“Comfort letter paradox” (agreement can be void under 81(2) before a national court despite a comfort letter!
- Leveraging
- Conglomerate mergers
- IP/Licensing etc.
- Airtours
- Schneider
- Cartels
- Enso/Stora on Buyer power
- Market definition (demand side/supply side)
