NB. Yet this is only concerned with competition between states that is “appreciable” – Does it produce an effect upon the competition? The Commission says that if parties to the concertive practise got less than 5% of the market (any market) your concertive practises are inappreciable.
It is, however, all relative. The market may be small and you may have a small turnover yet you may be big in your market.
**Therefore Article 81 is there to make sure competition exists. The primary target of article 81 is hardcore cartels. In other words, groups set up agreements for mutual gain. An example of this is:
- Bid rigging (3)
- Price Fixing (1)
- Quotas (2)
- most usual form of halting competition
- Quotas usually aid price fixing. They say A produces ‘x’ amount. B produces ‘y’ amount. X & Y are kept constant and prices kept automatically high.
- This is illegal now in the United Kingdom. ie only one hugely high bid for a thing = bid rigging.
For example, Cartel in German market of Steel cables. Had been operating since 1902 so no one had really noticed. They had established prices etc. The Cartel survived a lot – wars, socio economic and political change. The durability of cartels can be astonishing.
Consten & Grundig v EEC Commission
There was an agreement between German and French manufacturers of electrical goods that French company would distribute German goods for them. This meant that French company acquired a degree of exclusivity to the goods. They agreed that German goods wouldn’t be sold anywhere else. This was a distribution contract – it really increases competition by making German goods available in France. Court disagreed and said that this distorted competition which gave French company protection from other competitors – therefore it breached article 81(1).
This is a particularly sensitive area in the EU as it is trying to widen the internal market across the EU.
10/12/03
Article 81 – primary target were the cartels. Nb. Vertical agreements
(Costen) may also be prohibited.
Article 82 - Monopolies = economic loss. By definition if there is a
monopoly then there is no competition. Competition law seeks
to justify this.
HOW??
America – ban them ( think action against Microsoft )
European – Monopolies may be good things, but because they have absolute power you have to watch them. So therefore article 82 monitors abuse of the dominant position (eng) / monitors abuse of the exploitation of the dominant position (spain)
Monopolies aren’t always things like Microsoft, depends on the size of the
market.
What is a dominant position? → Define the market. IT IS NOT BAD TO BE IN A
DOMINANT POSITION, its just that you are not allowed to abuse it.
Dominant Position
Ask yourself what is the market? Products that are sufficiently homogenous:
- Product
- Geographical market – where there exists competitive restraint.
Economists will construct the product market through looking at the two things above.
Dominance within the market
Test – look at the companies market share.
You can consider other things – if you are big in a market then you are likely to be dominant.
If you are dominant you have to make sure that you do nothing to hither or weaken competition. Is it the purpose of competition law to protect the small? Is that fair? Is dominance not a showing of success; why therefore limit it?
How do dominant undertaking abuse their markets?
- Prices are too high
- Prices are too low (in order to eradicate competition further) There are consumer benefits if dominant undertaking sells below cost of production (predatory pricing). It is likely to send smaller undertakings out of business.
- English time clauses – I will not sell you it unless you buy B as well – BULLYING THE MARKET.
- Refusing to deal – as you may be in competition with the buyer – vertical relationships. Recognition that dominant undertakings have lots of responsibilities.
- Discounts – again eradicating the chance of other undertakings.
There are two types of abuse:
**Exploitative against the consumer
**Exclusionary abuse to weed out other competitors.
How do you enforce Competition Rules (articles 81 & 82)?
Regulation 17/1962 deals with article 81(3) – exceptions to the prohibitions.
Provides the prohibitions of 81(1) to be set aside.
Sets out economically beneficial tests.
Adopts the German system. The Commission and the Commission alone can only grant an exemption.
Q: How do you get an exemption?
A: Ask the Commission.
This is called notification. The Commission will write back and you may ( may not ) have an exemption = INDIVIDUAL EXEMPTION.
Block exemption.
Commission took certain types of contract and set them out in a manner favourable to the commission and therefore article 81 (3). If you comply then the contract is automatically exempted. (see**)
**Reg 17 – also conferred on the commission autonomous enforcement powers Commission has powers of interrogation and can fine you. Members of the commission can come to your house and ask to go through it and you have to comply. They may obtain a warrant which a national judge will simply just rubber stamp.
When they get all the information which they require they make a case and decide whether or not you are in breach of article 81 or 82.
The Commission can take undertakings which infringe either articles. You can challenge your fine via the Court of First Instance.
National Courts
Also – national courts have competence and duty to protect the ideals of articles 81 & 82. Article 81 (2) – void contract – court cant give effect to any contract that infringes article 81 (1).
If you are affected by a breach of article 81 or 82 you can go to the court and seek:
*declarator
*Specific Implement
* Damages
What are the consequences of a void contract? English courts hold the opinion that contract which are void are illegal therefore there can be no claim under unjustified enrichment. In Scotland you probably have a remedy in restitution.
Yet what if you have a claim in a national court and the commission.
Ie What if you have your contract analysed by a national court and the commission yet there are different outcomes?
CCJ – National Court has to start proceedings until commission decides.
But Brussels takes ages to get back to you meanwhile litigation starts as contract has broken down. What happens.
De Limitus.
REG 1/2003 – Commission monopoly over exemptions is to be abandoned from may 2004. National Judges can read exemptions into agreements (similar to French system). National Courts will therefore apply article 81 (3) if they are competent.
